Universal Basic Income: Free Money

The Problem

Jim has worked as a truck driver for 20 years. His wife, Erika, left her paying job a few years ago to care for her elderly mother. One day, Jim is laid off because his company no longer needs as many drivers, due to new technology. Unfortunately, Jim never finished high school and struggles to find a new job that pays as well as his truck driving job. 

Explanation

This is going to be the reality for millions of Americans within the next decade. As automation technology increases, the amount of jobs in the workforce will decrease. Other people, such as Erika, already work as caretakers and don’t get paid for their labor. These are just some of the reasons why politicians have suggested implementing a universal basic income.

Universal Basic Income

A universal basic income, or UBI, is a program where every person receives a flat monthly income regardless of whether or not they are working. Most proposals do not suggest an amount that is enough to live on completely, but enough to cover most basic necessities.

How It Works

Versions of UBI have been tried in different contexts. The state of Alaska established a Universal Basic Income in 1982, known as the Alaska Permanent Fund Dividend (PFD). Every year, each Alaskan citizen gets between 1,000 and 2,000 dollars from the state government depending on a special formula. The state funds the PFD with profits from oil and other natural resources. Studies have shown that the PFD has reduced poverty in the state by nearly 20%. 

More recently, different versions of UBI programs have begun around the world, but most of them are still in the experimental phase. This means that governments or philanthropy organizations are giving small groups of people money for a set period of time in order to measure its effects on their lives. Experiments like this are happening in cities in Spain, Finland, Brazil, Germany, and others. 

Two of the world’s largest UBI programs exist in Iran and Kenya. In 2011, the Iranian government started transfering money into the accounts of Iranians each month, the equivalent of about $1.50 per head of household per day. The program started after the government made cuts to subsidies on gas and bread. In Kenya, an organization called GiveDirectly has committed to giving a monthly income to thousands of the poorest Kenyans for 12 years. Other groups are also included that will receive money for 2 years, and ones that will receive a single lump-sum, in order to examine the different effects. 

Critics of UBI programs argue that they incentivize people to not pursue employment, but research doesn’t support this argument. A study of the Iranian cash transfer program found no effect on employment levels, and actually found that workers in the service industry worked more hours than before. Because UBI gives people money to fall back on, they are more free to look for a job they really want. Also, because UBI does not provide enough money to cover all expenses, it acts more like supplemental income, rather than replacing work. Other benefits seen in studies include a reduction in poverty, hunger, and crime, and an increase in school enrollment and mental well-being. 

Other concerns about UBI center around it’s potential to cause inflation, or rising prices, and uncertainty about how it would be funded. Economists estimate that a UBI of $1,000 per month for all adults in the United States could cost 2.8 trillion dollars each year. 

So What

While UBI would be expensive, it could also reduce the cost of social supports like food or housing assistance, known as means-tested programs, because people must meet certain requirements in order to access them. UBI eliminates some common issues with means-tested programs, including the bureaucracy making them difficult to access and them cutting off when certain requirements aren’t met. 

Universal Basic Income has been suggested as one of the potential solutions for the future when more and more jobs are replaced due to automation. In the more immediate term, it could provide much-needed relief to some of the poorest and most vulnerable communities. As the results of the many pilot programs become clear, cities and countries around the world will have to choose whether UBI is the best option for the future.

Think Further

  1. What do you think the effects of a Universal Basic Income program would be in your city or country? 
  2. Do you think UBI is the best option to protect workers whose jobs are eliminated due to automation? Why or why not? 
  3. What type of program do you think would be most effective for lifting people out of poverty, UBI or means-tested programs like food and housing assistance? 

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  1. Sundlee, Robyn. Alaska’s universal basic income problem. Vox. https://www.vox.com/future-perfect/2019/9/5/20849020/alaska-permanent-fund-universal-basic-income 
  2. Peters, Katelyn. Universal Basic Income. Investopedia. https://www.investopedia.com/terms/b/basic-income.asp 
  3. Samuel, Sigal. Everywhere basic income has been tried, in one map. Vox. https://www.vox.com/future-perfect/2020/2/19/21112570/universal-basic-income-ubi-map 
  4. Weller, Chris. Iran introduced a basic income scheme, and something strange happened. World Economic Forum. https://www.weforum.org/agenda/2017/05/iran-introduced-a-basic-income-scheme-and-something-strange-happened/