Written by Christopher Ren
What a Universal Basic Income (UBI) is
According to the Citizens’ Basic Income Trust, UBI-type policies are defined by five conditions:
- It is “unconditional”, or guaranteed to everyone past a certain age threshold.
- It is “automatic”, by being distributed at regular weekly or monthly intervals.
- It is “non-withdrawable”, or non-means tested, so that changes in wealth do not affect on income received.
- It is “individual”, meaning that it is not given at the household or couple-level.
- It is “a right of citizenship”, meaning that all legal residents should have access to it.
Such a concept is far from new. Similar proposals have roots as far back as the writings of 16th century humanist, Thomas More, and were explored by future generations of philosophers and theorists. Over the past fifty years, the US found a broad range of UBI advocates as well. Supporters spanned from Dr. Martin Luther King Jr., who believed guaranteed income to be an essential tool to fight poverty, to libertarian economist Milton Friedman, who believed that a similar policy of a negative income tax could simplify overcomplicated government bureaucracy.
Why interest in UBI has resurged
Discussions of UBI have resurfaced in mainstream politics through movements like the Andrew Yang campaign for the Democratic nomination. Such a trend begs the question of why a centuries-old public policy thought experiment now holds so much relevance today.
Karl Widerquist, former co-chair of the Basic Income Earth Network and a professor at Georgetown University in Qatar noted, “One [cause] is simply some of the success of basic income activism.” Widerquist points to a wave of Basic Income experiments that started in a small Namibian village in 2006 and was followed by experiments in Brazil and India soon after. Pilot programs run by private US institutions such as GiveDirectly, the Economic Security Project, and startup accelerator Y-Combinator make up the bulk of recent American UBI experimentation.
Global trends of economic inequality also play a significant role in generating public interest in UBI. “Over the last 50 years, wages stagnated. Meaning [for] the average American worker, wages basically stayed the same over the course of their lifetimes while the economy did very very well.” stated Natalie Foster, co-chair of the Economic Security Project. “Work has fissured into a much more unstable and unpredictable work […] average retirement savings, employee contributions to health care, all of that has been put more and more on the backs of workers, so their take home pay is less and less.”
And as workers grow more and more economically vulnerable, projections about future advancements in automation and fears of replacement further influence UBI’s revival. According to Stern professor Arun Sundararajan, “the confluence of both the accelerated or perceived acceleration in the pace of technological progress and a discussion of how rapidly jobs are going to be automated has brought the idea of giving everybody a living wage back into the political and popular dialogue.”
Some of the Pros and Cons of UBI, according to experts
Many of the advantages of UBI are clear on a small-scale perspective, particularly when one considers the individuals who would benefit the most from guaranteed income. For example, those trapped in poverty may be incentivized to improve their education, pursue better jobs, or attempt entrepreneurial endeavors with a UBI.
“When a person has their back against the wall and has to do what it takes to survive, they don’t always make the best long-term decisions,” explained Jason D’Mello, a professor of Entrepreneurship at Loyola Marymount University. “UBI may give an individual (or family) the breathing room needed in life sometimes that those with privilege take for granted to receive training, education or invest time into risky endeavors that have bigger future payoffs.”
UBI policies can also boost quality of life outcomes and help grow communities, according to Foster. “We know that money makes people’s lives easier. We know that health indicators go up, birth rates go up, nutritional input goes up, people staying in school goes up, people going back to school goes up,” she explained. Foster added that, “the Roosevelt Institute put out a paper looking at economic growth…specifically a guaranteed income. And it was significant growth because more economic activity is actually happening at the local level.”
More abstractly, UBI can also act as an affirmation of people’s economic freedom and dignity. “People use to have direct access to the resources they needed to survive.” stated Professor Widerquist. “And we took away that access, our governments took away that access from the individual. And they gave it to wealthy private holders and said now if you want to survive you’ve got to go and work for people who own property. And that is a horrible situation to put all the normal people in the world. If you’re a normal person, you do not have access to enough resources to survive. You have to get a job. That,” he explains, “is what basic income does really well: it saves normal people from being forced to work that way.”
