Following recent news that Finland opted out of continuing its Universal Basic Income pilot program beyond 2018, economists are questioning the sustainability of the controversial model.
What is the Universal Basic Income
Universal Basic Income is an economic concept in which everyone gets an equal amount of money from the government, every month, no strings attached. So whether you’re unemployed or working, low-income or in the 1%, the same check will always come and nobody will tell you how to spend it.
Supporters say the idea is that providing folks with a security net won’t encourage them to stop working, but actually, give them the freedom to pursue work they’re really interested in, and restore economic security.
Some liberal proponents argue that increasing taxes on corporations and the wealthy to help support a universal Basic income could be a positive way to help out low-income communities, while some conservative supporters like the idea that a successful Universal Basic Income (UBI) could replace what they deem as costly and ineffective social services like food stamps, job training, Medicaid, and more.
The idea has gained steam in recent years, with 48% of Americans supporting a Universal Basic Income program. As of 2017, a number which, according to economist Karl Widerquist, has skyrocketed up from 12% just 10 years ago. But it’s not a new concept. As far back as 1516, philosopher Thomas More proposed a similar idea in his book Utopia.
In a 1792 pamphlet, founding father Thomas Paine proposed a basic income for “every person, rich or poor” and 20th-century leaders from Milton Friedman to Dr Martin Luther King Jr., spoke out about the potential for a basic income to help different communities out of poverty and under President Nixon, a plan nearly passed to establish a guaranteed minimum income in the early ‘70s.
Fast forward to today, and the concept is the subject of books, documentaries, and countless academic panels. It’s got big-name backers from Elon Musk, to Mark Zuckerberg, to Senator Bernie Sanders, who said he’s “sympathetic” to the approach.
Countries around the world have piloted versions of the Universal Basic Income experiment including Kenya, Canada, Finland, the Netherlands, and Spain, with proposed versions in places like India and Scotland. It’s even been tested in a few U.S. cities – but, would it be a viable option for the American economy?
Universal Basic Income Pros and Cons
According to Sandhya Anantharaman( CO-DIRECTOR OF THE UNIVERSAL INCOME PROJECT), “Poverty is exhausting, and financial stress is exhausting, and it really limits the time and space mentally that you have to work on great ideas”.
So the idea is that, for people who are struggling to make rent payments, buy groceries, and support their families, the stress can be overwhelming – and flat-out tiring. But having a security net – of, say, $1000 per month, could clear up people’s time that they’d ordinarily spend stressing about where their next meal will come from, and spend more time job-searching, volunteering, or participating in the economy.
Some participants in Finland pilot program, which will run through the end of 2018, are already reporting that their stress levels have decreased and while many critics argue that free cash would disincentivize work, supporters say there’s some evidence to the contrary.
Sandhya Anantharaman said “In the 1960s we did a number of experiments around the country in different states to test the impact of unconditional cash on work. So essentially, do people work fewer hours or work for less money when you give them unconditional support? In a paper done by the Roosevelt Institute last year, they reexamined these experiments and saw that there was essentially no reduction in work hours, so when you gave people unconditional cash, you didn’t see a decrease in the hours worked, instead of folks just took the opportunity to enjoy the stability that they had”.
The data of Anantharaman references, it did indicate that some programs resulted in “a slight reduction in work and earnings,” but also ultimately showed that the experiments didn’t result in the average worker leaving the labour force.
Of course, data from a few small experiments in the ‘60s isn’t a perfect predictor of what would happen in the U.S. economy today. But another recent study by the Roosevelt Institute showed that the economy could stand to gain trillions of dollars if Universal Basic Income (UBI) were to be successfully implemented.
Others argue that Universal Basic Income is a good solution to the growing fear that automation will swallow jobs and lead to mass unemployment. Study results vary widely on how much of a threat automation actually is to the workforce.
Whatever the truth, the risk certainly feels real to some Americans. Two-third of them think robots and computer will do “much of the work done by humans” within 50 years, According to a 2016 Pew study.
There have been other positive from similar pilot programs in other parts of the world including one in Dauphin, Canada and in Western Kenya. Early results based on interviews with participants of the 12-year pilot program showed reduced conflict and poverty and advocates of universal basic income in the U.S. argue it could actually build bipartisan support, with a program that would both reduce social welfare programs and tax the wealthy.
Of course, critics of the concept argue there are many reasons UBI wouldn’t work in the U.S.
The left-leaning Center on Budget and Policy Priorities suggest that even a cautious approach to UBI would likely increase poverty rather than decrease it. Their report shows that a monthly $900 for each American would cost about $3 trillion annually.
Even if we just take into account the net cost of UBI rather than the gross, it’s still a huge cost and would Americans really go for a major tax increase?
Some critics of the program also take issue with the fact that, unlike other social welfare programs, UBI wouldn’t specifically help low-income communities. The same monthly check would arrive at Bill Gates’ doorstep as the average American.
Many argue creating something like a Universal Basic Income (UBI) would inevitably lead to the government having to slash other social welfare programs. Another critique is that UBI could disincentivize work. Critics argue that people wouldn’t feel the need to work or keep a job if they’re receiving a free check.
Most data examined from pilot programs both in the states and abroad showed that people generally kept working. In some instances, part-time work even increased. But some experts say that might only be the case if the cash subsidy is enough for people to live on.
One thing critics and opponents agree on is that funding this program will come with one heck of a price tag.