Should we have Universal Basic Income?

Should the state guarantee cash for everyone? I'll pull recent trial results and trade-offs to weigh UBI.

Should we have Universal Basic Income (UBI)? There is no expert consensus - the answer depends on what problem you want UBI to solve, how it is designed, and how it is paid for.

1. What is a UBI?

A UBI is usually defined by three features:

> a) it provides a sufficiently generous cash benefit to live on, without other earnings; b) it does not phase out or phases out only slowly as earnings rise; and c) it is available to a large proportion of the population, rather than being targeted to a particular subset

In its canonical form it is universal in three senses: available to everyone regardless of family structure, age or disability status, paid without a work requirement, and paid even to those with relatively high earned income.

Some pilot proposals called "UBI" depart from this and are smaller, partial or targeted payments.

2. Arguments For

a) Poverty and inequality reduction: One of the main arguments in favour of UBI is its potential to reduce poverty and economic inequality. A 2022 study by the University of York found that a UBI model could cut poverty by more than half, bringing it to its lowest level in 60 years without any net cost to public finances when combined with tax adjustments.

b) Income security and flexibility: There is also the notion of income security, which allows individuals to work more flexibly without having the financial burden of basic needs.

c) Simplicity and avoiding welfare traps: Practically speaking, "it is simpler to implement than other forms of welfare because it doesn't require means testing". Other forms of welfare benefits can also reduce incentives to work, because benefits get withdrawn as earned income goes up. UBI does not have that problem.

Philosophically, one argument is that "all of us are benefiting from the investments in society that were made by prior generations" and a UBI allows the benefits of society to be shared across all of us.

An additional argument is that UBI could replace the current patchwork of transfer programs, thereby avoiding the high cumulative marginal tax rates implicit in many existing poverty programs, such as cash welfare, which are claimed to create "welfare traps".

d) Evidence of wellbeing benefits: Trials suggest wellbeing effects:

3. Arguments Against

The arguments against implementing a UBI policy fall mostly into four broad categories: 1) Costs; 2) Its impact on the labor market; 3) The moral narrative of not rewarding the lazy or undeserving; and 4) Fears about automation are overblown.

a) Enormous cost: This is the most common economist objection.

The NBER framework notes: A UBI would direct much larger shares of transfers to childless, non-elderly, non-disabled households than existing programs, and much more to middle-income rather than poor households. A UBI large enough to increase transfers to low-income families would be enormously expensive. Compared to existing programs, a canonical UBI would also direct a much larger share of funds to younger, non-disabled workers and to families without children.

That means if it replaces existing programs it is less targeted, providing much less assistance to the lowest income families. If it is added on top of existing programs, it would represent a very large downward redistribution of income but would cost nearly double current total spending on the "big three" programs (Social Security, Medicare, and Medicaid).

A report by the New Economics Foundation analyzing 16 projects concluded: "There is no evidence that any version of UBI can be affordable, inclusive, sufficient, and sustainable at the same time".

b) Labour supply and incentives: Counter-arguments center around the idea that populations are bound to be less motivated to work if their basic needs are met, and the economic burden of UBI is also placed on the State, which can be a major issue, especially for developing economies.

The NBER review argues that ongoing UBI pilot studies will do little to resolve the major outstanding questions about labor supply, in part because short-term pilots cannot capture long-run, economy-wide effects.

c) Inflation: One of the most common arguments against universal basic income is the idea that it will cause inflation. Increasing citizens' income, a universal basic income would likely increase demand for most goods and services, which would increase prices. Even the policy's biggest proponents, such as Andrew Yang, acknowledge that a UBI would induce inflation. Empirical evidence from cash transfer programs is mixed: one review found there was less than 1% price inflation on average as a result of the transfers, suggesting the effect may be modest if the transfer is funded by taxes rather than money creation, but opponents argue such price effects would wipe away gains if UBI is large and debt-financed.

d) Better targeted alternatives exist: Critics note that UBI would benefit higher-income workers and distracts from immediate problems such as stagnant wages and persistent poverty. Instead, the U.S. should expand benefits for existing programs such as Medicaid, critics argue.

Even if UBI is designed as an "add-on" and all means-tested programs are to remain, which would add a massive figure to the budget, the results are still quite disappointing "with a modest effect on poverty".

This is why many economists favor alternatives like an expanded Earned Income Tax Credit (EITC) or a negative income tax - where funding would decline as their income rose- which is "very effective at redistribution and does not have a lot of red tape", or combining a modest guaranteed income with EITC to "actually raise wages and spur growth".

4. So, Should We Have It?

Case for "Yes" if:

Case for "No" or "Not Yet" if:

Many researchers propose a middle path: a modest, targeted guaranteed income for the poorest, or a negative income tax / EITC expansion, combined with universal services, rather than a truly universal payment to everyone including high earners.

> In short: A small UBI/guaranteed income as a simplified safety-net floor has shown promising wellbeing results and modest labour-market effects in trials, but a generous, truly universal UBI large enough to live on would be, in its current form, prohibitively expensive and less effective at targeting poverty than existing means-tested programs. The desirability therefore hinges on design and financing, not the idea alone.