But UBI, like most public policies, also has its share of drawbacks, particularly when considering successful implementing a UBI and the limitations of simple cash transfers. One disadvantage is that market forces can cause UBI’s entrepreneurial and risk-taking benefits among poorer communities to backfire.
According to NYU Stern professor of Management and Organizations Robert Seamans, “If lenders think that these entrepreneurs are going to be even more risk-taking than they currently are, they might decide to lend out less money…and so it’s that sort of countervailing effect that I really worry about. And in fact, under certain conditions that countervailing effect…can actually lead on debt to even less entrepreneurship than you would otherwise get.”
A more significant problem with a UBI proposal is the exorbitant amount of funding required for such a program. Professor Seamans conservatively estimated the cost to be $1 trillion annually, on top of the existing $600 million already spent on our current social safety net. Professor Sundararajan puts the cost closer to $3 trillion annually, stating that “spending that is 15 to 20 percent of GDP on one social program, and to me, seems excessive.”
And although UBI does help redistribute some income to resolve income inequality, there are still other forms of inequalities that UBI cannot solve. According to Professor Widerquist, “it doesn’t…address the cost of living between expensive areas and cheap areas [and] it doesn’t have anything in it especially for people who have special needs.”
Ideally, notes Foster, “a guaranteed income is just part of a larger renegotiation of the social contract that needs to happen alongside fixing housing [and] alongside fixing our broken… health care system.
Read the full article on thegouldstandard.com.
Views on implementing a UBI or introducing alternatives
As an adamant proponent of UBI, Professor Widerquist’s envisions a “hold-harmless” method of replacing the current welfare system, whereby those who receive benefits worth more than a UBI under the current welfare system get to keep those benefits instead of receiving a less valuable UBI. He also believes that non-cash benefits like public housing should remain unreplaced by UBI. In terms of financing such a proposal, he notes that “the United States has led the way in giving more gifts to wealthy people in the form of the government buying what they’re selling because they have a lot of lobbyists giving these bribes — I’m sorry — “campaign contributions” to people in Congress.” And apart from campaign finance reform, he also holds that “we need to start taxing [the 1 percent] again. There’s so much money. The 1 percent is so much better off now than it was 40 to 50 years ago and the rest of us are no better off.”
Natalie Foster’s ideal vision basic income takes a less drastic approach than Professor Widerquist’s and concentrates on “using the tax code to make sure to put money back in people’s pockets who need it the most.”
Recent political movements including widespread tax reform make Foster optimistic about the future of this version of UBI. “If you look at the Kamala Harris,” said Foster, “she proposed the Lift the Middle Class Act, which says that every half of Americans should receive 500 dollars a month through the existing tax code.”
Both Professor Seamans and Professor Sundararajan see direct cash transfer UBI as too costly. Each believe that reforming the existing welfare structure could more effectively address issues of inequality and the risk of automation.
Professor Sundararajan sees that “a few hundred billion dollars to spend every year” could be better utilized if some of it was spent on “investing very heavily in innovative new transition education programs.” In particular, he points to the growing edtech startup space and the College to Careers program at the City College of Chicago as good examples of effective transition programs. He also sees that cash transfers could still be useful if they were targeted at “high risk industries” most likely to be automated; however, unlike UBI this would be given under the condition that recipients “take six months off fully paid” while “investing actively in occupational transition”
Professor Seamans believes that if we “keep all the existing safety nets and then add $400 billion,” rather than fund a trillion dollar UBI program, we could expand welfare programs that are proven to work well, such as the Earned Income Tax Credit, and fund other forms of protection that UBI does not account for, such as funding public healthcare programs.
Joe Huston, CFO of GiveDirectly, another private institution running a UBI pilot program in rural Kenya, counters that while limiting transfers to people in need sounds cost effective, it is important to note that status quo welfare programs already do this with only limited results. He believes the universality of a UBI could avoid ineffective targeting of welfare benefits.