What would you do if you knew you had a universal basic income that you could always rely on every month? Would you cut back on your working hours to take care of your children or an aging family member? Would you take a lower-paying job in a field you were more passionate about? Give back to your community? Take some extra classes to improve your job skills?
Proponents of a universal basic income argue that all of these scenarios are possible when you take away a person’s financial stress. Researchers in Germany are now starting a small trial to determine if this is true.
Universal Basic Income
A universal basic income (UBI) is a government-guaranteed payment given to citizens. The intention is to provide enough money to cover the basic cost of living and provide financial security [1].
There have been many different iterations of this plan, with some paying every citizen, some paying only those below the poverty line, and some paying only those whose jobs have been replaced by technology.
Some plans call for an increased tax on the wealthiest members of society for funding, while others argue that corporations should be the ones to foot the bill.
There have been many famous supporters of a UBI, including Martin Luther King Jr. He said in 1967 that a guaranteed income would abolish poverty. Economist Milton Friedman proposed a negative income tax scheme, wherein those who fell below the poverty line received a tax credit.
In his book, “Fair Shot”, Facebook co-founder Chris Hughes argued that workers, students, and caregivers making less than fifty thousand dollars per year should receive five hundred dollars each month, financed by taxes on the top one percent of income-earners.
“a small group of people are getting very, very wealthy while everyone else is struggling to make ends meet,” he said [1].
Others say that a universal income is inevitable, and is the only solution to an increasingly automated economy.
UBI in Germany
The German Institute for Economic Research is about to begin a three-year-long trial to determine how a UBI affects the economy and recipients’ well-being. Through private donations, 120 citizens will receive 1200 euros (1430 US dollars) every month for three years, which is just above Germany’s poverty line [2].
Researchers will then compare the recipients’ experiences with another group of 1380 people who will not receive the monthly payment. The participants will complete questionnaires about their lives, work, and emotional state, to find out if the basic income has a noticeable impact.
Jürgen Schupp, the lead researcher for the study, says that it will improve the debate over a UBI by adding some new scientific evidence to the discussion.
“The debate about the basic income has so far been like a philosophical salon in good moments and a war of faith in bad times,” he said [2].
Schupp says that both sides of the debate are operating off of assumptions and not facts. Those against a UBI say that it will make people lazy, those for a UBI say it will do the opposite.
“We can improve this if we replace these stereotypes with empirically proven knowledge and can therefore lead a more appropriate debate.” [2]
A group in Finland led a similar experiment from January 2017 to December 2018, in which they gave unemployed participants 560 euros per month. The researcher behind this trial, however, concluded that while the money did improve recipients’ happiness, it did not lead to increased employment [2].
Read: Finland Ends Homelessness and Provides Shelter For All in Need.
The Pros and Cons of a Universal Basic Income
A universal basic income has been the topic for heavy debate for a number of years now, and both sides of the argument present valid points. Let’s have a look at them:
Pros
A UBI could allow workers to wait for a better job and negotiate better wages. It could also replace the existing welfare program, in which recipients lose their food stamps, medical care, and housing vouchers if they start making too much money.
With a basic income, citizens could return to school, or reduce their working hours to take care of an aging or sick loved one. It would also give young people enough money to start a family, and would help to stabilize the economy during recessions [1].
Cons
Opponents of a UBI say that giving everyone a basic income could cause an increased demand for goods and services and lead to inflation. They argue that it would not increase the standard of living in the long run, because inflation would make the basics even more expensive, and therefore unaffordable.
They also say that a free income would not incentivise people to get jobs, and there are many who are opposed to giving handouts to people without jobs [1].
Is a UBI Financially Possible?
The answer to that question is unclear. Economic journalist Annie Lowrey believes a UBI in the United States would have to be one thousand dollars per month, which would equal about 3.9 trillion dollars per year.
Lowrey suggests that new taxes on income, carbon, estates, pollution, and other areas would be required to pay for a UBI like this. She also notes, however, that other major initiatives in US history were not paid for, and yet still happened, insisting that if the country wants something to happen, they make it happen.
“The Bush tax cuts were not ‘paid for.’ The wars in Iraq and Afghanistan were not ‘paid for.’ ” she said [3].
So far, however, a program like this has not been tried on a national scale. Pilots have run in Finland, Canada, the Netherlands, Scotland, and Iran, and there are a few trials set to start in various municipalities in the United States, but the results from many of these studies have yet to be realized.
Interestingly enough, a UBI actually gets a significant amount of support from many of the country’s wealthiest citizens. Elon musk says it will be necessary, and Richard Branson says it will provide a sense of self-esteem for people.
Because it gives everyone a boost from the beginning, the wealthiest individuals in a society can believe they amassed their wealth based solely off of their own merit, and feel less guilty as they gain more wealth.
UBI: A Future in America?
So will a universal basic income become a reality in the United States? As of now, it is difficult to say yes with one hundred percent certainty. There are many among both wealthy, middle, and lower-class who support the idea, and those who believe that it is the only way forward.
As the world becomes increasingly technological, and the job market begins to shrink, something will need to be done in order for people to cover their basic needs. There is little doubt that the experiment in Germany will yield happier people, but will it benefit the economy? Only time will tell.