Universal Basic Income: American Dream or Pipe Dream?

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What would it be like to have all your basic needs met and be able to decide what to do with your time? Nothing fancy or extravagant, but enough money to cover your food, clothing, shelter, and medical care at a basic level.

Would you enjoy spending all your time socializing with family and friends or getting really good at your favorite hobbies, music, or sports? Or would you choose to work in a field you love and grow your bank account and lifestyle? On the other hand, do you think you'd get bored and directionless, spending all your time online, playing video games, doing weed (where it's legal), and dozing?

These are a few of the questions raised by the idea of Universal Basic Income, which some see as a libertarian paradise and others as wasteful utopian folly. Elon Musk and Mark Zuckerberg think it's a good idea. Do you?

24/7 Wall St. Insights

• Universal Basic Income is a theoretical approach that has not been fully implemented anywhere, but some states and countries are considering versions of it.
• At its best it would improve our quality of life and free us to pursue what most interests us.
• At its worst it would tank the economy and create a dissatisfied mass of people who would be vulnerable to political manipulation.
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What is Universal Basic Income?

Universal Basic Income is a proposal for a mass social welfare program in which citizens would receive a regular payment from the government, no strings attached. The same amount would be given to each citizen, regardless of their income level or whether or not they worked. This would ensure that every citizen had the basic resources they needed to live and had the freedom to work as much or as little as they wanted to improve their situation. These ideas have been floating around Europe at least since the 16th century but have never been fully implemented. Let's look at some of the pros and cons of this idea.

What Are the Advantages of Universal Basic Income?

Proponents of the scheme argue that UBI would:

• Eliminate many or all social welfare programs and a great deal of government bureaucracy.
• Be fair because everyone would receive it regardless of income.
• Raise the salaries and working conditions of unappealing jobs to attract people to them.
• Allow people to pursue activities that suit them rather than working outside their interests and giftedness to survive. This would make work more enjoyable and more productive.
• Allow people to spend more time with their families and friends, relieving stress and psychological problems and improving social bonds.
• Create a flourishing of culture and economic growth as people unleashed their creativity and found new ways to improve their lives socially and economically.

What Do Critics Say About Universal Basic Income?

Here are some of the potential negatives of a UBI program:

• It would require a massive increase in national budgets. Some studies estimate most countries would have to increase their budgets by about 30% for such a program.
• It would eliminate and transfer resources from programs that help the poor, disabled, and elderly to people who can work or already have money.
• Mass numbers of people would stop working and the tax base would not be sufficient to support the system.
• Raising the salaries and conditions of low-paying jobs might lead instead to the increasing use of robots and other technology rather than people, eliminating jobs.
• Costs of increasing salaries and technology would be passed on to consumers in higher prices, driving inflation.
• Some people would spend the money frivolously or on addictions, leaving children and elderly family members lacking in basic necessities.
• If the money were available to children at the same rates as adults, it would incentivize low income people to have larger families.
• Many people who chose not to work would feel lacking in purpose and become socially isolated without the enforced structure and built-in relationships of a job.

Overseas Experiments

A complete UBI system has not been attempted anywhere in the world, but small scale tests are ongoing in different parts of the world.

• In 2011, Iran began phasing out subsidies on bread, water, and energy and instead started paying each citizen the equivalent of about 29% of their household income.
• In a project scheduled to run from 2017-2029, a charity is distributing 75 cents a day to residents of 200 Kenyan villages to determine the effects on income and standard of living.
• A 2-year study in Finland showed that those who received a monthly cash benefit had better overall health and lower levels of stress, depression, and loneliness than a control group who did not.

U.S. Failed Experiments

From 1968-1980 the American government ran four experimental trials in six states in "negative income tax," which provided a guaranteed minimum income that phased out as earnings increased. The project decreased desired hours of work by 9% for husbands, 20% for wives, 25% for single women heads of families, and by 43% for single males. Each $1,000 of increased assistance reduced the amount of income people earned for themselves by $660.

U.S. Successful Experiments

On the other hand, studies in Stockton, California and Hudson, New York showed that UBI increased full-time employment because people had time to search for better jobs rather than spending all their time working unsuitable jobs to support themselves. In fact, the Hudson, NY study showed an increase in the employment level from 29% to 63%. The only example of a program running in an entire state is Alaska's practice of cutting a check of $1,000-$3,200 from oil revenues to each citizen of the state, which helps offset the unique expenses of living in a place with such harsh natural conditions and sparse infrastructure.

A Better Idea

One of many counter-proposals is an expansion of the Earned Income Tax Credit, which would reduce taxes on the earned income of low- and moderate-income households. This would create an incentive to work, up to a point. Of course, once a person's income reached the EITC limit, they would not want their income to grow further unless it was going to exceed what they would lose in giving up the tax credit. This is just one example of a social benefit that would target the working poor, who have demonstrated potential to increase their income—and the tax base–if they had some relief from overwhelming expenses.

The Jury Is Still Out

The jury is still out on whether Universal Basic Income would work the way it's intended. Much more evidence needs to be gathered to support it before such an expensive and risky social change were undertaken. In the meantime, we can consider other ways to improve access to education, healthcare, and other benefits that can not only enhance individuals' lives, but make a more productive workforce.

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