What Is Universal Income
Universal income is a program where every citizen receives a flat monthly payment, regardless of whether they're working and earning an income or not. Different programs outline who exactly receives the income some state that all citizens would get it regardless of what they make, while other programs may only give it to those who fall below the poverty line.
In 1967, Martin Luther King Jr. said a guaranteed income would abolish poverty. That means reducing income inequality as well.
Economist Milton Friedman proposed a negative income tax. The poor would receive a tax credit if their income fell below a minimum level. It would be equivalent to the tax payment for the families earning above the minimum level.
In 2018, Facebook co-founder Chris Hughes outlined his plan in his book "Fair Shot."4 He argued that U.S. workers, students, and caregivers making $50,000 or less a year should receive a guaranteed income of $500 a month. Hughes’ guaranteed income plan is financed by taxes on the top 1%. It would work through a modernization of the earned income tax credit.
23 Universal income Pros & Cons
- Workers could afford to wait for a better job or better wages
- People would have the freedom to return to school or stay home to care for a relative
- May help remove the "poverty trap" from traditional welfare programs
- Citizens could have simple, straightforward financial assistance that minimizes bureaucracy
- The government would spend less to administer the program than with traditional welfare
- Young couples would have more money to start families in countries with low birth rates
- The payments could help stabilize the economy during recessionary periods
- Inflation could be triggered because of the increase in demand for goods and services
- There won't be an increased standard of living in the long run because of inflated prices
- Jobs aren’t disappearing; rather, the nature of work is changing.
- A shrinking labor force would harm economic growth.
- UBI is very expensive, requiring substantial tax increases or spending cuts.
- Many of the most disadvantaged would likely be left more vulnerable.
- The idea has been scarcely tested.
- A reduced program with smaller payments won't make a real difference to poverty-stricken families
- Free income may not incentivize people to get jobs and could make work seem optional
- Free income could perpetuate the falling labour force participation rate
- There are many opposed to handouts for the unemployed
The motivation behind most universal basic income proposals is admirable: reduce widespread poverty and provide lifelong income security to all. But a UBI, in reality, would likely fall far short of eliminating poverty while imposing large economic costs and ignoring future opportunities for work. It also ignores that American life is rooted in a civic tradition of earning. Seventy-three percent of Americans believe working hard is “very important to getting ahead in life.”21 That’s the highest among advanced economies, with the United Kingdom second at 60% and Germany (49%), Japan (42%), South Korea (34%), and France (25%) far behind. Instead of pinning all hopes on UBI, policymakers should focus instead on designing ambitious policies that address the need that Americans have to earn a good life.
Universal income countries
The US has tried a few basic income experiments, but most have been short-lived small-scale trials.
Alaska is an exception. Since 1982, the state has given each citizen an annual check just for being alive, effectively wiping out extreme poverty. The money — which can range from around $2,000 per person when oil prices are high to $1,000 in cheaper gas years — comes from the Alaska Permanent Fund, a state-owned investment fund financed by oil revenues.
Economists investigated whether the payment was leading people to work less and found that “the dividend did not affect employment” overall. (It has affected fertility, encouraging families to have more kids. It’s also had some unexpected effects on the state’s politics.)
Another long-running program is the Eastern Band of Cherokee Indians Casino Dividend in North Carolina. Since 1997, revenue from a casino on tribal land has been given to every tribal member, no strings attached. Each person gets on average somewhere between $4,000 and $6,000 per year. Economists found that it doesn’t make them work less. It does lead to improved education and mental health and decreased addiction and crime.
Between 1968 and 1974, the US experimented with giving cash to around 7,500 people in New Jersey, Pennsylvania, Iowa, North Carolina, Seattle, Denver, and Gary, Indiana. The money proved beneficial to recipients but did modestly reduce the hours they worked; Dylan Matthews has explained for Vox why we shouldn’t make too much of that slight reduction. What about current projects? Stockton, California, is in the midst of an 18-month experiment: It’s giving $500 per month to 125 people. The money comes from individual and foundation philanthropy, with the initial $1 million in funding coming from the Economic Security Project. The first batch of data shows the recipients are mostly spending the money on food, clothes, and utility bills. Y Combinator, which previously ran a small trial in Oakland, California, is now planning to start a new trial elsewhere in the US.
Between 1974 and 1979, Canada ran a randomized controlled trial in the province of Manitoba, choosing one farming town, Dauphin, as a “saturation site” where every family was eligible to participate in a basic income experiment. The basic income seemed to benefit residents’ physical and mental health — there was a decline in doctor visits and an 8.5 per cent reduction in the rate of hospitalization — and high school graduation rates improved, too. Nevertheless, the project, known as “Mincome” and funded jointly by the provincial and federal governments, was cancelled after four years when a more conservative party came into power.
Four decades later, another Canadian province, Ontario, was willing to try again. In 2017, the Liberal government launched a basic income pilot project in three cities: Hamilton, Lindsay, and Thunder Bay. It was supposed to help 4,000 low-income people and last for three years.
But then a new Progressive Conservative government came into power, led by Ontario Premier Doug Ford. In 2018, they cancelled the project after hearing from staff that it disincentivized participants from finding work. However, the pilot had only been active a short time, not long enough to gather the data required to support that claim. A handful of participants have since filed a class-action lawsuit against the government.
