Should we have Universal Basic Income?

Should we have Universal Basic Income? I'll review the latest evidence and arguments for and against it.

Should we have Universal Basic Income (UBI)? The answer depends on what problem you want it to solve, how it is designed, and how it is paid for. There is no consensus among economists, but experiments provide useful evidence.

What is UBI?

Universal Basic Income is a policy where the government gives regular cash payments to every person or every eligible adult, usually without work requirements or means testing.

The core idea is:

•everyone gets a baseline income

•it is paid in cash

•it is unconditional

The concept has been around for centuries.

Arguments For UBI

Proponents see it as a response to automation, globalization and precarious work:

1.Redistribution and security: Unconditional basic income can redistribute the benefits from automation and globalization. It is described as protecting workers and families against the fluidity of today's workplace.

2.Avoids poverty traps: Since it is not conditional on income, unconditional basic income does not create "poverty traps" where earning more means losing benefits.

3.Simplicity and efficiency: Unconditional basic income is simple and transparent, with low administrative costs and is an efficient buffer against shocks and systemic risks from automation and globalization.

4.Underwrites participation: The most attractive aspect is that it can serve to underwrite market participation, in contrast to other welfare programs that essentially require people to not be employed to receive the benefit or to have essentially zero assets to qualify. In effect, programs kick in when people have hit rock bottom, rather than trying to prevent them from getting there.

5.Positive behavioural effects: Some evidence from experimental studies suggests that unconditional basic income might have positive effects on labor supply and education and occupation choices. Research on poverty also suggests that when you are focused on getting enough to eat or making rent, you don't have psychological resources to plan for the future, and cash can strengthen responsibility.

Arguments Against UBI

The two most popular arguments are: it would reduce the motivation for work and might encourage people to live off assured cash transfers; and it is simply unaffordable.

Critics argue that UBI might discourage people from seeking employment or pursuing career advancement if they can survive on the basic income alone.

Academic summaries list cons as:

•Unconditional basic income is very costly to implement and requires higher taxes to finance it.

•Microsimulation studies suggest that unconditional basic income might reduce labor supply because of the income effect of the transfer and the substitution effect of the higher taxes needed to finance the transfer.

•Unconditional basic income might lead to a reduction in effort, motivation, and autonomy.

•Unconditional basic income also benefits the "undeserving" - i.e., the wealthy receive it too, which many see as inefficient.

•Others question its affordability, warning that funding a universal program could require crippling tax increases or cuts to essential services. There's also the risk of inflation, as increased consumer spending could drive up prices, potentially eroding the value of the basic income itself.

What do the experiments actually show?

Multiple pilots — Finland, Kenya (GiveDirectly), Stockton California, Manitoba Canada — have produced broadly positive results: recipients spend money on necessities, health and wellbeing improve, entrepreneurship increases, and employment rates don't fall significantly. However, pilots are small-scale and short-duration, limiting conclusions about a permanent universal program.

Specific findings:

•Finland (2017-2018, 2,000 unemployed): Recipients worked 6 more days/year than control, higher life satisfaction, lower depression and reported significantly improved mental health and reduced stress levels. However, register data showed the basic income experiment did not increase the employment level of the participants in the first year... recipients were no better or worse than the control group in finding employment.

•Stockton SEED (USA, $500 for 24 months, 125 people): Recipients achieved full-time employment at 2x the rate of non-recipients. Participants were more likely to find full-time work than the control group.

•Kenya GiveDirectly (23,000 people): No evidence of "laziness"; recipients invested more, created more businesses, earned more and villages saw increases in entrepreneurship and livestock ownership.

Crucially, all three are targeted, non-universal pilots, not tests of a universal basic income at scale. The pilots are often cited as early or small-sample and should not be taken as proof that universal provisioning "works" at national scale.

Can we afford it?

This is the central practical challenge.

•In the US example: If UBI provided each American adult with a yearly stipend of $10,000, as libertarian Charles Murray proposed, the annual cost would be $2.42 trillion — almost three times current US welfare spending.

