Should we have Universal Basic Income?

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

Universal Basic Income (UBI) is a much-debated proposal, and whether we should have it depends on what problems you want to solve and what trade-offs you are willing to accept. There is no expert consensus.

1. What UBI Is

UBI is generally defined as a regular, unconditional payment to all citizens regardless of employment status or income level. The core idea is:

> everyone gets a baseline income, it is paid in cash, it is unconditional, people decide how to spend it

It is usually discussed as a way to reduce poverty, provide economic security, and simplify welfare systems.

The most common proposal in the US debate is typically around $12,000 a year for adults, though amounts vary.

2. Arguments In Favor

a) Reduction of poverty and inequality: By providing a guaranteed income to all individuals, UBI can help ensure everyone has access to basic necessities such as food, shelter, and healthcare.

b) Economic stability in a changing labor market: UBI can provide economic stability and security for individuals facing job loss or income volatility, acting as a buffer while people transition between jobs or retrain as automation transforms the job market. Proponents argue it can underwrite market participation, in contrast to other welfare programs that essentially require people to not be employed to receive the benefit

c) Simplification of welfare: Implementing UBI can simplify existing welfare systems by consolidating various means-tested benefits into a single, universal payment, reducing administrative costs and bureaucratic inefficiencies. It can also eliminate stigma associated with means-tested benefits.

d) Other potential benefits cited by proponents:

3. Arguments Against

a) High cost and funding: The primary criticism is its high cost and funding challenges. Providing a regular income to all citizens would require significant government expenditure. Critics argue funding would require substantial government expenditure, which could lead to increased taxes or cuts in essential services.

To put scale in perspective:

b) Disincentive to work: Opponents argue that providing a guaranteed income may disincentivize work, leading some to choose not to work or reduce working hours.

c) Inflation: If everyone receives additional income, overall demand may increase, leading to higher prices. This inflation could erode the purchasing power of the basic income.

d) Other concerns:

4. What Does the Evidence from Pilots Show?

There have been many small-scale experiments, but no large-scale permanent national UBI.

Results are mixed and nuanced:

5. Should We Have It? A Framework for Deciding

Rather than a simple yes/no, most policy analysts suggest asking:

1. What is the goal? If the goal is to reduce deep poverty, reduce bureaucratic complexity, and provide a cushion for automation and gig-work volatility, UBI directly addresses it. If the goal is to maximize employment or target help only to the poorest at lowest cost, targeted programs like an expanded Earned Income Tax Credit / Negative Income Tax - an idea supported by Milton Friedman as a minimum standard of living - may be more efficient.

2. How would it be funded? Options discussed include replacing existing welfare programs, raising progressive income or wealth taxes, carbon or value-added taxes, or redirecting subsidies. Each has different distributional effects. Replacing all welfare with UBI could harm those who need more than the average payment (e.g., people with disabilities or high housing costs), while adding UBI on top of existing welfare is vastly more expensive.

3. At what level and to whom? A universal payment to everyone including the wealthy is more expensive and less targeted than a means-tested guaranteed income. A modest amount (e.g., $500-600/month as in pilots) supplements work without replacing it, while a livable amount ($1,200-1,500/month) raises stronger work-disincentive and inflation concerns.

4. Can it be implemented politically and administratively? As Stanford historian Jennifer Burns notes, the real challenge is political - building support for a program that breaks the connection between welfare and work, and integrating it with the existing bureaucratic structure. For these reasons, we may see a UBI on the state level first.

Bottom Line

Many economists and policymakers favor intermediate approaches: a permanent, targeted guaranteed income for low-income households, an expanded negative income tax, or universal basic services (healthcare, housing, child allowance) rather than unconditional cash for all.

If you are weighing the question for yourself, consider which you weight more heavily: universal security and simplicity vs. cost-effectiveness and work incentives, and whether you prefer a universal or targeted design.