Brazil has been experimenting with cash transfers to poor families since the 1990s, and it now runs the massive Bolsa Familia program, which gives millions of people cash transfers. This isn’t a UBI since the transfers are conditional — recipients are expected to keep their children in school and visit health clinics. But the massive program has formed the backdrop for Brazilian experiments in unconditional cash transfers.
From 2008 to 2014, a Brazilian nonprofit called the ReCivitas Institute administered a basic income funded by private donors in the village of Quatinga Velho. One hundred residents received 30 reais (about $8) per month.
This year, around 52,000 people in the Brazilian city of Maricá are receiving a basic income under a new program called the Renda Basica de Cidadania (Citizens’ Basic Income). Each will receive 130 reais per month (around $35), which is expected to lift many above the poverty line. Because the money is coming out of the city budget, mostly from oil royalties, this program has the potential to stick around for a long time; it currently has no end date.
In 2017, the Finnish government decided to see what would happen if it chose 2,000 unemployed citizens at random and gave them a check of 560 euros ($635) every month for two years. Participants were assured they’d keep receiving the money if they got a job. As it turned out, the income didn’t help them get jobs, but it did make them feel happier and less stressed. The recipients also reported that they felt more trust toward other people and social institutions from political parties to the police to the courts — than they did before getting a basic income. Finland ended the trial in 2018.
In 2014, the nonprofit Mein-Grundeinkommen used crowdfunding to set up a basic income raffle. By the end of 2019, it had awarded almost 500 basic incomes to people all over the world who’d submitted their names. Each got about $1,100 per month for a year. According to FastCompany, 80 per cent of recipients said the income made them less anxious, more than half said it enabled them to continue their education, and 35 per cent said they now feel more motivated at work.
In 2019, the nonprofit Sanktionsfrei kicked off another basic income project funded entirely by private donors. For three years, 250 randomly chosen people in Germany will receive unconditional transfers of up to $466 per month, while 250 others act as a control group.
In 2017, Utrecht and a few surrounding cities kicked off a basic income experiment with 250 recipients as part of a randomized controlled trial. Some recipients got the money (around $1,050 per month) unconditionally, while others had to do volunteer work. The researchers aim to figure out which way of delivering financial assistance works best. Results are expected to be made public this May.
In 2011, Iran rolled out a nationwide unconditional cash transfer program to compensate for the phase-out of subsidies on bread, water, electricity, heating, and fuel. The government gave out sizable monthly payments to each family: 29 per cent of the median household income on average.
The program was later dialed back as some Iranians came to believe it was disincentivizing people to work. Yet economists found that “the program did not affect labour supply in any appreciable way.” The program is still running, and it’s the only such program in the world to run nationwide.
The largest and longest UBI experiment in the world is taking place in Kenya, where the charity GiveDirectly is making payments to more than 20,000 people spread out across 245 rural villages. As part of this randomized controlled trial, which started in 2016, recipients receive roughly 75 cents per adult per day, delivered monthly for 12 years.
Some preliminary results will be available later this year. In the meantime, we’ve already seen that in another GiveDirectly program in Kenya, cash transfers have stimulated the economy and benefited not only the recipients themselves but also people in nearby villages.
Between 2008 and 2009, all residents below the age of 60 living in the Otjivero-Omitara region of Namibia received a basic income: 100 Namibian dollars ($6.75) per person per month, no strings attached, regardless of their socioeconomic status. Funding came from private donors in Namibia and around the world.
As a result, child malnutrition dropped and school enrollment rates went up, while poverty-related crime (like theft) fell, according to reports from BIEN and the Center for Public Impact. However, a lack of alignment with the national government meant that the pilot project was never rolled out nationwide.
Between 2011 and 2012, a pilot project in the state of Madhya Pradesh gave a basic income to some 6,000 Indians. The project, coordinated by the Self-Employed Women’s Association and funded by Unicef, included two studies.
In the first study, every man, woman, and child in eight villages received a monthly payment: 200 rupees ($2.80) for adults and 100 rupees for each child (paid to the guardian). After one year, the payments increased to 300 and 150 rupees, respectively. Meanwhile, 12 similar villages received no basic income, acting as a control group.
In the second study, one tribal village received an income of 300 rupees per adult and 150 rupees per child for the entire trial. Another tribal village acted as a control.
The results: Receiving a basic income led to improved sanitation, nutrition, and school attendance.
In 2011, following years of budget surpluses and under pressure to help poor and elderly people, Hong Kong tried out a program called Scheme $6,000. All adults with a valid Hong Kong permanent identity card — some 6 million people — were eligible to receive a one-time giveaway of HK$6,000 ($772) each. The public had a host of complaints about the program — for example, that administrative costs were eating up too much of the money that could go to citizens — and it only lasted one year. However, it was briefly revived in 2018 thanks to another budget surplus and the round of pressure to help the needy.
Macao, an autonomous region on the south coast of China, has been experimenting with basic income since 2008 when it began giving small but unconditional transfers to all residents — around 700,000 people — as part of a Wealth Partaking Scheme. Each year, local residents get around 9,000 patacas ($1,128) and nonpermanent residents get around 5,400 patacas ($672). Unfortunately, critics say these sums are too paltry to make a real dent in poverty.
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