The craze for a universal basic income: everything you need to know

By Apolitical

Thursday September 28, 2017

Basic income is a simple, radical idea. In essence, it is that a government should give each of its citizens enough money to live on, with no strings attached. What people do with it is entirely up to them.

It could end poverty and the indignity of the welfare state at a stroke, while making mincemeat of red tape and regulations. Or it could turn us into feckless layabouts and destroy the economy. It depends who you ask.

Either way, it has people’s attention. The governments of Finland, Ontario, and numerous municipalities in Holland are launching experiments to test basic income. The charity GiveDirectly is running one in Kenya with 30,000 participants. Y Combinator, a tech industry incubator, is doing its own, secretive trial in Oakland, California. And just this week Scotland committed to several local basic income tests.

As inequality widens and automation eats away at jobs, governments of all colours are seriously exploring the feasibility and repercussions of implementing a basic income.

But there’s a crossfire of conflicting, sometimes crazy, claims about basic income. Here’s what we actually know.

What is a basic income?

In its purest form, a basic income has three essential elements: it is basic, universal and unconditional.

In other words, the amount of money must be enough to live on, everyone must be eligible for it, and they should receive it no matter what they do or earn.

In popular usage, though, the term has come to cover a range of proposals that share the idea of simply handing out money to citizens. These include, for example, negative income tax proposals, in which everyone is guaranteed a certain amount of money, but for every dollar they earn a certain amount is subtracted from that guarantee. The result is that only the poorer people in society actually end up receiving any money from the state. While this is not strictly a basic income, they have much in common.

What are the arguments for it?

There are several, and they come with very different motivations.

The usual leftist argument is that a basic income is a fair and elegant way to eliminate poverty. They see it as radical redistribution, likely funded by a progressive tax scheme, that would help narrow inequality.

By contrast, those on the right see a basic income as the pin to pop a bloated welfare state. A universal basic income would require far less bureaucracy than the many overlapping welfare programs that many states have today. It could reduce the size of the state and produce better outcomes too.

Sitting strangely between left and right, you have the tech visionaries of silicon valley. Their argument is less ideological, and more of a logical end-point to their sector’s business. They foresee a future where technology leaves most people unemployed and a few companies with unimaginable riches. In this equation, a universal basic income is simply necessary to keep the unemployed masses clicking, consuming—and content.

The libertarians see another benefit: freedom. People could spend a basic income however they like. They could spend it on healthcare; they could drink themselves into oblivion. The state should not be nannying people and making their decisions for them. A basic income puts people’s futures in their own hands.

That sense of independence is what attracts feminists too. A basic income would effectively put a value on all the unpaid labour that goes into our society, such as caring for children and the elderly. In doing so, it would give women and children economic independence and security.

What are the arguments against it?

Again, there are naysayers from across the political spectrum.

On the left, the argument boils down to a question of what to prioritise. Assuming that having both a basic income and a welfare system would be unaffordable, would it be better to provide a basic income or to simply pump extra money into the existing safety nets in the way that the Nordic social democracies have done?

For those on the right, there are numerous objections to a basic income, not least the fact that it is, in essence, a huge redistributive program. Many also fear its effect on the family unit and the incentive to work. It could hurt both individuals’ well-being and that of society as a whole.

But all sides have one question in common: who would foot the bill?

People debate exactly how much it would cost. Robert Greenstein of the Center on Budget Policy and Priorities reckons it would cost $3 trillion to give every US citizen an annual check for $10,000. That amounts to nearly all the tax revenue collected by the federal government. Scott Santens, a prominent advocate of basic income, puts it at $900 billion. Still, whichever way you swing it, it’s a huge sum of money.

Most acknowledge that paying for it would require some combination of tax hikes and cutting the existing welfare state. And that runs the risk of leaving some more impoverished than they were before.

Has anyone actually tried it?

Yes and no. Many argue that a true basic income has never been tested. But similar things have been, and with tentative extrapolation they may tell us about how a basic income would pan out.

