What is Universal Basic Income?
Universal basic income (UBI) is a policy concept that involves providing a set, regular payment from the government to every citizen. It aims to establish an income floor and meet basic needs regardless of employment status or wealth.
While specifics vary, most UBI proposals suggest an equal monthly payment distributed to all adults or households. It would not phase out or have conditions like work requirements. This uncomplicated cash transfer contrasts standard welfare programs with extensive regulations and eligibility restrictions.
Now gaining mainstream momentum, UBI has moved from fringe theory to serious policy contender. Let’s examine the history, evidence, considerations and future of a seemingly radical idea.
A Brief History of UBI
Universal basic income may sound like a new, untested proposition, but variations on the concept have been floated for centuries. In 1516, philosopher Thomas More proposed a welfare system to guarantee citizens a means of survival in his book Utopia. In 1795, American revolutionary Thomas Paine advocated a “citizen’s dividend” funded by taxing landowners to provide all people basic financial security.
The idea further evolved in the 19th and 20th centuries through Henry George, John Stuart Mill, Bertrand Russell, and Huey Long’s “Share Our Wealth” platform. Martin Luther King Jr. promoted UBI to address poverty stemming from discrimination. Free-market economist Milton Friedman proposed a “negative income tax” version in the 1960s.
The first real-world UBI style program came about in the 1970s when the Canadian town Dauphin provided stipends to its poorest citizens. Around that time, Alaska began distributing some of its oil revenue proceeds as an annual dividend to all state residents. Since then, a growing list of countries has experimented with various basic income pilots and policy proposals.
With concerns about job insecurity and income inequality on the rise, UBI has gained serious mainstream momentum. What was once considered a radical idea is now a policy proposal taken seriously across partisan lines.
UBI Experiments Around the World
While intellectual debate continues, many direct tests of UBI have already provided real-world data. From Kenya to California to Finland, basic income pilots reveal intriguing clues about potential impacts. Let’s examine some major experiments:
Canada
In the 1970s, the Canadian town of Dauphin, Manitoba conducted a novel experiment known as “Mincome.” For 5 years, all residents below a certain threshold received monthly stipends to lift them out of poverty. Analyst Evelyn Forget tracked down old records and found that only two segments of the population worked substantially less during the program – new mothers and teenagers. The time was used for education, family care and pursuing personal goals. Meanwhile hospitalization rates fell 8.5% in Dauphin, particularly for accidents and injuries. Many families lifted themselves out of poverty. Today, many view Mincome as demonstrating UBI’s potential for social uplift at little cost economically.
Namibia
From 2008 to 2009, the Basic Income Grant (BIG) pilot provided a regular payment to residents of Otjivero-Omitara, a Namibian village plagued by unemployment and poverty. Within just 12 months, child malnutrition fell from 42% to 10%, school dropout rates declined, economic activity spiked, and healthcare access improved. However, financing and political challenges have hampered efforts to scale nationally. While a major anti-poverty success story, the future of BIG in Namibia remains uncertain.
India
In 2011, UNICEF partnered with the Indian state of Madhya Pradesh to trial a basic income program in selected villages. All adults received a monthly unconditional cash payment. Reports found improved sanitation, nutrition, school attendance, and healthcare access. While small in scale, many viewed this pilot as an instructive success. The program ended after 18 months due to administrative changes in the state government.
Kenya
GiveDirectly, a development nonprofit, launched a 12-year UBI study on poor villages in Kenya beginning in 2016. Initial findings after 2 years show a boost in assets and food security with no drop in work activity. Many used the income to pay down debt, start businesses, and cover urgent medical needs. GiveDirectly plans to continue tracking these recipients for over a decade to better understand long-term impacts. Early data indicates great promise in poverty alleviation.
Finland
In 2017 Finland launched a UBI pilot targeted at unemployed citizens. For two years, 2,000 people collected a monthly €560 stipend with no work requirements. The test ended as scheduled in 2018 with inconclusive employment impacts but improved wellbeing and health markers. The experiment received heavy criticism for limited scope and lack of a true control group. While praised by some as demonstrating UBI’s positive social effects, the flaws make labor data and policy conclusions difficult.
