Is it Time for a Universal Basic Income?

In 1967, Martin Luther King, Jr. wrote, “I am now convinced that the simplest approach will prove to be the most effective – the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”

?What is a Universal Basic Income (UBI)?

?Universal basic income?(UBI)?is a?proposal in which all citizens of a given population regularly receive a minimum income through an unconditional transfer payment without a means test? or need to work.?In contrast, a guaranteed minimum income is paid only to those who do not already receive an income that is enough to live on. A UBI would be received independently of any other income. If the level is sufficient to meet a person's basic needs (i.e., at or above the poverty line), it is sometimes called a?full basic income; if it is less than that amount, it may be called a?partial basic income.

?The Basic Argument for UBI

1. Economic Stability and Poverty Reduction. UBI provides a guaranteed, unconditional income to all citizens, which can significantly reduce poverty and provide economic stability. Research has shown that direct cash transfers can effectively alleviate poverty. For instance, the?United Nations Development Programme?found that UBI can reduce poverty and inequality while promoting economic security for all citizens.
2. Health and Well-being. Studies suggest that UBI can improve health and well-being. A notable experiment in Canada, the?Mincome project?in the 1970s, revealed that providing a basic income reduced hospitalizations and mental health issues. People experienced lower levels of stress and greater overall well-being.
3. Economic Growth. UBI can stimulate economic growth by increasing consumer spending. When people have more money, they are more likely to spend on goods and services, boosting demand and, consequently, the economy. The?Roosevelt Institute?has projected that a UBI in the United States could expand the economy by up to 13% over eight years, depending on the funding method .
4. Labor Market Flexibility. With a basic income guarantee, individuals can make more meaningful career choices without the constant pressure of financial survival. This flexibility can lead to a more dynamic labor market, fostering entrepreneurship and innovation. According to research from the?University of Oxford, a UBI could allow people to invest in education or start businesses, contributing to a more adaptive and resilient economy.
5. Automation and Technological Advancements. As automation and artificial intelligence advance, many jobs risk becoming obsolete. UBI provides a safety net for those displaced by technological changes. The?McKinsey Global Institute?estimates that up to 375 million workers globally may need to switch occupations by 2030 due to automation. UBI could support these transitions by providing financial security during retraining and job search.
6. Administrative Efficiency. UBI simplifies welfare systems by merging various social safety nets into a single payment system. This can reduce bureaucracy and administrative costs associated with managing multiple welfare programs. A study by the Center for Welfare Reform?in the UK suggests that a UBI system could be more cost-effective and efficient than the current complex welfare state.

The Advantages of Universal Basic Income (UBI)

As an unconditional money transfer, Universal Basic Income (UBI) has the unique ability to alter deeply ingrained incentive structures. Addressing poverty effectively requires reshaping the motivations that influence society as a whole. Our concepts of work and welfare are shaped by the norms and cultures of individuals who are typically full-time, wage-earning, and insured members of society – many of whom have never experienced a lack of alternatives.

This one-size-fits-all approach to work and income has not yet improved the overall choice architecture for impoverished individuals. In essence, UBI can maximize choices for those living in poverty by reducing the choice-limiting behaviors of those who are not.

UBI promotes the “de-commodification” of human labor by transforming how the majority views work. It highlights the distinction between paid and unpaid work. We often see these as competing activities, but the right to work for pay and the right not to work for pay should be entirely compatible.

Perspectives on UBI

Human Rights Perspective:?Unconditionally providing income outside of employment allows people to realize their full right to work, offering protection against unemployment and enabling them to refuse precarious employment.

Sociological Perspective:?A secure economic base revitalizes personal and societal relationships, giving those who wish to work for pay the freedom to seek meaningful employment.

Gender Lens:?UBI supports individuals undertaking unpaid work, such as domestic tasks, caregiving, and volunteer work. This unpaid work often sustains other socially useful activities but is typically undervalued and uncompensated.

Free Market Perspective:?UBI fosters a more competitive labor market by reducing the dominance of paid work over unpaid work. This levels the playing field between employers and workers, forcing employers to offer better wages and more flexible hours to attract talent.

