If you haven’t heard of Universal Basic Income, you probably will hear about it again soon in the future. If ideas were sailing ships, then think of this one as a pretty yacht that just recently adjusted its sails to make full use of the wind, and is consequently well underway, even if you can’t quite see it over the horizon, yet.
But what is it?
Universal Basic Income (UBI) is the idea that people should receive monthly stipends from the government, free of charge, to be used on essentials like housing, clothing, and food, and that have no restrictions related to the amount that one earns.
Or, to put it as basicincome.com does, “A basic income is a periodic cash payment unconditionally delivered to all on an individual basis, without [a] means-test or work requirement.”
There are two big differences between UBI and other forms of government assistance. Firstly, it is unconditional in regard to how much someone works, meaning that people don’t have to have a job in order to receive payment. Secondly, it is given out to all citizens, regardless of how much money they make.
How much money would be given out?
The ultimate answer to that question lies in other questions: How much do you want to give out? How much can the government afford to give out?
A shorter answer is that it depends on a lot of factors, so there’s no set number.
There are, however, some trials of Universal Basic Income taking place around the world.
€560 (about $590) per month is given to 2000 participants in Finland
Approximately $1138.11 to singles and $1609.59 to couples per month in Canada to 400 residents. 1
Approximately $121 to $2041.33 per month to families in Barcelona, Spain.
$23 per month to hundreds of villagers in Kenya. 2
$1000 per month to people in Oakland.
So, each trial varies somewhat wildly in terms of amount, number of participants, and in length, but all are trying to see if UBI works.
If it works? What does that mean?
We really don’t know if UBI will work. That’s why we’re running the trials. To be fair, it has the potential to prove to be better than other forms of government assistance, which is often accused of being wasteful and killing the incentive to work. Proponents of UBI claim that it will not fall prey to the same issues, due to its uncommonly-unrestricted nature.
There are two groups of people who are pushing for UBI to be implemented.
The first is a group I’m going to call ‘futurists.’ These are the people that are thinking about how the world will be in the future and are worried that automation will have a massive negative impact on the world. In their minds, no job is safe, and eventually, most jobs will have been taken over by machines. This group includes people like Elon Musk, Bill Gates, and Sam Altman, founder of Y-Combinator, and the man responsible for the UBI trial in Oakland.
The second group is socialists. And if you think about it, that makes a lot of sense. UBI is wealth redistribution in almost its purest form, and it has yet to take on some of the baggage that other social programs now have. In their minds (and they’re probably right), it’s a soft step that would prepare society for an eventual transition to socialism. 3
But, can it be paid for?
That’s a good question. Even in the abstract, most people realize it would be quite expensive. If the government starts giving out money, it needs to take more in taxes, which means that for UBI to work there needs to still be at least some people working for a living. If everyone goes on UBI and chooses not to work, there’s no tax base for the government to tax. That’s an unlikely scenario, though. What’s more likely is that some people, possibly in the minority, would continue to work, and be taxed on that work, in a fundamentally unfair system. One can imagine a lot of dystopian futures where the haves and have-nots are constantly at each other’s throats.
But, if we pull the idea out of the abstract, it begins to appear unlikely that there’s a real path to Universal Basic Income. Even a modest sum of $10,000 per year per person in the United States would cost around 3.2 trillion dollars. Which is almost the entirety of the $3.6 trillion the U.S. government is expected to take in during the fiscal year 2018. (And, it’s still projected to run a $440 billion deficit). Even if we exclude children, households that earn more than $100,000, and people already receiving social security, at which point, it’s no longer ‘universal,’ it would still cost around $1.5 trillion.
If proponents of UBI are really serious about putting it into practice, they need to find ways to finance it that won’t utterly destroy the economy. Depending on how much money is given out, the U.S. government would have to add between 50% and 100% to its revenues, which is a monumental task.
I actually gave this some thought before sitting down to write the article, and came up with what I thought was a pretty good idea, but while I was researching it, I realize that Bill Gates had beaten me to it. The idea would satisfy the futurologists who feel that automation is going to cause mass unemployment. You simply tax the machines that are replacing people in proportion to the salaries of the people they replaced, and you have a ready-made fund to help those people, whether through a UBI-like program, or job-retraining. This will also slow the rate at which jobs are lost to automation, reducing the number of people that would require government assistance in the medium-term.
While I don’t know that the future will ever be so bleak that Universal Basic Income becomes a necessity, it’s important that we figure out exactly how it would work, and exactly how much it would cost before we’re backed into a corner and accept it as a last resort.
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- These numbers are the maximum, given to people who aren’t working, and scales back with greater income. Also, income must fall under a certain margin to qualify. Not truly “universal.” Source
- This is around half of a local’s normal monthly income.
- For a weird interview with a socialist economist, click here.
I think it would be very interesting to look at the cost of living in these places that you mention. We talk about how it varies widely from place to place, but think about how much a dollar will get you in California compared to Texas. Sure, an apple might cost the same amount, but gas costs wildly different amounts even across the same state, and the same goes for living.
Theoretically, the point of UBI would be to cover your living expenses so that any extra work you did would be your disposable income. That would be the point in a futurist society where humans get to lay on their backs all day while robots do everything: ensuring that humanity can still pay the bills.
But there’s also not any rule saying that we have to pay for it in taxes, which is where, it seems, Bill Gates’ idea comes from. We still make money in this post-automation society, it’s just a matter of who that money is going to. In the post-automation society, you still have someone who owns the robots (even if it is the government) who is profiting based on the sales of what the robots make. That revenue has to go somewhere. And hopefully it doesn’t go solely into the pockets of those who own the robots or the wage gap would increase to the point where you could tell if someone owned robots based on the amount of dirt covering them.