Universal Basic Income — What is It?
Universal Basic Income: Government program that provides every adult citizen a set amount of money on a regular basis.
Currently no countries have permanently enacted a Universal Basic Income, but there have been various studies and experiments across the globe that have demonstrated the possible effects.
Every UBI plan can be different especially in terms of amount, design, operation, monitoring, financing, etc.
Below are some results to Finland’s trial with UBI. The test group (blue) is those receiving a UBI and the control group (red) is the average citizen.
The intent is to provide cash relief to ensure everyone has the means to live comfortably. Very often families find themselves having to choose whether to pay the electricity bill or buy groceries that month.
Difference in Opinions:
In Favor of UBI:
- Reduces poverty and income inequality, while also improving health.
- Leads to positive job growth and lower school dropout rates.
- Guarantees income for non-working parents/caregivers.
Against UBI:
- Takes money from the poor and redistributes to everyone, increasing their poverty and decreasing their targeted support.
- Removes work incentive and affects the economy.
- Costs too much money.
Experimental Trials:
Critics state that “No trial conducted so far has provided any indication of whether governments could afford such a large-scale program.”
Stockton, California is currently giving $500 per month to 125 people. The money comes from foundational and indidual philanthropy. Originally a $1 million funding donation came from the Economic Security Project. Most spent their money on food, clothes, and utility bills.
Alaska is the only income experiments that isn’t temporary. Since 1982, each citizen gets an annual check ranging from $1,000 — $2,000 depending on oil revenues. Economists found that the payment has not led people to work less, but has encouraged families to have more children.
New Jersey, Pennsylvania, Iowa, North Carolina, Seattle, Denver, and Gary, Indiana all experimented with giving cash out between 1968 and 1974. A small reduction in hours worked did occur.
Finland, from 2017- 2018, found there was no effect on employment after the first year. Those receiving a UBI reported to be less stressed, healthier, and financially stable.
Canada preformed a trial between 1974 and 1979 where they chose one farming town to provide every family with a basic income of close to $11,000 annually. A large decline in both doctors visits and rate of hospitalization occurred.
Ontario, Canada was willing to try out basic income again and launched three pilot programs intended to help 4,000 low-income people and last for thee years. In 2018, a new conservative government came into power and cancelled the program due discouraging participants from finding work. Many participants have filed a class action lawsuit against the government in response to the pilot being active for such a short time.
Brazil has just recently provided 52,000 people receiving around $35 a month. The money is from the city budget, mostly oil royalties, making it a potential to sttick around. It currently has no end date and is expected to lift many above the poverty line.
Germany has started a new basic income experiment in reponse to the Covid-19 pandemic. 120 Germans are receiving about $1,500 every month for three years. They fill out questionnaires about how the cash is benefiting their well-being, home life and work life. These reposnses will be compared to a control group of 1,400 people not recieving a UBI.
How Would We Fund This?:
Recently there has been two proposals that suggest various ways to fund this type of program; one from Andrew Yang and one from Mitt Romney. I am going to review these two, but there are various other ideas to fund such plan that you can find online.
- Andrew Yang — Freedom Dividend (A form of UBI)
Yang proposes funding this dividend by consolidating some welfare programs and implementing a Value Added Tax (VAT) of 10%. A VAT is a tax on the production of goods and services that a business produces, not including groceries or clothing. 160 out of 193 countries have this tax, or one similar. All of Europe has an average VAT of 20% This tax becomes more important the more technology improves; you cannot collect income tax from robots or software resulting in more corporations finding a way out of paying taxes. A VAT at just 10% would generate $800 billion in new revenue. Finally, he wants to end the favorable tax treatment for capital gains by removing the Social Security cap and implementing a financial transactions tax (FTT). FTT is a tax on the buying and selling of financial assets, you can read more about the FTT here.
- Mitt Romney — The Family Security Act (A form of UBI)
Romney plans to replace the current child tax credit and replace it with a once-a-year bonus income support. This would be funded by the Social Security Administration. The current tax credit is restricted to parents with substantial income, making it regressive. Changing it to a specific monthly allowance for ALL parents would make it progressive. This bonus would offer parents with ages 0–5 would receive $350 per month, and parents of kids ages 6–17 would receive $250 per month. Parents with multiple kids are capped at $1,250 per month. This proposal would eliminate some tax breaks and spending programs that currently exist. It is estimated that only 12% of families with children benefited from the current credit in 2020. In comparison, Romney’s plan would be to credit close to 100% of families. To read more about the current proposals that would be eliminated in Romney’s Family Security Act, click here.
