What is... | June 14, 2016

What is universal basic income?

What would you do with your life if you were given a no-strings cash payment from the government? Would you live the life you've always dreamt of or would you play video games all day?

A universal basic income (UBI) – sometimes referred to as “guaranteed” minimum income, citizen’s income or negative income tax – is essentially a fixed monthly payment by the government, regardless of whether you are wealthy or poor, employed or not. No questions, no conditions.

New benefits for all
On 5 June 2016 a referendum in Switzerland included a vote on introducing a UBI of 2,500 Swiss francs, but 77% of the population rejected the proposal. However, interest in the idea is increasing globally. Finland has considered giving its citizens an unconditional stipend, scheduling a trial programme for 2017, and the Netherlands has thought of piloting a similar proposal in several cities, including Utrecht.

Y Combinator, a start-up incubator, is funding a basic-income experiment in the US State of California and in Germany, crowdfunding organisation Mein Grundeinkommen (“my basic income”) has attracted over a quarter of a million contributors to a project aiming to give a basic wage to as many people as possible.

Fans of UBI say it will help reduce inequality, offer people the opportunity to retrain to explore different careers or continue education and assist people as more jobs are lost to automation.

Where the idea came from
The UBI concept was floated in Thomas More’s Utopia, published in 1516, and again in 1797 by Thomas Paine, one of the founding fathers of the USA. It was revived in the 1920s by CH Douglas, a British engineer and pioneer of the social credit movement. Douglas had noticed that the total cost of goods produced was more than people actually earned in terms of wages and other income. Since then, the UBI idea has received broad support, from civil rights activists like Martin Luther King Jr to economists such as Milton Friedman.

What’s not to like
Critics argue that implementing UBI would be very expensive and reduce the incentive to work. Some people say that offering “money for nothing” will increase immigration, attracting people into countries that have implemented such a plan. Others say raising taxes on incomes and profits to fund UBI will increase tax evasion.

Hopes of paradise
Fans claim UBI will help reduce inequality, offer people the opportunity to retrain, explore different careers or continue education, and assist people as more jobs are lost to automation. Many experiments have shown that people assured of a basic income don’t lead idle lives and instead invest in their personal development. They can end up in more qualified positions, working longer hours and earning more than those without a safety net.

Dutch journalist Rutger Bregman writes in his book, Utopia for Realists: The Case for a Universal Basic Income, that many UBI initiatives have grown mainly out of frustration with welfare programmes that are expensive and inefficient.

Others argue UBI would help us step towards a gender-neutral world, increasing flexibility and helping women, who take on more unpaid child care and responsibilities in the family home.

So could it really work?
The UBI idea has clearly been floating around for a while, garnering widespread support as well as criticism. But rising unemployment and economic downturns, along with the disruptive effects of digital technology, have refocused attention on providing a safety net to the poor.

But how this ultimate social safety net might work remains to be seen.

eZonomics team
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