•Other estimates put cost of UBI in the United States at $3.8 trillion per year, which is more than the entire federal budget. Proponents argue cost would be offset by savings from welfare and unemployment benefits.

•In the UK, providing a universal basic income equal to the income poverty line (60 percent of median wage) would cost £669 billion, or just over a third of UK GDP.

•There is a trade-off between affordability and effectiveness: The more effective a universal basic income is at achieving its aim of eradicating poverty, the less affordable it becomes.

Some scholars argue the net cost is lower than gross cost if UBI is taxed back from higher earners and replaces existing transfers. The best argument against UBI is feasibility. If one multiplies $12,000 a year by the population you get over $3 trillion. However, if you set this against current taxes and transfers, and conceptualize the UBI as a benefit that can be taxed for higher earners, the costs come down significantly.

The real challenge is political: there is significant bias against unconditional transfer programs. Most welfare programs in the United States are tied to employment; building popular support for a program that breaks this connection will require political leadership, plus the enormous hurdle of integrating a UBI with the extant institutional and bureaucratic structure.

Alternatives to Full UBI

Because of cost concerns, many economists prefer targeted alternatives:

1. Negative Income Tax (NIT): Advocated by economists from James Meade to Milton Friedman, a negative income tax provides a guaranteed baseline income by reversing the tax flow: those earning below a certain threshold receive money from the government instead of paying it. Compared to UBI, NIT is more targeted and cost-effective, as it provides assistance to those who are most in need rather than giving a universal income to all.

Unlike the negative income tax, which provides assistance only to those with incomes below a certain threshold, a UBI would provide a guaranteed income to all individuals, regardless of their income level.

Friedman's NIT was enacted through the Earned Income Tax Credit (EITC), a policy still in place today considered highly successful with well-documented benefits for children and found to increase workforce participation.

2. Guaranteed Minimum Income / Means-Tested cash transfers: Similar to NIT but often administered as a benefit guarantee.

3. Targeted Guaranteed Income pilots: Like Stockton SEED, provide cash only to low-income residents, not universally.

4. Job Guarantee or expanded social services: Instead of cash, invest in healthcare, housing, education, or guaranteed employment.

So, should we have it?

There is no single answer:

You might favor UBI if you prioritize:

•Eliminating poverty traps and bureaucracy

•Providing resilience against automation, AI job loss, and precarious gig work

•Recognizing unpaid care work and enabling entrepreneurship/education

•Simplicity and dignity of unconditional cash

You might oppose or prefer an alternative if you prioritize:

•Fiscal sustainability and avoiding broad tax increases

•Targeting scarce resources to the poorest (where NIT/guaranteed income is more efficient)

•Avoiding potential labor supply reductions or inflation

•Working within existing political and administrative systems

Most evidence suggests a modest UBI would not cause mass work withdrawal, would improve wellbeing, and could simplify welfare - but a generous, truly universal UBI sufficient to live on would be extremely expensive and has never been tested at scale for a long period in a developed economy.

A common middle-ground among researchers: rather than an immediate universal payment to everyone, expand and test targeted guaranteed income / negative income tax models, fund them through progressive tax reform (e.g., carbon, wealth, automation dividends), and evaluate long-term effects on work, health, and inequality before moving to universality.

If you tell me your country, income level you're considering, and what you want UBI to achieve (reduce poverty? replace welfare? respond to AI?), I can model costs and trade-offs more specifically.

1.[World of Labour - Is unconditional basic income a viable alternative

to other social welfare measures?](https://wol.iza.org/articles/is-unconditional-basic-income-viable-alternative-to-other-social-welfare-measures/v1)

Citations (2)

1iza.orgAcademic
World of Labour - Is unconditional basic income a viable alternative to other social welfare measures?
Backs: “Arguments For UBI. Proponents see it as a response to automation, globalization and precarious work: Redistribution and security: Unconditional basic income can redistribute the benefits from automation and globalization.”
2stanford.eduAcademic
Stanford scholar explores pros, cons of ‘basic income’
Backs: “Redistribution and security: Unconditional basic income can redistribute the benefits from automation and globalization.”