Iran
In 2011, Iran replaced longstanding food and fuel subsidies with a nationwide cash transfer program. All citizens now receive a regular monthly basic income of approximately $40 per person, deposited directly into their bank accounts. This subsidy represents about a third of the median per capita household income.
When the program launched, critics expressed concerns about disincentivizing work. However, research indicates no negative effects on productivity or employment. In fact, labor force participation, especially among women, has seen slight increases. This suggests that at moderate levels, a guaranteed income may empower people to invest in work and education. Iran demonstrates the huge scale at which unconditional cash transfers are possible.
The Netherlands
In select cities across the Netherlands, a two-year basic income pilot ran from 2017 to 2019 to test welfare reform ideas. The program had three approaches – relaxing job-seeking requirements, intensifying employment coaching, and allowing earnings on top of benefits.
Early results showed no significant impacts, positive or negative. But most municipalities were content and public attitudes grew more favorable toward basic income. While inconclusive, this small, decentralized experiment did indicate many Dutch are open to rethinking their social safety net. More rigorous testing would be needed to draw policy conclusions.
The Continuing Debate Over UBI
Given the limited but insightful experiments so far, UBI appears poised for more widespread adoption. However, thoughtful policy debate continues around potential benefits versus drawbacks. Here are some key discussion points:
Cost and Funding
Perhaps the most frequent criticism of UBI is its huge price tag. Implementing an income floor for all citizens requires substantial tax revenue. Most proposals suggest possible funding sources like a value-added tax (VAT), carbon tax, or consolidation of existing welfare programs. Alaska’s oil revenue dividend demonstrates a scaled approach funded from common natural resources. Creative funding solutions remain imperative for fiscally sustainable UBI.
Employment and Productivity
Another common concern is that UBI could lead to voluntary mass exit from the workforce. However, experiments show minimal effects on productivity. In Canada’s Dauphin, part-time work increased 11% during UBI. But total hours worked only dropped 1-3%, primarily by mothers and teenagers. With income security, UBI may empower more career mobility, entrepreneurship, and creativity. Evidence does not support fears of widespread work disincentives.
Economic Growth
By putting money in the hands of lower-income consumers who spend it, UBI circulates through local businesses stimulating broad economic growth. The Roosevelt Institute estimated a permanent GDP increase of 12.56–13.1% from UBI implementation. With financial stability, people also take more personal, professional, and health risks that can drive innovation. UBI seems to show great promise for boosting prosperity.
Inequality and Poverty
Research shows that simply providing cash is one of the most effective approaches for alleviating poverty. UBI has immense potential to essentially eliminate destitution. However, it alone does not address systemic inequality causes like discrimination or unequal access to jobs and education. UBI should be viewed as complementary to, not a replacement for, other programs promoting opportunity and social equity.
The Road Ahead: Bringing UBI Into Reality
The experiments and data so far make a compelling case for UBI’s potential, if thoughtfully implemented, to positively transform lives and economies.
According to the Roosevelt Institute, a UBI in the US would permanently grow the economy by 12.56–13.1% by putting money in the hands of lower-income consumers. Research shows cash transfers are one of the most effective tools for alleviating poverty. UBI could essentially eliminate destitution if administered at a level that provides basic needs.
Concerns about disincentivizing work seem largely unfounded based on real-world UBI experiments. Programs in the US, Iran, Kenya and elsewhere suggest minimal to no reductions in employment from guaranteed income systems. In fact, UBI appears to empower more beneficial labor force changes like job retraining, entrepreneurship, and addressing unpaid care work.
Administratively, UBI removes bureaucracy, eligibility audits, and perverse welfare incentives. By simplifying the social safety net to direct cash payments, it reduces inefficient administrative costs and obstacles to support for those in need.
Financing a UBI transition remains a challenge. But proposed funding mechanisms like a VAT, carbon taxes, reduced defense spending, and consolidating other welfare programs could cover costs in a deficit-neutral way.
With the right policy design and continued research, universal basic income exhibits potential to bring about greater prosperity, equity, and economic security. The long-term evidence indicates UBI merits serious consideration among policies aimed at improving human wellbeing.