Should we have Universal Basic Income?

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

Should we have Universal Basic Income (UBI)? There is no consensus among economists and no long-term evidence from a true, national-scale UBI - the debate balances potentially large benefits against very large costs and design challenges.

What UBI Is

Universal basic income is a government program providing a regular, unconditional cash payment to every citizen or resident regardless of income level, employment status, or behavior. The three defining features are universality, unconditionality, and regularity.

This distinguishes it from existing welfare which is targeted, conditional and administratively complex. Compared to welfare, UBI has:

Arguments For UBI

1. Poverty and inequality reduction: The pros of universal basic income include providing a safety net for everyone, helping to reduce poverty, and potentially boosting the economy. Supporters argue that it could help reduce poverty and inequality.

Related arguments:

2. Efficiency and dignity: UBI advocates argue the administrative cost of the existing welfare system exceeds 30 cents on every dollar spent, and that unconditional cash is both more efficient and more dignified. It also removes bureaucratic barriers and stigma that cause 20-30% of eligible households in developing countries not to receive benefits they qualify for and avoids penalizing people who cannot meet conditions.

3. Well-being effects: Pilot programs consistently show improved mental health, well-being and trust.

Arguments Against UBI

1. Cost and funding: The cons include that it could be expensive to fund and difficult to implement. The economic burden of UBI is placed on the State, which can be a major issue, especially for developing economies.

Examples of gross cost estimates:

Proponents note this is a "false cost" calculation - the true cost is the amount provided to net receivers, not net payers, minus what net receivers put back in taxes - but still requires significant progressive taxation, wealth taxes, taxes on automation, or reallocation from other programs, or eliminating existing welfare programs, reducing administrative costs.

Critics argue UBI is fiscally inefficient because it pays everyone including the well-off, risks crowding out better-targeted programs, and may require large tax increases.

2. Work incentives: A central concern is that populations are bound to be less motivated to work if their basic needs are met and that it could incentivize people not to work.

The 1970s U.S. Income Maintenance Experiments found recipients substantially reduced their work hours: an average of 119 fewer hours per year for husbands, and 93 fewer hours per year for wives.

3. Inflation: Another critique is the potential for inflation. Providing everyone with a guaranteed income could increase demand for goods and services, potentially leading to inflation that could erode the purchasing power of the income provided. Critics worry that if UBI is not carefully calibrated, the resulting inflation could diminish its intended benefits.

Some economists argue inflation is caused by more money chasing the same or fewer goods, and UBI does not increase the money supply if tax-funded, and research in Kenya found less than 1% price inflation on average as a result of the transfers. But a modern money critique argues the unconditional supply of the monetary unit is inherently inflationary.

4. Lack of evidence for universality: Even though experiments have resulted in favorable outcomes, such as reduced crime, happiness, better health, they provide little evidence for the impacts of a universal income.

What Do Pilots Actually Show?

Results are mixed and limited by size and duration:

Finland (2017-2018): 2,000 unemployed people given €560/month unconditionally for two years instead of unemployment allowance made them happier and less stressed—but it did not make them any more or less likely to get a job. A more detailed analysis found the basic income group worked an average of 6 more days per year than the control group and reported significantly higher levels of well-being, mental health, confidence, and trust. Limitations: sample was limited to unemployed people, payment below poverty line, two-year duration may be too short to observe long-run changes.

Stockton, California (SEED, 2019-2021): $500/month to 125 randomly selected residents for 24 months. Evidence is mixed across pilots: Finland's trial did not significantly increase employment, while Stockton participants saw improved full-time employment rates. Stockton produced a 28 percentage point increase in full-time employment (from 28% to 40%), opposite of work disincentive prediction. However pilots like Stockton n=125 and Finland n=2,000 unemployed are early or small-sample and lacked baseline surveys - do not prove universal provisioning works at scale.

GiveDirectly Kenya: Largest rigorous experiment, 20,000 recipients across 328 villages, $22.50/month for 12 years. Findings: substantial increases in assets and food security, every dollar transferred generated $2.60 in local economic activity, and no significant reduction in labor supply. Long-term data on whether permanent income transforms trajectories expected around 2028.

Alaska Permanent Fund Dividend: World's longest-running unconditional cash transfer since 1982, $331 to $2,072 annually. Research found it reduced poverty by approximately 20% with no statistically significant effect on employment.

So Should We Have It?

The answer depends on what problem you want UBI to solve and how you design it:

You might favor UBI if you prioritize:

You might oppose or prefer alternatives if you worry about:

Most researchers now argue the question is not "UBI yes/no" but "what kind of UBI?":

If you are forming a view, consider asking: Should cash be unconditional? Should it be universal or targeted to those most in need? How would it be funded without inflation or cuts to essential services? And what evidence would change your mind from the upcoming 12-year Kenya results?

There is promising evidence that well-designed, modest unconditional cash improves well-being without destroying work incentives, but no evidence yet that a full, permanent, national UBI at a livable level is affordable or sustainable long-term.