Universal Basic Income – Top 3 Pros and Cons

Con 1

Universal Basic Income (UBI) takes money from the poor and gives it to everyone, increasing poverty and depriving the poor of much needed targeted support.

Universal Basic Income (UBI) takes money from the poor and gives it to everyone, increasing poverty and depriving the poor of much needed targeted support.

People experiencing poverty face a variety of hardships that are addressed with existing anti-poverty measures such as food stamps, medical aid, and child assistance programs. UBI programs often use funds from these targeted programs for distribution to everyone in society. [15]

According to Robert Greenstein, President of the Center on Budget and Policy Priorities, “[i]f you take the dollars targeted on people in the bottom fifth or two-fifths of the population and convert them to universal payments to people all the way up the income scale, you’re redistributing income upward. That would increase poverty and inequality rather than reduce them.” [15]

Luke Martinelli, PhD, Research Associate at the University of Bath, created three models of UBI implementation and concluded that all three would lead to a significant number of individuals and households who are worse off. He noted that “these losses are not concentrated among richer groups; on the contrary, they are proportionally larger for the bottom three income quintiles.” [37]

Research by the Organisation for Economic Co-operation and Development (OECD) in Finland, France, Italy, and the UK concluded that “rather than reducing the overall headcount of those in poverty, a BI [basic income] would change the composition of the income-poor population” and thus “would not prove to be an effective tool for reducing poverty.” [39]

UBIs are also less cost-effective than targeted welfare programs because many people lack more than just cash. UBI does not cure addiction, poor health, lack of skills, or other factors that contribute to and exacerbate poverty. [19] [24]

Anna Coote, Principal Fellow at the New Economics Foundation, and Edanur Yazici, PhD student, explain that there is “ the danger of UBI entrenching low pay and precarious work. It could effectively subsidise employers who pay low wages and – by creating a small cushion for workers on short-term and zero-hours contracts – help to normalise precarity.” UBI could become like another American tipping system in which employers pay low wages and count on customers to fill in the gap with tips. [52]

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Con 2

UBI is too expensive.

A 2018 study found that a $1,000 a month stipend to every adult in the United States would cost about $3.81 trillion per year, or about 21% of the 2018 GDP, or about 78% of 2018 tax revenue. [57]

A $2,000 a month per head of household UBI would cost an estimated $2.275 trillion annually, says Marc Joffe, MBA, MPA, Director of Policy Research at the California Policy Center. Some of this cost could be offset by eliminating federal, state, and local assistance programs; however, by Joffe’s calculation, “these offsets total only $810 billion… [leaving] a net budgetary cost of over $1.4 trillion for a universal basic income program.” [23]

The UBI trial in Finland provided participants with €560 ($673 USD) a month for two years. [21] lkka Kaukoranta, MS, Chief Economist of the Central Organization of Finnish Trade Unions (SAK), says that Finland’s UBI model is “impossibly expensive, since it would increase the government deficit by about 5 percent [of GDP].” [20]

In a Sep. 14, 2016 parliamentary debate, UK Minister for Employment, Damian Hinds, rejected the idea of UBI, saying that estimated implementation costs ranging from £8.2 billion – £160 billion ($10.8 billion – $211 billion USD) are “clearly unaffordable.” [38]

Economist John Kay, Research Fellow at the University of Oxford, studied proposed UBI levels in Finland, France, Germany, Switzerland, the United Kingdom and the United States, and concluded that, in all of these countries, UBI at a level which can guarantee an acceptable standard of living is “impossibly expensive… Either the level of basic income is unacceptably low, or the cost of providing it is unacceptably high.” [41]

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Con 3

UBI removes the incentive to work, adversely affecting the economy and leading to a labor and skills shortage.

Earned income motivates people to work, be successful, work cooperatively with colleagues, and gain skills. However, “if we pay people, unconditionally, to do nothing… they will do nothing” and this leads to a less effective economy, says Charles Wyplosz, PhD, Professor of International Economics at the Graduate Institute in Geneva (Switzerland). [33]

Economist Allison Schrager, PhD, says that a strong economy relies on people being motivated to work hard, and in order to motivate people there needs to be an element of uncertainty for the future. UBI, providing guaranteed security, removes this uncertainty. [36]

Elizabeth Anderson, PhD, Professor of Philosophy and Women’s Studies at the University of Michigan, says that a UBI would cause people “to abjure work for a life of idle fun… [and would] depress the willingness to produce and pay taxes of those who resent having to support them.” [17]

Guaranteed income trials in the United States in the 1960s and 1970s found that the people who received payments worked fewer hours. [9] And, in 2016, the Swiss government opposed implementation of UBI, stating that it would entice fewer people to work and thus exacerbate the current labor and skills shortages. [34]

Nicholas Eberstadt, PhD, Henry Wendt Chair in Political Economy, and Evan Abramsky is a Research Associate, both at American Enterprise Institute (AEI), stated, “the daily routines of existing work-free men should make proponents of the UBI think long and hard. Instead of producing new community activists, composers, and philosophers, more paid worklessness in America might only further deplete our nation’s social capital at a time when good citizenship is already in painfully short supply.” [55]

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