Pros and Cons of Universal Basic Income (UBI)
What is Universal Basic Income (UBI)?
An unconditional cash payment that is given at regular intervals by the government to all residents in a country, regardless of their income or employment status, is called universal basic income (UBI). It is a concept of a government welfare programme in which each adult citizen receives a set amount of payment regularly. Since UBI is unconditional, everyone will receive this payment irrespective of their employment status or current earnings.
The Goal of UBI
The primary goal of UBI is to overcome poverty, income inequality and replace some need-based social programmes that potentially require greater bureaucratic involvement. The idea of UBI has gained fame in the United States because automation is increasingly replacing workers in production and other sectors of an economy.
Example
The concept of UBI gained attention during the first stage of the 2020 presidential campaign after businessmen and former democratic candidate Andrew Yang made it a cornerstone of his campaign. He called his campaign “Yang’s Freedom Dividend”. This would give every American over the age of 18 a $1,000 cheque every month. The people who were enrolled in the federal assistance programme are still able to collect this dividend. Yang said that the labour-force participation rate was at its lowest in decades, which is the percentage of Americans who were working or looking for work. The Yang’s Freedom Dividend would provide money to cover the basic needs of Americans while enabling them to look for better job options, start their own business, go back to school, take care of their loved ones, or work towards their next opportunity, he quoted on his campaign website.
Later, he dropped out of the presidential race because his proposal for a federal basic income has not been tested. A number of local jurisdictions have experimented with UBI pilot projects.
Historical Background
The idea of providing basic income to each person in society is present in different shapes in history. The 16th-century English philosopher and statesman Thomas More, explain this idea in their work, named Utopia.
A pamphleteer named Thomas Paine, whose idea helped stimulate the American Revolution. He proposed a tax plan in which revenues would provide a basic government income. Another one, named Martin Luther King, Jr., proposed the concept of “guaranteed income” in his book, named Where Do We Go from Here: Chaos or Community?, which was published in 1967.
Although the federal government provides support, i.e., financial support, for low-income Americans through the earned-income tax credit (EITC), which is temporary assistance for the needy families, and other programmes, a system of basic universal income has never taken hold in the U.S.
In 2020, this concept rose to the national consciousness. The renewed interest has to do with fundamental changes to the economy, which was known as the growth of automation and threatened to leave many Americans without jobs that pay a subsistence wage.
UBI does not have much history as it largely remained theoretical. In 1976, in the United States, the Alaska Payment Fund was created, which was mainly funded by oil revenues. It provided dividends to the permanent residents of the state. The amount of funds varies each year based on the stock market and other factors. In 1985, the range of this fund was $331.29, and in 2015, was $2072. During the pandemic COVID-19, the overall payout of this fund was $992.00. It was the smallest cheque received since 2013. But for 2023, the most recent payment received was $1312.
Pros of Universal Basic Income (UBI)
The following are some pros of the universal basic income (UBI):
Reducing Poverty
Supporters for UBI claim that UBI could be helpful in bringing everyone’s income above the poverty line. An author of “Give People Money, Annie Lowrey said that we have tonnes of experimental data from the U.S., from Iran, from other countries, from all over the world. This data shows that if we give people money, it reduces the poverty rate. UBI will be especially beneficial to those who are poor or unemployed in getting at least some amount of money to cover their basic needs, leading to the elimination of poverty.
Discouraging Low Wages
A major pro of UBI is that it would provide employees enough security to have bargaining power. Lowrey also said that why take a crummy job for $7.25 per hour when people have guaranteed $1000 per month to fall back on? It means that along with the reduction of poverty, UBI will allow the unemployed people to take their time to find a job that will be more suitable for them in terms of wages and employment conditions.
Redistribution of Wealth
The economic growth of high-income countries makes the rich richer but has very little impact on the working class. An economist, Thomas Piketty, has spoken about the idea of “inheritance for all.” A UBI could help to balance the inequality in a country and allow fair redistribution of wealth between each age group.
Fighting Technological Unemployment
As technological advancement is taking more jobs, advocates for UBI say that it would act as a security net for the millions of people who will be losing their jobs in the near future due to the tech revolution. According to research for the Federal Reserve Bank of New York, the longer a person is unemployed, the longer it would take to get employed. If the jobless had a small source of income to help them back on their feet, they would soon find a new job and start contributing to the economy.
Helping Victims of Domestic Violence
Research by Women Aid shows that women who suffer domestic violence become trapped in violent situations because they don’t have the means to leave them. UBI would make it easier for women to leave the abusive partner from a financial point of view. By giving financial independence to everyone, UBI would ensure that no woman is ever dependent on their partner for their basic needs, and it would act as a barrier from leaving.
Supporting Unpaid Care Workers
Some ill or differently abled relatives are forced to quit their jobs to care for them full-time. UBI allows care workers to support themselves, encouraging care work at home and reducing pressures on the public services that give support and care to the sick and elderly.
Eliminating the Need for Social Security
There are many governmental organisations that are responsible for supporting those in poverty, handing out unemployment benefits, food stamps, and subsidies for housing. UBI would remove these countries spending by eliminating these organisations. UBI can also replace the unemployment benefits or means tested benefits where the government will pay money to those unemployed or meeting some criteria.
Cons of Universal Basic Income (UBI)
The following are some cons of the universal basic income:
Inequity
UBI is universal for everyone; regardless of how poor or rich, they would get the same amount of money. Even millionaires will get the UBI payment. This means that the income inequality will still be there in the country. In 2020, political communist Stephen Bush said that most of the time, when we talk about universal benefits going to people who don’t need them, we are taking about a small number that it does not really matter either way. Therefore, giving high earners an extra amount of $960 per month would hand them serious financial firepower to establish their advantage as compared to saving for buying property, paying for private education, or any number of other socioeconomic benefits.
Cost
A major disadvantage of UBI is the cost. The cost of implementing UBI would be huge. For example, the estimated UBI is about $3.9 trillion per year in the US, and in the UK, it is estimated at about $28 billion. It is argued that UBI takes pressure off health services and makes social security institutions unnecessary, but these are not enough numbers for the government to budget for.
Motivation to Work
Another disadvantage of UBI is that it would provoke many workers to stop working by removing the incentive to work. Moreover, the unconditional payment of UBI can make some people lazy in terms of acquiring new skills, which can lead to a reduction in occupational mobility of labour. If people are not working, there is a lower amount of taxable income for a country’s economy. Therefore, people choose to stop working due to many reasons that benefit society as a whole. For example, getting a better education or caring for a needy relative.
Philosophical Counterarguments
Capitalist countries are built on the foundation that money or income is something we earn. UBI would change this completely. But some people believed that community service should be a requirement for receiving UBI.
Criticism of Universal Basic Income (UBI)
UBI was also criticised due to its major disadvantage of cost. According to a non-profit Tax Foundation, Andrew Yang provided $1000 per month as a Freedom Dividend to every adult, which would have cost over $2.8 trillion per year. He proposed covering that expense by shrinking other social programmes and imposing a 10% value-added tax (VAT) on businesses. He also ended up proposing the cap on Social Security payroll taxes and putting a tax on carbon emissions that contribute to his guaranteed income plan.
Conclusion
In conclusion, the universal basic income (UBI) states that the government regularly gives every adult citizen a fixed amount of money without conditions related to wealth and unemployment. The aim of the UBI is to reduce poverty and help meet individuals their basic needs. The UBI proposals have been implemented in the cities across the United States, though they have been limited in scope. The idea of UBI has gained attention in 2020, especially given ongoing developments in automation and artificial intelligence (AI).