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Should we have Universal Basic Income?

Should we adopt Universal Basic Income? I'll weigh the latest pilot data against costs and alternatives.

Should we have Universal Basic Income (UBI) is one of the most debated economic policy questions - there is no consensus among economists, and recent evidence is mixed.

What is UBI?

Universal Basic Income, also called Citizen's Income or Basic Income, is generally defined as an unconditional, regular payment made to every citizen of a country or territory. It is described as a baseline level of income – sufficient to cover basic expenses - distributed to everyone, regardless of their current work status or income level. The average proposed stipend is around $10,000 annually.

The question "should we" depends on what goals you prioritize: reducing poverty and bureaucracy, preparing for automation, vs. controlling costs, preserving work incentives, and avoiding inflation.

Arguments In Favor

Advocates typically point to:

1.Alleviates poverty and provides a safety net for all citizens
2.Stimulates economic growth and reduces administrative costs compared to complex means-tested programs
3.Dignity and human rights: especially the right not to be destitute
4.Simplicity: basic income as a right for everyone versus complex benefit safety nets
5.Avoiding bad features of means-testing such as stigma, work disincentives and barriers to worker flexibility. A guaranteed baseline income is said to free people to build on this through paid work without worrying about losing benefits; "work always pays"
6.Liberty: it can free people from state involvement in their lives
7.Future-proofed: an antidote to automation, which inevitably leads to fewer people in the labour market

A Stanford historian argues 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. Poverty research also suggests poverty itself makes it harder to be responsible, to plan and think about the future when focused on getting enough to eat or making rent.

Improved well-being is often reported in pilots. For example, a 2023 meta-analysis claimed 68% of UBI recipients report reduced anxiety and improved life satisfaction.

Arguments Against

Critics typically point to:

1.Increased taxes or cuts in public spending to fund it
2.Disincentivizes work and productivity decline
3.Potential for inflation or higher cost of living
4.Sustainability of funding and long-term economic impact
5.It could be difficult to implement and expensive to fund

Other specific concerns:

•Work disincentives: Critics argue UBI may reduce incentive to work
•Inflation: Providing universal income could potentially drive up prices as demand increases
•Cost requires substantial government expenditure, raising questions about financial feasibility. Critics argue high taxes required could stifle economic growth

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

What Does the Evidence Show?

Because a true nationwide permanent UBI has never been tried, evidence comes from short-term, targeted pilots:

1. Finland (2017-2018):
Gave €560 monthly to 2,000 unemployed recipients. Findings:

•UBI did not have a significant effect on employment, but it significantly increased confidence in reemployment
•Recipients worked 6 more days per year than the control group
•In detail, employment rate was slightly higher (78 days vs. 73 days), though the difference was statistically nonsignificant for the primary outcome in the first year
•Final evaluation: basic income increased number of days of employment by 6 days

2. Stockton, California - SEED (2019-2021):
Provided 125 residents with $500 per month.

Results showed recipients experienced improved financial stability, better mental health, and increased employment. Other analyses found:

•Fulltime employment increased by 12%
•Employment among recipients increased by 12 percentage points
•Recipients were able to find full-time employment at more than twice the rate of non-recipients

3. United States - 122 Guaranteed Income Pilots (2017-2025):
A recent American Enterprise Institute working paper reviewed 122 guaranteed basic income pilots across 33 states. Those pilots allocated about $481.4 million to 40,921 recipients, average payment $616 per month.

But the evidence base is weaker than it appears:

•Only 52 had published outcomes. Only 35 used randomized designs.
•Among the 30 randomized pilots with published employment results, the average effect was a 0.8 percentage-point increase in employment.
•However, among the four pilots with treatment groups of at least 500 participants, the mean effect was minus 3.2 percentage points, with a mean income elasticity of -0.18 - consistent with standard economics that unearned income reduces work at the margin.
•Average treatment group was just 359 people, median only 151, average attrition rate was 37 percent.
•Conclusion: findings may not generalize to a permanent, universal, nationwide UBI and larger studies show employment declines.

4. Other pilots:

•Wales (2022-2025): Paid £1,600 monthly to 635 care leavers. The government announced it will not be continued after the initial pilot ends in 2025 because of the cost.
•Sam Altman / OpenResearch (2020-2023): Raised $60 million and distributed $1,000/month to 3,000 low-income individuals in Texas and Illinois for three years. Most spent the money on food, rent, transportation, and helping family.

