Universal basic income is a concept where a small payment is made to everyone regardless of their need. On the other hand, basic income refers to a wage payment given to persons who need it.
Basic income is considered an outrageous idea, but in 2020 we all experienced and lived it. Explained further universal basic income is a concept of providing minimal payments to everyone, thus removing the stigma of welfare payments. Universal basic income is a trimmed-down cousin of basic income where an amount covering all expenses is provided to individuals in need example, the elderly, unemployed, and caregivers. The economic crisis in 2020 resulting from the Covid 19 pandemic provided a basis for the idea of a monthly or fortnight coronavirus supplement, essentially doubling the value of welfare payments for the unemployed and providing people with money to live on (Cook, Sarah & Marianne, pg. 23).
The notion that if you give people money, you achieve nothing at all was proven not true. The welfare and livelihoods of the unemployed and job seekers improved due to the regular monthly checks. People are productive and highly productive, which we saw with this natural experiment that acted like basic income from the federal government. People spent the money and didn’t have to ration medicine or food and could afford accommodation.
The goals of universal basic income are to replace other need-based programs and alleviate poverty which requires more thought and bureaucratic involvement. The idea of basic income has gained traction in the developed world for instance, the US, as automation and new technology replace employees in the economy in areas such as manufacturing. Providing an assured regular income has been around for ages, regardless of the need.
Universal basic income (UBI) varies in size from country to country, but the basic idea is to meet people’s basic monetary requirements. The concept of UBI first emerged in the 16th century, where it was developed by Thomas More, an English statesman and philosopher, in his work Utopia. Thomas Paine, whose ideas helped start the American Revolution, had proposed a tax plan where revenues would be generated to give the government money for every person, rich or poor. Martin Luther also had presented this in his book “Where do we go from here: Chaos or Community” guaranteed income.
While in many developed countries, the government provides financial support to low-income earners, no country has a system for universal income. For instance, in the United States, the federal government provides financial support to low-income Americans via the earned income tax credit and temporary assistance to families in need. However, the need for universal income has risen to national consensus in recent years and has gotten most Americans’ attention. Much of the need for basic income is due to the rise in automation and fundamental changes to the economy that threatens to leave thousands without meaningful work (Vestad, Ola Lotherington & Mirjam Wentzelet, pg., 34).
An example of a recent universal income initiative is the signing of the American rescue plan by President Joe Biden in March of 2021, which entailed tax breaks for low-income people and an increase in the earned income tax credit for childless households for only the year 2021. The most significant barrier to implementing Universal Basic Income is the enormous cost and how to fund guaranteed income sources. There are currently 5.4 million people who received income support from the federal government this year. If other social welfare programs are taken into consideration, this drives up the cost of financial aid and the tax burden on the citizens.
Brookings institute in 2019 released a report which found that 25% of all jobs in the US are threatened by automation. The research found that most vulnerable jobs were those in manufacturing, office administration, transportation, and food industry. Those in support of basic income believe that a secure payment from the government can assist in ensuring that those left behind in economic change and transformation avoid poverty (Wickham, Sophie & Daisy, pg., 5).
Even if the financial support from the government isn’t enough to live on, it can go a long way in supplementing income or part-time job earnings. Also, it would make it easy for people to receive financial assistance but have difficulty qualifying for other government programs. Some Americans, for example, seeking insurance disability payments, may lack access to the healthcare system; hence their ability to verify their impediment is hindered.
Political Support for Universal Basic Income.
The majority of UBI proponents come from the liberalized end of the political spectrum. Although, prominent figures as well have expressed their support for a government supplied income source. An example is the late economist Milton Friedman who suggested that private donations and contributions aren’t enough to resolve the many financial issues Americans grapple with. In his 1962 capitalism and freedom, he argued that a negative income tax-UBI would help remove the thinking where citizens aren’t motivated to sacrifice if they don’t believe the rest will follow the same example. He argued that people could be willing to contribute to the alleviation of poverty provided everyone else takes part. Charles Murray also believed that a guaranteed income stream would reduce government bureaucracy. In his proposal, he suggested a 10000$ per year universal basic income and basic health insurance which he argued would enable the government to reduce social security and redistribution programs.
Momentum for Universal Basic Income.
It received considerable attention during the 2020 presidential campaign in the first stage when democratic presidential candidate and entrepreneur Andrew Yang made the idea of UBI the lifeblood on his campaign. As he famously called it “Freedom dividend” would enable every American a 1000$ check every month if over 18 years of age. For individuals enrolled in federal assistance programs would opt to receive their payments or opt for freedom dividend.