Broader Impacts of UBI

UBI not only has the potential to lift millions out of poverty but also to promote efficiency and reduce federal bureaucracy. In the U.S., for example, there are currently 79 means-tested welfare programs. A single point of access would simplify recipients' lives. With a guaranteed basic income, workers could negotiate better wages and conditions, pursue education, or leave low-paying jobs to care for children or aging relatives. Moreover, they wouldn’t have to worry about losing crucial benefits by earning more money.

Nobel laureate, professor and best-selling author?Joseph Stiglitz?was among leading economists decrying the rise in income inequality. Just before the onset of the global pandemic, Stiglitz authored his?book,?People,?Power, and Profits,?which chronicles how the masses have lost economic leverage and lays out a path for a more progressive capitalism that shrinks income inequality.

??Stiglitz says “?One of the marked aspects of American inequality is that health inequalities are even greater than our income and wealth inequalities. COVID-19 has brought out the magnitude of these inequalities.?Republicans have taken the view in Congress that?the states should be on their own, and the states are responsible for education, for health, for social welfare. The states all have balanced budget frameworks. They can’t borrow.The states don’t have the facility to print money like the federal government does. The states are about to be hit by a revenue shock that is surely greater than in 2008. That means if there is no assistance from the federal government, there will be significant cutbacks in education and health and so forth, and the inequalities that we’ll see in our society will be all the greater.”

?The coronavirus pandemic has exposed some uncomfortable truths about the state of America today. First and foremost is the fragility of the American economy. After years of outsourcing manufacturing, the United States has constructed an economy where services industries comprise some 55 percent of overall economic activity. In the age of globalization, with interconnectivity functioning seamlessly, this model has generated the appearance of prosperity, with a booming stock market and increased GDP.

?American corporations have been shown to have little capacity to plan for “rainy day” contingencies, instead focusing all their economic resources on generating short-term profit. And the American working class has been likewise exposed as living on the edge of catastrophe, with few Americans able to fall back on savings that would enable them to ride out a period of sustained economic inactivity or, worse, to pay for emergency health care.

?The other uncomfortable truth about America that the crisis has exposed is the overall fragility of American society. The medical emergency brought about by the need to treat COVID has shown that what passes for a national healthcare system is, in fact, a fragile construct of for-profit institutions susceptible to being rapidly overburdened and unable to function once the cash-stream of overpriced healthcare has been cut off. The coronavirus crisis has revealed the reality of the US healthcare system today – most Americans don’t have the wherewithal to get quality healthcare when needed – the cost of such care is prohibitive, as are the insurance premiums one must pay to cover it.

?Economist Mariana Mazzucato, Professor of Economics of Innovation and Public Value and Founder and Director of the Institute for Innovation and Public Purpose, University College London, says the COVID pandemic will illuminate societal and economic systems worldwide, exposing some of the flaws of a capitalist society.

?She contends Capitalism is facing at least three major crises. A pandemic-induced health crisis has rapidly ignited an economic crisis with yet unknown consequences for financial stability, and all of this is playing out against the backdrop of a climate crisis that cannot be addressed by “business as usual.” The news media continues to provide us with frightening images of overwhelmed firefighters, not overwhelmed health-care providers.?

United States

Alaska has had a guaranteed income program since 1982. The?Alaska Permanent Fund?paid each resident an average of $1,606 in 2019, all out of oil revenues. Almost three-fourths of recipients save it for emergencies. In 2017, the?Hawaii state legislature passed a bill?declaring that everyone is entitled to basic financial security. It directed the government to develop a solution, which may include a guaranteed income. In?Oakland, California,?the seed accelerator Y Combinator will pay 100 families between $1,000 and $2,000 a month. In 2019, Stockton, California, began a two-year pilot program. It’s giving $500 a month to 125 local families. It hopes to keep families together, and away from payday lenders, pawn shops, and gangs. About 43% of the recipients are still working. Most of the others were taking care of relatives, disabled, retired, or students. Chicago, Illinois, is considering a pilot to give 1,000 low-income families $1,000 a month.

