Debating Universal Basic Income
October 26, 2016
Studies on UBI
Universal basic income (UBI) is the idea of periodically granting every citizen an unconditional cash payment without any means test. There have been several studies on basic income already, yet the topic remains hot with countries like Finland, the Netherlands, France, and Canada discussing future studies. Even in the US one can find several startups and initiatives trying fund further research.
The US and Canada started experimenting with a series of negative income tax studies in the 60’s and 70’s. These served as predecessors to the current idea of UBI, by having people with incomes below a certain threshold receive money from the government instead of paying taxes. Results showed that whilst some recipients reduced their working hours, they did so at a modest rate of about 5%. The effect was larger, however, for secondary earners and complete withdrawal from the labor market was not found.
From 1974-79 Canada ran a “Mincome” experiment in a village with 10.000 inhabitants in Manitoba which resembles the idea of UBI more closely. The results were largely positive with fewer (mental health) hospitalizations, increased high school graduation rates, fewer adolescent pregnancies, and large reductions in poverty. Simultaneously, there were virtually no employment effects on primary earners.
These results look promising, but concerns about the research methods leave the results to be questioned. Therefore, current projects try to ensure completely random experiments that start tackling the many questions surrounding UBI, like its amount or frequency. Besides European governments, private organizations like Give Directly in Kenya and Y Combinator in Silicon Valley (where some are hoping for UBI to soften the blow of robotics replacing jobs) are conducting further studies to gather new data.
Source: The Economist
Arguments for UBI
The argument for a universal basic income begins with the idea that it will theoretically abolish poverty (at least for eligible citizens, that is). Providing a minimum living standard through monthly cash payments allows for each recipient to experience economic freedom and therefore to strive for their dream job or fight for better working conditions with improved bargaining power.
Several of the studies showed that the effect of reduced work hours was strongest on second earners and single mothers, which directly translated into more time spent with the family. The British author and journalist Paul Mason also suggests that basic income would consequentially lead to decreasing numbers of poverty related diseases through e.g. reduced stress or blood pressure.
Lastly, a basic income is reliant on the idea of being universal. Besides the cost benefits of not trying to figure out who is eligible for which form of social welfare, this leads to all societal groups to be invested in its timely and efficient execution as well as to the reduction of interest groups fighting over the allocation of the welfare budget.
While the social theory behind the Universal Basic Income is generally thought of as being endemic of progressive spheres of thought, it has been embraced by some conservative and pro-capitalism theorists as well. By giving every citizen a basic income, they would be granted a foundation to sustain themselves. More citizens would be encouraged to work and add to our economy because they would have the safety with which they could take chances, become entrepreneurs, or pursue new innovations which they otherwise might be averse to trying because of the financial risk.
Furthermore, by awarding private citizens a lump sum of money they are free to spend it as they wish, rather than allowing the government to force them to purchase a certain type of healthcare coverage or food supplies, for example, that might not otherwise be suited uniformly to each citizen’s circumstances. Finally, right-wing proponents of a UBI would laud the simplification and increase in efficiency of the welfare system that would be brought by reigning in the dozens of federal welfare systems under one umbrella. This idea has political precedent as well, as Utah Senator Mike Lee recently said during a speech to the right-wing Heritage Foundation that, “There’s no reason the federal government should maintain 79 different means-tested programs,” after calls by Paul Ryan to simplify and streamline federal welfare disbursements.
Arguments Against UBI
Past the idealistic notion that every citizen will be lifted out of poverty by the institution of a UBI, come clear limitations that prevent the policy from taking off in the United States. At face value, the idea of the government collecting tax revenue just to disperse it across the population is a clear effort of redistribution, which is chastised by some political ideologies as being unfair and contrary to the capitalist foundation of the American economy. Handing out basic incomes to the lowest earners of the nation’s citizenry could dis-incentivize work for the least skilled and most vulnerable members of our economy, leaving less taxable income for the federal government to collect in order to maintain other public functions.
Additionally, it was noted earlier that a UBI has been tested on a small-scale basis, in a select number of American cities, Canadian provinces, and Scandinavian countries with varying levels of success. But to promote a UBI on a national scale in America is currently simply unfeasible; to revamp an entire welfare system and to provide egalitarian benefits to nearly 320 million citizens across 50 states would be far too difficult and costly. If a UBI was instituted as a federal program, it would have to be scaled accordingly in different regions because the cost of living in rural Kansas is substantially lower than in New York City, for example.
Instituting a UBI would consolidate federal welfare programs, but would also expand its benefits uniformly to even the top 1% of the population, which is antithetical to the priorities of many of its proponents. There is no reason to waste taxpayers’ dollars to substitute means-based welfare programs with a plan that gives money to those at the top of the economic scale when it can be better invested in the middle or lower classes. In 2015, Social Security made up nearly 25% of the federal budget, which is significant considering that population growth is harming the government’s ability to fund it, so combining Social Security with other forms of welfare and universalizing them would drive the nation’s debt even higher than it already is.
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