What Is Universal Basic Income (UBI)?
Universal basic income (UBI) is a government program in which every adult citizen receives a set amount of money on a regular basis. The goals of a basic income system are to alleviate poverty and replace other need-based social programs that potentially require greater bureaucratic involvement.
Facts: Finland undertook a two-year trial, from January 2017 to December 2018, of modest monthly payments of €560 (£477) to 2,000 unemployed people – but the government has refused to fund further expansion. It told us little about UBI except that, when push comes to shove, elected politicians may balk at paying for a universal scheme.
The cost of a sufficient UBI scheme would be extremely high according to the International Labour Office, which estimates average costs equivalent to 20-30% of GDP in most countries. Costs can be reduced – and have been in most trials – by paying smaller amounts to fewer individuals. But there is no evidence to suggest that a partial or conditional UBI scheme could do anything to mitigate, let alone reverse, current trends towards worsening poverty, inequality and labour insecurity. Costs may be offset by raising taxes or shifting expenditure from other kinds of public expenditure, but either way there are huge and risky trade-offs.
Money spent on cash payments cannot be invested elsewhere. The more generous the payments, the wider the range of recipients, the longer the scheme continues, the less money will be left to build the structures and systems that are needed to realise UBI’s progressive goals.
However, opponents of UBI argue that the model needs to be funded somehow, raising taxes for everyone. Additionally, because there are no requirements to receive UBI (proof of employment or willingness to find employment), people may be disincentivized to work. Free income could also trigger inflation, canceling out its purpose to increase the overall standard of living.
The idea of universal basic income has gained momentum in the U.S. as automation increasingly replaces workers in manufacturing and other sectors of the economy.
Understanding Universal Basic Income (UBI)
The idea of providing a basic income to all members of society goes back centuries. The 16th century English philosopher and statesman Thomas More mentions the idea in his best-known work, Utopia. Thomas Paine, a pamphleteer whose ideas helped spur the American Revolution, proposed a tax plan in which revenues would provide a stream of government income “to every person, rich or poor.”1
And Martin Luther King, Jr., proposed “guaranteed income” in his book Where Do We Go from Here: Chaos or Community?, published in 1967.2
While the federal government provides financial support for low-income Americans through the earned income tax credit (EIC), Temporary Assistance for Needy Families (TANF), and other programs, a system of universal income has never taken hold in the United States. However, the concept has risen to the national consciousness in recent years. Much of this renewed interest has to do with fundamental changes to the economy—namely, the growth of automation—that threatens to leave many Americans without jobs that pay a subsistence wage.
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