The concept of universal basic income (UBI) dates back centuries with its roots in the American Revolution and the founding of America. Founding Father Thomas Paine and English radical Thomas Spence first introduced the economic theory where all citizens are guaranteed a basic income for living expenses. Since then, the theory has been forgotten, reintroduced, and embraced—or at least considered—by certain countries, such as Finland, Switzerland, Canada, India, and Kenya. Even some cities in the United States have implemented certain trial versions of UBI to test whether the concept could be applied on a large scale.
Though the notion that the federal government would pay Americans, without condition or expectation, may seem far-fetched on the surface, research suggests that it could have many positive effects on the economy, from boosting worker creativity and entrepreneurship to staving off economic disasters. Sluggish U.S. wages and the rise of automation in the workplace have made the concept of UBI more relevant now than ever. But what, precisely, is UBI, and how would it work? Read on to learn more.
A universal basic income is a fixed amount of money that a government allocates to its citizens on a regular basis. Unlike programs such as welfare or social security, which have conditional eligibility criteria, most UBI proposals call for the federal government to pay everyone, regardless of earnings or employment status. Suggested payments hover around an annual $10,000 to be paid in weekly, monthly, or yearly increments. Some experts suggest an additional sum for adults with children. Whatever the schedule, most proposals agree that these payments would have no strings attached to support a basic standard of living.
Universal basic income may sound like something pulled from an overzealous progressive think tank, but the idea can be traced back to Thomas More’s 1516 novel, Utopia, and has surprisingly broad appeal. According to Nature, progressive politicians view UBI as a means to end poverty while conservatives see it as a streamlined welfare system that is simpler and less expensive than the assortment of social programs that exist today. Indeed, there are several nations and even a couple of U.S. states that currently have, or are considering, some form of UBI.
One of the biggest concerns with establishing UBI is cost. Can the government afford to cut all of its citizens a check each month? The answer is not yet clear. A report from Futurism projects that UBI of $10,000 per person, per year, would cost the U.S. government about $3.2 trillion. If the state were to restrict UBI to citizens who make less than $100,000 each year or do not receive social security, that sum drops to $1.5 trillion. Experts cite many ways the U.S. could fund UBI, including through carbon taxes, income taxes, negative interest rates, investment earnings, and sovereign wealth funds.
As with most matters of government, however, determining the potential value of a universal basic income is more complicated than merely balancing the proverbial checkbook. Such a program could replace existing programs, absorbing those funds while minimizing the expensive bureaucracy that maintained them. Perhaps more importantly, UBI is seen as an investment in people—one that may strengthen a nation and, research suggests, might pay for itself.
Experts suggest that the threat that automation poses on the U.S. workforce is both real and significant. It is also one of the most often cited justifications for establishing UBI. Futurism reports that robot-to-worker ratios are rising in factories all across the globe, and the United States’ ratio of 1.64 robots per 100 workers is already more than double the .66 global average.
As automation becomes more plentiful, it also becomes easier to produce, expounding the problem. However, risk is not limited to factory jobs alone. According to the same report, automation threatens to displace all kinds of jobs, such as construction workers, truck drivers, farmers, fast food cooks, and mail carriers. From a different perspective, automation threatens more than 40 percent of jobs in New York City and roughly half of all jobs in Los Angeles and Las Vegas.
Universal basic income could help soften the blow of humans losing jobs to machines by providing a safety net to sustain displaced professionals while they train themselves for new positions and explore other industries. Some even suggest that UBI would offset lost jobs, boost the economy and stimulate innovation and freelancing, according to FastCompany.
Enhancing quality of life is perhaps one of the most obvious perks of instituting UBI, but it is also one of the most profound. Several countries have experimented with UBI programs, and the results suggest they do more than cover the cost of food. Nature reports, for instance, that an experimental program in Dauphin, Canada called Mincome established UBI for the town’s most impoverished residents over the course of four years. Researchers found that:
Another notable (and ongoing) experiment in UBI comes from within the United States: Alaska. Alaska has had a version of UBI since 1982. The program, called the Permanent Fund Dividend, pays all Alaskan residents a uniform sum every year. The amount varies, corresponding to the average five-year interest earned in a fund derived from oil mining revenues, but is the same for everyone, regardless of age or employment status.
Quartz reports that in recent years, the annual dividend check has reached more than $2,000 per person. The interesting result of this project has been that full-time employment did not change at all and that the part-time jobs in Alaska increased by 17 percent. What’s more, consumer spending and saving increased, poverty declined, and many of the health and social problems associated with poverty lowered as well.
One of the common misconceptions about establishing UBI is that “free” money disincentivizes work and undermines the national workforce. According to Ioana Marinescu, a professor at the University of Pennsylvania and author of the recent paper on the potential of UBI, the results in Alaska suggest otherwise.
Her research found that on average Alaskans work at the same rate as comparable states. What’s more, women were more likely to join the workforce because they were able to invest in things that would make it easier for them to work, such as cars and childcare. “If you’re going to only work part-time, it may not be worth it to go to work,” she said. “But if you have some money that relaxes your constraint, say you can buy a car or whatever it is that you need to do, then you might be able to work.”
People who have money tend to spend it, pumping revenue into the community while stimulating jobs. Her research also noted that UBI tends to increase education among the most disadvantaged youth, improving the standard of living across the board.
Guy Standing, co-founder of the Basic Income Earth Network, reaffirmed to CNBC the idea that UBI boosts employment and improves mental and physical health, which results in a more capable workforce. According to Basic Income UK, this unconditional safety net can also provide workers with the breathing room they may need to challenge employers over unfair, unsafe, or otherwise degrading work conditions. The result: a stronger, happier, more inspired workforce.
According to a recent study from the Roosevelt Institute, a UBI program could add $2.5 trillion to the national gross domestic product (GDP) in eight years. Researchers went on to note that the higher the UBI payment, the more positive the impact on the economy. The UBI mentioned in this research would be funded by increasing the federal deficit instead of raising income taxes.
Some experts suggest that the UBI could not only grow the U.S. economy but also enrich it. According to Standing, the UBI safety net could resolve many of the day-to-day concerns affecting American workers, freeing them up to pursue new ideas and take careful career risks. Americans could become more creative, innovative, and entrepreneurial and the freedom to pursue additional education would only support these efforts. As more jobs are lost to automation, America’s prowess as a knowledge-based economy depends largely on the ideas and abilities of its people.
Establishing a universal basic income is not the pipe dream it once was: according to a Northeastern University and Gallup survey, almost half of all Americans now support the idea. The rise of automation, the Great Recession, and celebrity UBI endorsers such as Elon Musk and Sir Richard Branson have all ignited a fierce debate on the issue. A handful of cities and states across the country have already signed on to pilot programs, so if there ever was a time to get involved in UBI, it is now.
Those interested in the concept can get involved by joining, contributing to, or volunteering for organizations, such as the Basic Income Earth Network and United States Basic Income Action. They can also call, email, or write to their elected officials. The U.S. Government has a public database of representatives’ contact information for just this purpose.