The first experiments took place in North American: a negative income tax was trialled in five locations across the US and Canada in the 60s and 70s.

The findings were mixed, and politicised. In general, though, they did not see the feared collapse in participants’ motivation to work. Where work hours did decrease, it was mostly among adolescents and new mothers, who appeared to be staying at school and with their children respectively. People were not permanently dropping out of the workforce for the Malibu surfer lifestyle.

In the Southern hemisphere, two conditional cash transfer schemes – Bolsa Familia in Brazil and Prospera in Mexico – have been running for years. Both involve giving the very poor small sums of money in return for fulfilling certain conditions, such as getting their children vaccinated and sending them to school.

The amounts were far smaller than a basic income, but the schemes have been effective at lifting people out of extreme poverty. There has also been no effect on motivation to work, but that is unsurprising with such small amounts of money.

Aside from that, two unconditional cash transfer experiments have also taken place, one in Namibia and the other in India. These experiments gave people just about enough to get them over the poverty line. Neither saw an increase in spending on tobacco or alcohol. Instead, money was spent on housing, diet, medicine and schooling. This may indicate that attaching conditions to cash transfers is unnecessary—people know how to improve their lives, and that’s what they do.

However, the closest thing to the principle of a universal basic income that exists can be found in Alaska. The Permanent Development Fund has been running since 1982, when the government decided to put the proceeds from a portion of their oil and gas resources into a fund. Since then, every year they have split the dividends from that pot equally between every resident of Alaska. The amount is not enough to live off – it has ranged from $300 to over $2,000 – but it may have had an effect: inequality in Alaska decreased during the 1990s and 2000s—the only US state where this was the case.

None of these examples provide conclusive evidence for a basic income. But they do support two ideas: a basic income does not destroy the motivation to work, and people can be trusted to spend it responsibly.

What’s next for basic income?

A new wave of experiments have brought it back to the fore.

Finland is testing whether a basic income for the unemployed works better than its existing unemployment benefits.

Municipalities in Holland are experimenting with removing the various conditions from their employment benefits—with some groups effectively receiving a basic income.

Ontario is trying a negative income tax to see whether it improves job prospects and quality of life, with a particular interest in how it helps those in the gig economy.

And in Kenya, the charity GiveDirectly is running perhaps the most ambitious trial, giving a basic income to 30,000 people for up to 12 years.

Altogether, these experiments should answer a few questions.

Those in Finland and Holland will tell us whether a basic income is a better way of disbursing benefits to the unemployed, both in terms of finding work and quality of life.

Ontario’s will show us whether a negative income tax – the form of basic income with the broadest political appeal – could help bring balance to the lives of those in the gig economy.

And Kenya’s will provide the first truly longitudinal data on basic income. It will be fascinating to see the behavioural changes that come about in a 12-year trial compared to the usual two-year span—although it’s debatable how far findings in Kenya can be translated to the developed world.

Fascinating, but academic

At this stage, the discussion around basic income is fascinating, but academic. It’s very unlikely a government will roll out a true basic income any time soon. But a few decades down the line, their hand may be forced.

The economy, work and the social contract are mutating. Automation is stripping away traditional jobs. Globalisation and the internet have injected transience and uncertainty into the economy. Increasingly, we expect a share of community resources, such as land and fossil fuels, and something in return for our attention, which is currently being exploited by internet companies—for nothing.

A basic income may still be an alien idea, but it could be the answer to those changes. More experiments are welcome.

This article was first published by Apolitical.

Photo: Flickr/Stefan Bohrer

About the author
Newest Most Voted
Inline Feedbacks
View all comments
Eva Cox
Eva Cox
4 years ago

So let’s replace the Twiggy expensive, shaming cashless debut card trials here with one of these, as the UBI model is both cheaper and provides more dignity and benefits.

Nicholas Gruen
Nicholas Gruen
4 years ago
Reply to  Eva Cox

I doubt if it’s cheaper. UBI is famously expensive, though that’s not to endorse the card.

I fear UBI is strategisation, as outlined in this piece

The essential resource for effective
public sector professionals