Should we have Universal Basic Income?

Should we adopt universal basic income? I'll weigh the evidence from recent pilots and the core arguments for and against.

Should we have Universal Basic Income (UBI) is one of the most debated economic policy questions. There is no consensus among economists - the answer depends on how you weigh its benefits against costs and feasibility.

What is UBI?

Universal basic income is a regular stream of payments made unconditionally by the government to the entire population or a large segment of it.

The idea is not new. Thomas Paine called for a similar idea in his 1797 pamphlet “Agrarian Justice” and Rev. Dr. Martin Luther King Jr. advocated for guaranteed income. It has gained momentum in the past decade in response to fears of automation, with proposals like Andrew Yang's $1,000 a month "freedom dividend", and interest grew during the COVID-19 pandemic when recurring payments were proposed.

A basic income is typically defined as citizens receiving a regular sum of money from the government.

Arguments For

1. Simpler, more inclusive safety net
Proponents argue UBI is less cumbersome to administer than means-tested public benefit programs, which often don't reach intended beneficiaries due to stigma and administrative burden. It can provide improved social safety net and access to food and healthcare and has potential to reduce childhood poverty.

Stanford historian Jennifer Burns argues the most attractive aspect is that it can underwrite market participation, in contrast to other welfare programs that essentially require people to not be employed to receive the benefit or have zero assets - in effect, programs kick in when people have hit rock bottom, rather than preventing them from getting there.

Other cited benefits include:

2. No large drop in work effort, improved well-being - according to pilots

Small-scale experiments have been used to test claims:

Supporters also point to arguments that when combined with paid income, a UBI would lift living standards of low-skilled workers, and that in most scenarios the grant would not be enough to forsake paid employment altogether. Scholarly work has also suggested poverty makes it harder to plan and be responsible, and providing cash can strengthen responsibility.

Arguments Against

1. Cost and feasibility

This is the most common objection.

Critics argue implementing universal basic income would require substantial government expenditure, raising questions about financial feasibility and whether high taxes to fund it could stifle growth.

2. Inflation
A widely expanded money supply would increase demand for goods and services and could exacerbate inflation.

3. Work disincentives
Critics argue UBI could create a disincentive to find work for some individuals and may dis-incentivise the least skilled to work, leaving less taxable income for other public functions.

Proponents counter that pilots have not shown large employment drops, but skeptics note pilots are small-scale and short-duration, limiting conclusions about a permanent universal program. Several UBI results are early or small-sample, including Finland targeting only 2,000 unemployed and Stockton n=125.

4. Political and structural hurdles
The best argument against UBI is feasibility in a political sense, not just cost. There is significant bias against unconditional transfer programs - most US welfare is tied to employment like Social Security - and building support for breaking that connection requires high-level political leadership, plus the enormous hurdle of integrating UBI with the existing bureaucratic structure.

A large 2024 experiment highlights mixed results: researchers tracked 3,000 young, low-income Americans, giving two-thirds $50 a month and one-third $1,000 a month for three years, to study effects of the staggering expense of UBI.

Should We Have It? Key Questions to Decide

Rather than a simple yes/no, most policy debates focus on design:

1. Universal vs. targeted or conditional? Should payments go to everyone, including higher-income people who don’t need assistance, or only to low-income adults? Alternatives like Milton Friedman's negative income tax / Earned Income Tax Credit (EITC) - which was enacted and is considered highly successful at increasing workforce participation - provide means-tested cash but preserve work incentives.

2. Replacement vs. supplement? Would UBI replace existing means-tested programs (saving administrative costs but potentially leaving some worse off) or be added on top (much more expensive)?

3. Funding method? Through income tax increases, VAT, carbon or wealth taxes, dividend from sovereign wealth fund like Alaska, or automation taxes? The funding mechanism determines inflation and growth effects.

4. Level of payment? $500/month as in Stockton has very different cost and behavioral effects than $1,000-2,000/month proposed during COVID.

5. Goal? If the primary goal is reducing deep poverty and administrative complexity, evidence from pilots suggests modest guaranteed-income programs can improve well-being, mental health, and financial stability without large drops in work. If the goal is preparing for widespread automation-driven job loss, small short-term pilots don't answer whether a permanent, population-wide program is sustainable without major tax restructuring or inflation.

In short, supporters see UBI as a simpler, less stigmatizing way to guarantee basic security, support flexibility, and underwrite market participation. Opponents see it as costly, potentially inflationary, politically difficult to implement at scale, and less efficient than targeted assistance.

Whether "we should" have it depends on whether voters and policymakers believe the poverty-reduction and well-being gains justify the fiscal cost, tax changes required, and risks to work incentives and prices - and whether a more targeted guaranteed income or expanded EITC would achieve most of the benefits at lower cost.