Topic: Universal Basic Income

A 8,000 square meter poster is pictured on the Plainpalais square in Geneva

What if we could replace our current welfare system, and provide a baseline income for not only poor, but all individuals?

UBI is such a radical economic idea in the context of current America. This independent, everyone for themselves, mentality of our capitalist nation will reject this idea immediately. However, as more countries are beginning to test this idea in specific regions, it’s interesting to explore the advantages and disadvantages of UBI.

The main argument for UBI is that it provides economic and social security, as well as financial independence and freedom. People can use this security to explore entrepreneurship or gain education and set up for a promising career. An Alphachat podcast titled “Radical economics, rethought”, argues this point that UBI might be a solution if jobs in the future get affected by technology and workers find their skills in low demand. If UBI is in place before this happens, it gives them freedom and encourages the risk to leave that job to find a high growth industry and retrain. A UBI would have avoided this cliff-edge that’s been happening in manufacturing and putting people in desperate situations. They wouldn’t be stuck in their job and have some means to find a better future for themselves and pursue their talents.

Other advantages to consider:

  • Will people’s well-beings and happiness be improved, offsetting healthcare costs?
  • Increased bargaining power with employers, who will have to offer more competitive packages.
  • Studies show that cash transfers are much more effective than charities, and technology could make overhead nearly nonexistent. A 2015 World Bank study found that skills training and microfinance “have shown little impact on poverty or stability, especially relative to program cost.”
  • Consolidating welfare programs- current programs waste too much money and don’t do enough to help.
  • Destigmatizes welfare
  • If only citizens could get it, would there be less tension between how citizens feel about immigrants?

A minimum income experiment was conducted in a town called Dauphin in Canada in the 1970s for 5 years, and economist Evelyn Forget conducted an analysis on the results which were largely positive.

  1. Hospitalization rates had fallen by about 8.5% compared to the control group- possibly due to more choice in jobs and less work-related injuries
  2. High school completion rates increased as boys in low income families used to be under pressure to become self-supporting.
  3. Adults with full time jobs dont actually reduce the number of hours they work by that much
  4. Women who just had a baby took more time off

The main argument against UBI is really if humans will become lazy slackers and UBI will give them no incentive to work. A UBI essentially places a huge marginal tax rate on going to work if you have low skills. This becomes the major debate point of whether or not UBI could achieve its goal of getting more people to work. Critics argue that UBI would be socialism, but proponents champion it as a way to activate the unemployed.

Freakonomics podcast “Is the World ready for a UBI” says that every conversation comes back to the idea of the value of work. Not only is there a financial payoff, but a moral payoff; people find meaning in contributing to society, and that fabric would get tampered with. However, Silicon Valley entrepreneur Sam Altman argued that basic income could still support productivity despite those who don’t work, “Maybe 90 percent of people will go smoke pot and play video games. But if 10 percent of the people go create new products and services and new wealth, that’s still a huge net win.”

Other disadvantages to consider:

  • Costs: If every American were to receive just $10,000 a year, the tab would be roughly $3 trillion a year, roughly eight times what the United States now spends on social service programs.
  • Would this also work logistically? What about fraud?
  • Would people move to the country?
  • Poor people don’t spend money wisely. But Mullainathan and Shafir, in a 2013 book, argue that it’s because they don’t have money, that they make poor financial decisions.
  • Will there be resentment from the middle class or the rich? A fair point, but UBI will also give them extra cash and more importantly, bargaining power. Most Americans don’t have savings to cover a high expense emergency and UBI would make sure that this will not be a problem.

UBI around the world:

  • Finland is experimenting with about 2,000 unemployed workers getting UBI starting in 2017. It’s probably the largest scale program at this point and has a two year trial.
  • Switzerland voters recently rejected a UBI in 2016 of a monthly sum of $2600 to each adult in the country. 77% of people opposed the plan.
  • The Dutch city of Utrecht and a few nearby cities in the Netherlands is conducting an 2 year experiment to give 250 citizens who are currently receiving benefits, UBI instead, a flat sum of ~$1100 per month.
  • A Silicon Valley start-up incubator, Y Combinator, is preparing a pilot project in Oakland, Calif., in which 100 families will receive unconditional cash grants ranging from $1,000 to $2,000 a month.
  • The French Senate, in 2016, committed to testing basic income in France, through 3-year pilots involving up to 30,000 citizens.
  • Ontario, Canada, plans to roll out a pilot for UBI, in three cities, possibly in the spring of 2017.
  • India included a UBI question in an annual survey drafted by the government’s chief economic advisor, hinting at its possibility.
  • Annie Lowrey in New York Magazine “The Future of Not Working” and Alphachat “UBI in action” talks about the pilot in Kenya by GiveDirectly, a nonprofit organization, that is funding over 6,000 residents in 40 villages for 12 years, and 11,500 in 80 additional villages for 2 years. This will be the first true test (as many others arent offered to the entire community for such a long period of time). Many villagers discussed making plans for basic comforts they couldnt afford previously-fixing roof, buying foods, while some had entrepreneurial plans.

There is simply no conclusive answer to the effects of UBI, but all these experiments and prospects with UBI in the past two years could lead to some exciting research. I look forward to see where those take us.

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