Universal Basic Income: What is it, and Could it Work?

By Riley Patricof

Universal Basic Income (UBI) is becoming more popular, with support rapidly increasing due to the coronavirus outbreak. But what is UBI? A UBI has many different forms, yet essentially it gives every citizen a set amount of money each month—in most cases, $1,000. However, there are numerous variations of a UBI plan. 

 

The concept of UBI was first introduced in 1968 by economists John Kenneth Galbraith, Harold Watts, James Tobin, Paul Samuelson, and Robert Lampman when they urged Congress to adopt a UBI plan. Though Congress did not embrace the idea when it was proposed in 1968, it has recently grown significantly in popularity. The topic has recently gained traction because it was a key component of Andrew Yang's campaign in the 2020 Democratic Primary and again in his recent bid for mayor of New York City.

 

Among its many supporters are Mark Zuckerberg, who believes that UBI will promote innovation, and Elon Musk, who supports its benefits for Americans losing manufacturing jobs to the tech industry. Support among American voters has steadily increased over the past few years, with an August poll finding that 55 percent of voters supported UBI.

 

A recent report from The Roosevelt Institute found that a UBI would expand the economy upwards of 12 percent over the next eight years, equivalent to roughly a $2.5 trillion increase by 2025. The report states that the larger the UBI, the more significant the positive impact would have on the economy. Although these effects are only expected to last eight years, GDP output is left permanently higher.

 

However, growth in national output is not the only advantage to a UBI. In Scotland, the Economics Observatory found that implementing a UBI would reduce poverty numbers by 25 percent for adults and 33 percent for children. Alaska, currently the only state with a UBI, has the highest median income for the middle class. This serves as a real-time example of what UBI could do for working-class Americans.

 

UBI is often compared to welfare. Even though to qualify for welfare, one must be below the federal poverty line, making some citizens who need welfare programs ineligible. Additionally, some economists say that welfare does not promote growth; if people do well, they will no longer qualify, but many just above the poverty line will still struggle.

 

A UBI might be beneficial and could encourage economic growth, as well as having potentially life-saving outcomes. Women’s Aid research found one in five women could not leave abusive relationships due to lack of financial independence. Women experiencing domestic abuse are often unable to leave due to dependence on their partner. A UBI could tremendously help women escape these circumstances and become fiscally independent.

 

There are numerous potential benefits to a UBI, but it also raises many questions. First: “how are we going to pay for this?” The three most explored options are tax revenues, increasing the federal debt, and replacing welfare. There have been conflicting studies that show different results with all three programs. 

 

The other essential question is, “will a UBI disincentivize people to work?” Economist and researcher Iona Marinescu conducted a study in 2017 that surveyed an array of UBI experiments. They found implementing a UBI had little to no effect on the hours worked or earnings. In addition, in two rural states, they found positive impacts on the quality of nutrition. In a Canadian study, there was an 8.5 percent decrease in hospitalizations. Half of their subjects reported a reduction in alcohol and tobacco use, and 83% reported better mental health. The Canadian study also showed better attendance and grades in schools.