Could a Universal Basic Income Make Small Town America Great Again?

10. 11. 2017

In my view, it’s time we transitioned from place-based development to people-based development. And that comes in the form of UBI.

In the summer of 2013, I undertook a field study of sorts with my graduate school classmates in Southside, Virginia. Our hope was to see the theories we’d learned in classes on local economic development and regional economies put to practice. We spent a week roaming through towns like Floyd and Martinsville; observing business incubators in Blacksburg and Danville; and discussing development projects in Roanoke and Rocky Mount.

But the moment that stuck with me was listening to author Beth Macy read a selection from Factory Man, her best-selling account of the rise and fall of the furniture industry in the towns we visited. Macy, who spent 25 years reporting for the Roanoke Timesrecounted the tale of Mary Reed, a displaced factory worker who would do anything to get her job back: “If Tultex were to open back up today and the only way I could get there would be to crawl on my belly like a snake, I would do it.”

In the years since that trip, as Donald Trump used the grievances of small town America to fuel his unprecedented political surprise, I’ve returned frequently to the memory of that factory worker’s longing. Our sojourn through Southside was an eye-opening experience that showed me the gulf between economic theory and economic reality.

Yes, downtown revitalization improves prospects for employment. Community college apprenticeships attract new industry while providing a path to the middle class. But these place-based methods often fail to immediately provide opportunities for people on the ground to regain the prosperous lives they once knew. And they often lack cultural salience, preferring to cater to well-to-do newcomers over longtime residents.

As I highlighted in my recent TEDx talk on the universal basic income (UBI), geographic inequality is the elephant in the room. According to one 2015 study of the richest counties in America, four of the five richest are in the Greater Washington, DC area, a fact that increases outrage and mistrust of government in small town America. Further research shows an economy increasingly concentrated in big cities and along our coasts.

What policy, then, would “square the circle” between long-run economic growth and short-term need? In my view, it’s time we transitioned from place-based development to people-based development. And that comes in the form of UBI.

UBI, which would provide enough no-strings-attached money for every citizen to cover their basic needs, is a much more effective solution to geographic inequality for two clear reasons.

First, UBI would expand the buying capacity of current residents rather than subsidizing businesses that are theoretically attractive to new residents. Monthly UBI checks would provide a boost to local economies through direct spending, much as payroll tax deductions did in the wake of the financial crisis and food stamp benefits do today in many small towns.

UBI payments would also have knock-on effects for local sales tax revenues, leading to healthier municipal and state governments and more investment in important public services. Stimulating local demand quickly, in addition to making human capital investments that improve the labor market in the future, is an excellent recipe for job creation.

Second, UBI would empower small town residents to participate in and shape their local economies. Instead of discouraging work, studies show that safety programs encourage entrepreneurship by reducing risk, and that small business owners are more likely than other Americans to receive public benefits. Ensuring that their basic needs are met would enable more Americans to create their own businesses to meet rising local demand, boosting employment and rejuvenating Main Street at the same time.

One of the biggest arguments against UBI as a solution has been that many rural and small town residents might resist government “handouts” on principle, no matter the positive effects on local economies. But a program similar to UBI can be found in one of the most conservative rural states, Alaska, where all residents receive payments from the Alaska Permanent Fund. This universal income payment, commonly referred to as a dividend, is a distribution from earnings on state oil wealth, not a redistribution of personal income. Similar schemes could work in coal-rich Appalachia or regions of North Dakota and Texas that enjoy vast reserves of natural gas. Indeed, some conservative eminences have suggested replacing EPA regulations with a tax-and-dividend regime for carbon emissions.

As automation further erodes industries like manufacturing and trucking, traditional pillars of rural employment already decimated by globalization, UBI offers an opportunity to open up entrepreneurship and paths of possibility to more of our fellow citizens while preserving the rich cultural traditions of small town America. The question is if policymakers will seize the moment.