?Canada

Canada was one of the first Western countries to experiment with UBI. The province of Manitoba, Canada experimented with Mincome, a basic guaranteed income, in the 1970s. In the town of Dauphin, Manitoba, labor only decreased by 13%, much less than expected.?The Ontario provincial government, Canada, launched a three-year basic income pilot in?the cities of Hamilton, Thunder Bay and Lindsay in July 2017. It gave 4,000 Ontario residents living in poverty?$17,000?a year or $24,000/couple at a cost of $50 million annually.?Although called basic income, itwas only made available to those with a low income and?funding would be removed if they obtained employment, making it more related to the current?welfare system than actual basic income. The pilot project was cancelled on 31 July 2018 by the?newly elected Progressive Conservative government under Ontario Premier?D oug Ford.

?Finland

Finland gave?2,000 unemployed people 560 euros a month for two years, beginning in January 2017. In April 2018, the Finnish government rejected a request for funds to extend and expand the program from Kela (Finland’s social security agency). Despite the decision to cancel the project, the recipients said it reduced stress. They said it gave them more incentive to find a good job or start their own business.

?Scotland

Scotland has committed ￡250,000 to four pilot areas that pays every citizen for life. Retirees would receive 150 pounds a week. Working adults would get 100 pounds and children under 16 would be paid 50 pounds a week.

?Taiwan

Taiwan may vote on?a basic income. Younger people have left rural areas in search of decent wages. Some have even left the country to look for work. A guaranteed income might keep them from emigrating. It would also help the senior citizens left behind who live in poverty. The country only spends 5% of its gross domestic product on welfare programs. The average for developed countries is 22%. Under the proposal, the government would pay NT$6,304 per month for children under 18 and?NT$12,608 per month for adults. It would cost NT$3.4 trillion, or 19% of GDP. To fund it, Taiwan would levy a 31% tax on earnings above NT$840,000 per year. As a?result, the program would raise the incomes of two-thirds of the population. The richer third would lose NT$710 billion.

?Brazil

Bolsa Famíliais a large social welfare program in Brazil that provides money to many poor families. The system relates to basic income but has more conditions, like asking the recipients to keep their children in school until graduation. Brazilian Senator Eduardo Suplicy?championed a law passed in 2004 that declared Bolsa Família a first step towards a national basic income. However, the program has not yet been expanded in that direction.

?Silicon Valley Proponents

Much of the resurgent interest in UBI in the U.S. has come from Silicon Valley. Tech titans and the academics around them are concerned that the robots and artificial intelligence they’ve built will rapidly displace humans in the workforce or at least push them into dead-end jobs. Some researchers say robots will replace the low-paying jobs people don’t want, while others maintain that people will get the worst jobs not worthy of robots.

Underpinning the Silicon Valley argument for UBI is the belief in exponential growth powered by science and technology, as described by Peter Diamandis in his book?Abundance: The Future is Better Than You Think. Diamandis contends that technological progress, including gains in health, the power of computing, and the development of machine intelligence, among other things, will lead to a kind of technological transcendence that makes today’s society look like how we view the Dark Ages. He argues that the human mind is unable to intuitively grasp this idea, and so we constantly underestimate long-term effects. If you plot progress out a few decades, Diamandis writes, we end up with unimaginable abundance: “We will soon have the ability to meet and exceed the basic needs of every man, woman, and child on the planet. Abundance for all is within our grasp.”

What About the Impact on People’s Motivation to Work?

But what about people who choose not to work? Isn’t that a huge burden too? That’s where things get really interesting. For one, conditional welfare assistance creates a disincentive to work through the removal of benefits in response to paid work. If accepting any amount of paid work will leave someone on welfare barely better off, or even worse off, what’s the point? With basic income, all income from paid work (after taxes) is earned as additional income so that everyone is always better off in terms of total income through any amount of employment – whether full-time, part-time or gig. Thus, basic income does not introduce a disincentive to work. It removes the existing disincentive to work that conditional welfare creates.

Fascinatingly, improved incentives are where basic income shines. Motivation studies reveal that rewarding activities with money is a good motivator for mechanical work but a poor motivator for creative work. Combine that with the fact that creative work is to be what’s left after most mechanistic work is handed off to machines, and we’re looking at a future where increasingly the work that’s left for humans is not best motivated extrinsically with money, but intrinsically out of the pursuit of more important goals. It’s the difference between doing meaningless work for money and using money to do meaningful work.