Opinion Interview — My Dad (51yrs) vs. My Roommate (21yrs):
Do you support the United States providing a form of Universal Basic Income? If yes, are you concerned about the issues revolving around funding or the idea that motivation to work will be lost? Please explain why or why not. If no, why?
- Phoebe (Roommate): “I do support the United States providing UBI! I am not concerned about funding. I believe it can be funded through a Value Added Tax or by reallocating existing tax dollars. I don’t think people will lose motivation due to UBI because it is human nature to stay productive and create.”
- Bill (Dad): “I support some form of UBI that puts money in people’s hands for immediate use. The multiplier effect of giving one person $1,000 a month has an enormous effect on the economy. It increases disposable cash for people to spend. This spending puts more cash in business hands to hire people and increase productivity which ultimately improves quality of people’s lives.”
Despite concerns about funding, do you believe overall people would benefit from some form of a cash dividend?
- Phoebe (Roommate): “ I think everyone would benefit from UBI whether it was for paying rent or paying off medical debt or creating an emergency fund. Also people will be able to pursue more creative jobs and our society would benefit as a whole.”
- Bill (Dad): “Yes the benefits can lift people up from poverty and raise their self esteem by having money to educate or invest in themselves. It can help one save up to buy a home or pay off debt.”
Do you think we should stray away from the classic UBI, and create a dividend that people are eligible to receive as long as they are following some expectation? For example, eligible if working or actively looking for work if physically capable?
- Phoebe (Roommate): “I think that UBI should be guaranteed because eligibility cannot be equitably determined. Everyone has their own unique situation that can’t be regulated universally.”
- Bill (Dad): “A form of a cash dividend can accomplish similar goals as a UBI but is distributed on a means test basis. No such social payment should be given to people who do not need it. The primary purpose and target recipients should be people and families who are in need and not people or families who are endowed with generational family wealth.”
What would you use a basic income towards? Food, bills, education, investment, etc.
- Phoebe (Roommate): “If I received a Universal Basic Income, I would be able to be less dependent on my parents!”
- Bill (Dad): “The UBI should only be permitted for family essentials such as food, clothing, education, bill payment, debt payment, housing, etc. It should not be used for discretionary spending, such as vacations , luxury items, second cars, etc. However if implemented I would use my UBI to help pay for my children’s college education, or invest it.”
More Information:
- The documentary “UBI, Our Right to Live” is 40 minutes long and discusses the history of UBI. It contains various interviews with the founders of the UBI movement.
- Andrew Yang’s book The War on Normal People discusses how jobs are rapidly disappearing and why he believes UBI will help our future. You can purchase a Hardcover, Paperback, Kindle, or Audiobook by clicking on any of the attacked links.
Work Cited:
Charlton, E. (2019, February 12). The results of Finland’s basic income experiment are in. Is it working? World Economic Forum. https://www.weforum.org/agenda/2019/02/the-results-finlands-universal-basic-income-experiment-are-in-is-it-working/
Cox, D. (2020). Canada’s forgotten universal basic income experiment. BBC Worklife. https://www.bbc.com/worklife/article/20200624-canadas-forgotten-universal-basic-income-experiment
Matthews, D. (2021, February 4). Mitt Romney’s checks plan: up to $350 per month, per kid for parents. Vox. https://www.vox.com/future-perfect/22264520/mitt-romney-checks-parents-4200
Miller, C., & Tyger, A. (2021, February 18). The Impact of a Financial Transaction Tax. Tax Foundation. https://taxfoundation.org/financial-transaction-tax/
Preliminary results of the basic income experiment: self-perceived wellbeing improved, during the first year no effects on employment. (2019, August 2). [Press release]. https://vatt.fi/en/-/perustulokokeilun-alustavat-tulokset-hyvinvointi-koettiin-paremmaksi-ensimmaisena-vuonna-ei-tyollisyysvaikutuksia
Samuel, S. (2020, October 20). Everywhere basic income has been tried, in one map: Kenya; Iran; Alaska; Stockton, California; and more. Vox. https://www.vox.com/future-perfect/2020/2/19/21112570/universal-basic-income-ubi-map
Universal Basic Income — Top 3 Pros and Cons. (2020, July 17). ProCon.Org. https://www.procon.org/headlines/universal-basic-income-top-3-pros-and-cons/
Universal basic incomes. (2016, June 6). The Economist. https://www.economist.com/the-economist-explains/2016/06/05/universal-basic-incomes