He contended that the percentage of Americans who were looking for jobs or working known as the labor force participation rate was at its lowest in decades (Vasilev & Aleksandar, pg. 7). Therefore the freedom dividend would provide for a means to cover the basics while enabling them to look for jobs, start a business, enroll back to school, work towards the next opportunity or take care of loved ones. Pope Francis a staunch supporter for the disenfranchised or poor has spoken over the subject in moral terms. “It would ensure and concretely achieve the ideal, at once so human and so Christian, of no worker without rights” a 2020 letter on basic wage from the pontiff (Vestad, et al, pg. 8)
Criticism for Universal Basic Income.
Universal basic income faces an uphill battle despite its promise to eliminate poverty and remove red tape from the government. The cost of Andrew Yang’s 1000$ a month freedom dividend for all adult persons over the age of 18 would cost 2.8 dollars each year. Yang had proposed to cover that cost by reducing the cost of social programs and a 10% value-added tax would be added on businesses.
He also had proposed putting an end to the cap on payroll taxes for social security and imposing a tax on carbon emissions to contribute to the government-guaranteed income scheme. Whether the set of proposals can cater for the cost of the freedom dividend is still a debatable and contentious issue. The tax foundation analyzed and concluded that only half of the total impact on treasury would be met by the income-generating ideas.
Another criticism of Universal basic income is the argument that an income source not pegged on employment would serve as a disincentive to work. This is debatable as Yang’s plan had suggested providing 12,000 dollars a year which isn’t enough to live on especially for a family. Thus, the majority of adults would need to supplement the income source with other incomes. This could lead to a rise in inflation; if every citizen suddenly received an income it could create inflation as the majority of people would immediately spend the extra cash, thus increasing demand and driving prices up.
Also in the long run there is no improved standards of living in the long haul as higher prices would make basic commodities and services unaffordable to those at the bottom of the income pyramid (Ernst, Ricardo & erry pg., 147). Therefore a guaranteed income would not raise one’s standards of living. Others criticize it as there are opposed to free giving of money to the unemployed. It’s hard to support a family or even one person on a welfare check as it discourages people from working a job or wanting a higher standard of living.
Only a weak link between joblessness and UBI according to recent studies. In 2016 MIT and Harvard did research that concluded that cash transfer programs in developing countries had minimal effect on the impact on job patterns and employee behavior. However, there is some evidence suggesting that the replacement of traditional welfare payments with UBI would increase employment as some of its supporters suggest. Results from a two-year experiment in Finland where UBI has fully replaced unemployment benefits found that the recipients of UBI were less likely to find employment.
The UBI benefits would allow workers to wait while searching for a better job or negotiate for better wages. It enables workers to wait for better situations. It would also assist in removing the poverty trap in welfare programs from the past. The majority of welfare programs are blamed for the lack of lifting of people from above the poverty line. Often, when welfare recipients make too much their end up losing housing vouchers, free medical care and food stamps which does not help their financial situation. This happens without considering their income and cost of living to see if they are equal.
Universal Basic Income could help households rise above the poverty line and improve living standards. There are more pros than cons regarding universal basic income as it helps distribute resources and cut bureaucratic red tape. More studies need to be done to develop enough data to show how to implement universal basic income. Currently, the implementation of universal basic income leaves more questions than answers; hence more data is needed to form an informed decision. The financial support provided by governments in the financial crisis of 2020 is an excellent place to start looking at the successes and failures of universal basic income.
Cook, Sarah, and Marianne S. Ulriksen. “Social policy responses to COVID-19: New issues, old solutions?.” Global Social Policy (2021).
Ernst, Ricardo, and Jerry Haar. “M2W and the Multinational Enterprise.” From Me to We. Palgrave Macmillan, Cham, 2022. 147-168.
Vasilev, Aleksandar. “Can Shocks to Risk Aversion Explain Business Cycle Fluctuations in Bulgaria (1999–2019)?.” Managing Global Transitions 19.4 (2021).
Vestad, Ola Lotherington, and Mirjam Wentzel. “Income, Consumption, and Savings Around Retirement.” Available at SSRN 3979587. (2019)
Wickham, Sophie, and Daisy Fancourt. “Perspective Commentary: The Implementation of Welfare Policies Are Not Held to the Same Ethical Standards as Research: Raising Intergenerational Health Inequality Concerns.” Frontiers in Public Health 9 (2021).