Should The Government Offer Universal Basic Income to Citizens?

An English village in Speenhamland experimented with universal basic income in response to rising grain prices. That was in 1795.

The idea was much the same to what has been proposed today, although with a greater focus on bread. If you didn’t work or were unable to, you received bread for you and your family. If you did work, you were given additional bread to supplement what you could already afford.

At first this concept worked well. People who worked hard but still lived in poverty enjoyed a better life, and those who didn’t want to work were no longer the targets of intimidation, a task that was not manageable or effective by the government.

As many things do, the good times ended and things fell apart. Now that people could afford a better life, they had more children. The system strained and collapsed, casting many workers into a society built around the idea of not needing a strong labor market.

In the following decades, the idea of a universal basic income system would be proposed under many different leaders, but these systems were either labeled too socialist and never passed, or the governments trying to implement them fell apart.

Universal Basic Income Today

The idea of universal basic income (UBI) is once again a topic of conversation being taken seriously. While we don’t face a shortage of bread there is growing income inequality and globalization that has left millions of able-bodied blue collar workers without any hope of providing anything more than what welfare or food stamps provide. Even those in white collar jobs are at risk of losing their jobs to automation and artificial intelligence that could force workers into lower paying jobs or requiring them to return to school to learn an entirely new trade.

There is a lot of disagreement around how UBI should be implemented today. Some proposals, such as those from former presidential hopeful Andrew Yang, outlines a policy that gives $1,000 a month to every U.S. citizen over the age of 18, regardless of income or employment. 

If you are unemployed, this money would help to ease the burden that comes from poverty because it would be a cash payment. For those in higher income brackets, it would supplement their existing income.

At this point, many people might say this all sounds rosy! The problem becomes how to pay for it, and that’s where things start to fall apart. 

How to Pay for UBI

Under Andrew Yang’s proposal, money would be raised through a value added tax (VAT) that is placed on purchases for most goods that would fall under the category a non-essential good or service. The second would come from simplifying current social welfare programs. The third is by restructuring the healthcare system.

Yang’s policy proposal says that these and other changes would cover the program’s entire cost and could lead to economic growth. But we don’t entirely know that any of these changes would generate enough money to cover the system’s costs.

Another way to make UBI more practical is to limit who would get the money. For example, anyone who makes under $50,000 a year would receive the full payment. Those who earn above that amount would receive a smaller amount up to a phase-out number, or no money at all. 

How It Would Backfire

Assuming that a UBI did pass, there are very real concerns about how it would affect the labor market. Besides more people leaving the job market and choosing to live on the modest cash they get each month, there is the possibility that employers would suppress wages. 

If the government is helping to supplement a person’s income, why would they pay them as much? Workers too might no longer be disincentivized to work harder and longer for promotions and pay raises, which would hurt the business’s growth.

There are ideological differences, too. UBI is seen as a socialist program that rewards the lazy person while everyone else gives up their time and hard work for a too-small paycheck.

Final Thoughts

For the longest time, automation has been called the greatest threat to society. Even back during the industrial revolution, it was believed that there would be mass unemployment as machines replaced many labor jobs.

Instead, automation led to the creation of many new jobs that were less dangerous and paid better. Much of the discussion around UBI is framed as being necessary to prevent automation and AI from taking jobs, but there is no guarantee of this.

However, one true thing is that millions of people who want to work simply can’t find a job or lack the skills necessary to compete in the modern workforce. Those who do work are finding that a dollar doesn’t go as far, and that their wages aren’t enough to pay for a starter home, kids, hospital bills, college, and retirement. 

UBI can help to alleviate some of the challenges that people today face. It may even be necessary in the future. Governments should not outright dismiss the idea. Society might find that it winds up being the best way to help fix some of the problems currently affecting society and prevent new problems that could arise from worsening income inequality and mass unemployment.