Basic income thus enables the future of work and even recognizes all the unpaid intrinsically motivated work currently going on that could be amplified, for example, the $700 billion in unpaid work performed by informal caregivers in the US every year and all the work in the free/open source software movement (FOSSM) that’s absolutely integral to the internet.

There is also another way basic income could affect work incentives that is rarely mentioned and somewhat more theoretical. UBI has the potential to match workers to jobs better, dramatically increase engagement, and even transform jobs themselves through the power UBI provides to refuse them.

A Truly Free Market for Labor

How many people are unhappy with their jobs? According to Gallup, only 13% of those with jobs feel engaged with them. In the US, 70% of workers are not engaged or actively disengaged, which results in a productivity loss of around $500 billion per year. Poor engagement is even associated with a disinclination to donate money, volunteer, and others. It measurably erodes social cohesion.

At the same time, there are those among the unemployed who would like to be employed, but the jobs are taken by those who don’t really want to be there. This is an inevitable result of requiring jobs in order to live. With no real choice, people do work they don’t wish to do in exchange for money that may be insufficient – but that’s still better than nothing – and then cling to that paid work despite being the “working poor” and/or disengaged. It’s a mess.

Consider an economy without UBI. We’ll call it Nation A.

In Nation A, there are only 80 jobs for every 100 working-age adults. Half of the workforce is disengaged from their jobs, and another half is unemployed, with many actively seeking work but finding none, like players left without a chair in a game of musical chairs.

Now, imagine an economy with UBI. We’ll call it Nation B.

In Nation B, for every 100 working-age adults, there are still 80 jobs initially. However, the unconditionally provided basic income allows people to refuse jobs that don't engage them, opening up these positions to the unemployed who would find them engaging. This creates bargaining power for everyone to negotiate better terms. Jobs become more attractive with higher pay or fewer hours. This reorganization of the labor supply could significantly increase productivity by reducing the number of disengaged workers, leading to greater prosperity.

In Nation B, the disengaged workforce opts out of the current labor market, allowing all 50 people who want to work to find jobs they are interested in. Some employers raise wages to attract workers who demand more compensation or shorter workweeks, and others reduce hours. The result is a transformed labor market with more engaged, better-paid, and more productive workers. Fewer people are excluded, and there’s more scope for workers to become self-employed entrepreneurs.

Simply put, a basic income improves the market for labor by making it optional.

The transformation from a coercive market to a free market forces employers to attract employees with better pay and more flexible hours. It also creates a more productive workforce, reducing the need for market-distorting minimum wage laws. Labor market friction might be reduced, allowing people to move quickly from job to job, pursue education or retraining, or even become entrepreneurs, thanks to increased individual liquidity and the elimination of counterproductive bureaucracy and conditions.

Perhaps best of all, higher wages incentivize the automation of low-demand jobs. Tasks that people refuse to do for less than the cost of a machine become automated. With a basic income, workers displaced by automation aren’t left stranded. Instead, they can find new work, whether paid or unpaid, full-time or part-time, that suits them best.

Summary :The Tip of a Big Iceberg

The idea of a Universal Basic Income (UBI) may sound simple, but it’s like an iceberg with far more beneath the surface. The investment in human capital promises far greater returns, revealing deeper impacts on what truly motivates us. There are many known benefits, such as improved social cohesion and better physical and mental health, evidenced by a 42% drop in crime in Namibia and an 8.5% reduction in hospitalizations in Dauphin, Manitoba. Debts tend to decrease, and entrepreneurship tends to grow. Other benefits will emerge with further experimentation.

The growing body of evidence behind cash transfers generally points to basic income as transformative to the future of work, even more so than its long history of consideration has imagined. It’s like a game of Monopoly where the rules have been rewritten to prevent players from collecting money for passing Go, effectively excluding people from markets. Basic income corrects this, making markets more inclusive and addressing something more fundamental.

Humans need security to thrive, and basic income provides a secure economic base. This new foundation can transform our precarious present and build a more solid future. While it’s not a silver bullet, it shows that our problems are not insurmountable. Poverty, extreme inequality, and the threat of mass income loss due to automation are not supernatural foes; they are choices. At any point, we can choose to make new ones.

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