Originally published June 2021.
The costs have been exaggerated and the benefits are ones that every modern society should welcome.
There has been a lot written lately about universal basic income (UBI). Some are in favour, explaining the economic and societal benefits; others decry the principle and detail why they think it would lead to the ruination of our cities and a demotivated workforce.
As with most things in life, the answer is not linear. There are a number of nuances worth noting as UBI is further exposed to public and private scrutiny. Let’s start from the very beginning – which, as noted in “The Sound of Music”, is often the very best place to start. We live in a society where many people struggle to live an economically sustainable lifestyle. The cost of housing relative to average income is at an all-time high, private rented accommodation is often out of reach, and properties that fall under the social housing umbrella are fewer than for previous generations. The gap between the ‘haves’ and the ‘have-nots’ is often cited as increasing, and the determinant of how we experience life is very much our financial situation.
There is a temptation to either oversimplify or over-intellectualise what UBI means and the impacts it will have. In essence UBI is a government programme that provides for every adult to receive a set amount on a regular basis. It is not intended to be a replacement for a job nor is it pegged at minimum wage level, as some commentors suggest. The goals of a UBI system are to move people out of poverty and to replace existing means-tested social benefits that typically require far greater levels of bureaucracy and management.
Although the premise of UBI has been around for centuries, it has gained greater prevalence since the turn of millennium because of the increasing role of automation – with machines, robots and code replacing tasks traditionally undertaken by human employees. The argument about whether automation will increase or decrease employment opportunities is one for another day. (Although as a reference point, the Brookings Institute in 2019 found that 25% of all US jobs are susceptible to automation.) If we accept that some roles will be lost, there will be an increase in the gig economy, zero-hours contracts will continue to exist and that we will have an ever more volatile employment market, then we should embrace the opportunities UBI offers.
UBI is unlikely to be high enough to maintain or develop a lifestyle that most people would view as enticing
Governments already spend a large proportion of their respective budgets on supporting their citizens – not only in direct financial support but also in terms of healthcare, education, law and order, and aged care. The first question worth exploring is whether UBI would assist those who might otherwise be left behind as a two-tier economy continues to develop. The answer to this, no matter whether you believe UBI to be affordable or not, must be yes.
UBI is unlikely to be high enough to maintain or develop a lifestyle that most people would view as enticing. What it does offer is support and an income supplement for those on lower incomes or in part-time work. The challenge with existing benefits is that as soon as someone starts to earn what might be loosely classified as a living wage, their benefit payments are reduced and they find themselves in a situation where working in a low-paid job with commuting and childcare costs just isn’t economically viable. Therefore the individual in question can take a view that remaining in the benefit cycle is their only option.
Universal basic income gained mainstream attention during the last presidential election campaign, with Democratic candidate Andrew Yang making it a cornerstone of his run to win the party nomination. His approach was to give every US citizen $1,000 each month. UBI unlocks the option to look for a better job, study or take on an entrepreneurial quest – as well as simply providing a fallback to give people greater security. While Andrew Yang was ultimately unsuccessful in his campaign, the fact that such a high-profile politician focused so sharply on the topic has ensured that dialogue and debate continue.
The pandemic has exposed the fragility of the employment market for many. Millions of people losing their jobs and income, even on a temporary basis, is something no one wants to see. UBI would have offered the security that many craved and allowed them to continue to spend to support other businesses and thereby reduce the risk of others seeing their jobs evaporate. Over the course of the past year, we have seen a number of funding methods employed by different governments – such as the CARES Act in the US pumping $2tn into the economy, including a one-off $1,200 for every qualifying adult. Across the UK and the EU we have seen different versions of furlough and financial support, in a hurried approach to a terrible event. UBI would have supported the economy, keeping constant the flow of money through people to businesses.
Political, business and religious leaders have advocated for the introduction of UBI. Pope Francis positions the need for UBI as a moral issue, saying that “it would ensure and concretely achieve the ideal […] of no worker without rights”. There is a natural fear of the new, however – and UBI, for all the dialogue we’ve seen over centuries, is still a ‘new’ idea and one that makes many nervous.
The money to fund UBI has to come from somewhere, of course. Suggestions have been made to raise levels of purchase tax, to expand business taxation, or to increase the notional deficit. The focus of those opposed to UBI remains on the cost as opposed to the value created in societal terms. There is, hopefully, a general acceptance that taking people out of poverty is a good thing. Enabling families to have the funds to buy food and secure accommodation that allows them a healthier environment is something to which we should surely all aspire.
There is, hopefully, a general acceptance that taking people out of poverty is a good thing
A fear that UBI would change the behavioural characteristics of the workforce is one that many have expressed. The main suggestion here is that UBI would take away people’s incentive to look for work or to improve their situation. An aligned idea is that UBI would decimate our cities as people would no longer desire to live in a central, multicultural, connected city. However, evidence collated by MIT, Harvard and the Finnish government (following a two-year experiment in UBI) showed no disinclination to look for other work. The recipients of UBI were no more or less likely than other members of society to adjust their search for new employment opportunities. The idea that cities would become less attractive does not make any sense; people have always flocked to cities, whether the richest or poorest in society. The attractiveness of cities is likely to increase as people will be more able to afford to leave their current situation to move to an attractive city, thanks to the certainty of a continued income.
The implicit reduction in requirements for healthcare (as a result of people having more money to spend on food, housing and utilities), a reduction in people committing crimes to support their lives (not all crimes are committed to put food on the table, but some are) leading to a decrease in the prison population, and an increase in the educational attainment of pupils (thanks to a more secure home life) will all lead to lower costs for the government and a higher potential for individuals across society.
People deserve the opportunity to feel secure. Society benefits when people feel safe. There is no reason UBI cannot be rolled out successfully without bankrupting any countries. The world has changed, technology has changed, and expectations have changed – but as yet many are reluctant to accept the need for adaptive change in response to all this. The biggest fear is fear itself. UBI should be embraced and accepted.