The Cost and Feasibility Challenge

This is often cited as the best argument against UBI.

•If you multiply $12,000 a year by the US population, you get over $3 trillion.
•Providing $1000 per month to every U.S adult would cost over $3 trillion annually - almost the entire federal budget.
•Other estimates: The cost has been estimated as roughly 10% of the country's GDP.
•In the UK, a basic UBI of £3,692 per annum was estimated to cost approximately £150 billion annually, while another estimate put a UK UBI at £400-670 billion annually.
•In India, feasibility is debated with estimates suggesting it could cost about 1% of GDP per capita.

Funding it would require the basic marginal tax rate to be much higher than it is now, unless funded via wealth / carbon tax or cuts to spending elsewhere, none of which are easy options. Modelling of modified UBI schemes in the UK showed costs of £177bn to £210bn, requiring basic tax rate to rise to 25%, higher rate to 45% and top rate to 50%.

A central design problem is that the current system provides specific payments for specific circumstances (caring, disability, high housing costs). If you sweep that away, you either give a massive boost to people without those needs at huge cost, or you create a fall in income for those with them. UBI that retains the bulk of means-tested support is effectively a top-up, not really a UBI system at all.

Stanford analysis notes that if you set costs against current taxes and transfers, and conceptualize UBI as a benefit that can be taxed for higher earners, costs come down significantly — the real challenge is political, including bias against unconditional transfers and integrating with existing bureaucracy.

Supporters often imagine replacing the welfare state with one simple transfer, but critics argue programs rarely disappear and UBI would likely be stacked on top of much of the current welfare state.

Alternatives to Full UBI

Because of these trade-offs, many economists propose more targeted approaches:

•Negative Income Tax / Expanded Earned Income Tax Credit (EITC): Milton Friedman's early proposal for a minimum standard of living evolved into the EITC, considered highly successful with well-documented benefits for children and increased workforce participation.
•Targeted Guaranteed Income / Empowerment Accounts: Targeted to people already eligible for welfare, with work requirements for capable adults, consolidating fragmented programs rather than universal payments.
•Improving existing benefits: e.g., restoring work allowances in Universal Credit and ensuring benefits keep up with essentials, rather than being distracted by UBI.

Bottom Line

•Should we if the goal is well-being, poverty reduction, and simplification? Pilots consistently show improved well-being, financial stability, and trust, with small or no negative effects on work in short-term experiments — and sometimes modest employment gains.
•Should we if the goal is affordability, employment, and inflation control? Large-scale, permanent, truly universal programs remain untested, larger credible studies show small employment reductions, costs are enormous, and funding would require major tax increases or replacement of existing targeted support that could increase poverty for some groups.

Most researchers agree rigorous evaluation of pilots is essential for assessing effectiveness and informing evidence-based policy decisions, but pilots do not answer what a permanent national UBI would do to national budgets, labor markets, and prices.

If you are considering supporting or opposing UBI in your country, the key questions to ask are: How would it be funded? Would it replace or supplement existing welfare? What level is considered "adequate" vs "affordable"? And are targeted alternatives like an expanded EITC or guaranteed income for vulnerable groups a more efficient way to achieve the same goals?

Citations (3)

  1. 1rethinkingpoverty.org.ukNot yet classified
    Universal Basic Income - not the answer to poverty | Rethinking Poverty

    Backs: “Should we have Universal Basic Income (UBI) is one of the most debated economic policy questions - there is no consensus among economists, and recent evidence is mixed. What is UBI? Universal Basic Income, also called Citizen's Income or Basic Income, is generally defined as an unconditional, regular payment made to…”

  2. 2stanford.eduAcademic
    Stanford scholar explores pros, cons of ‘basic income’

    Backs: “Future-proofed: an antidote to automation, which inevitably leads to fewer people in the labour market. A Stanford historian argues 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…”

  3. 3zerohedge.comNot yet classified
    What 122 Universal Basic Income Experiments Actually Show

    Backs: “Recipients were able to find full-time employment at more than twice the rate of non-recipients. 3. United States - 122 Guaranteed Income Pilots (2017-2025): A recent American Enterprise Institute working paper reviewed 122 guaranteed basic income pilots across 33 states.”