Universal Basic Income – The Good, The Bad, The Beneficial

Public Choice

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Lately, there has been an explosion in popularity of the idea of a guaranteed income for every citizen, also known as Universal Basic Income (UBI).

It was popularized most recently by the democratic candidate Andrew Yang, the mass unemployment from COVID-19, and the accelerated threat of automation.

UBI has had many supporters over the years like Martin Luther King Jr. and Milton Friedman.

But what makes UBI so desirable?

The Good

Universal Basic Income guarantees a certain amount of money to each adult citizen with nearly no requirements to be eligible.

For example, Andrew Yang, while running for president, proposed that every adult US citizen would be guaranteed $1,000/month.

This disregards your socioeconomic status, your employment status, your level of education, all that is required is that you are a citizen of the United States and are above the age of 18. Simple enough.

There are many benefits that come with a UBI, like how it encourages people to find work.

Many people on the current welfare programs will lose their benefits once they find a job, which will either leave them in a worse economic state or just the same.

But since UBI disregards employment status you would still receive the same check from the government on top of your working income, which encourages people to go to work if they want to increase their quality of life.

This is under the assumption that most people strive to have a better quality of life.

UBI also promotes entrepreneurship because it gives people cash to start the business as well as that money to fall back on if the business fails. 

Many people have great ideas for a business or a product but either don’t have the money to start it or are too scared to take the risk in case the business fails.

A Universal Basic Income would solve both issues and promote new businesses and ideas.

No matter what your socioeconomic status, employment status, or education level a guaranteed income will help you pay for essentials and stimulate the economy.

So why is has there been pushback for UBI? And why hasn’t it been implemented yet?

The Bad

The biggest issue with UBI is where is the government going to get the money. Money does not grow on trees, so your only option to obtain this money is by either taxing the citizens, taxing the corporations, or printing the money.

Every method of collecting the money for it has some negative consequences, the goal is finding a way to minimize the costs while maximizing the benefits.

That is easier said than done, even the best economists will be taking a shot in the dark by “predicting” the outcomes of UBI, even with all the small-scale studies done on UBI scaling it up to make it work in a country like the United States is a whole different story.

Acquiring the funds for UBI will be difficult to achieve because if you tax the citizens, it defeats the purpose of the UBI, as you are taking money from the citizens just to give them back their own money.

Although increasing the tax on higher income brackets then distributing the money to those who need it more using UBI could be an effective strategy but typically people in higher income brackets use effective strategies for tax avoidance making this option not as effective and may even lead to a decrease in aggregate tax revenue.

Taxing the corporations is similar to Andrew Yang’s plan for UBI (he proposed a VAT or Value Added Tax), but that has the downside of driving corporations out of the United States to countries with a lower tax rate, or lower cost of production.  Thus decreasing jobs and domestic investment.

Finally, the government could print the money. This avoids the issues that come with taxing the citizens or corporations, but a new problem arises which is Inflation.

Printing all the money to fund UBI will cause massive inflation, and the cost of everything from food to rent to transportation will all increase by a factor we haven’t seen in the United States.

Printing the money would most likely be the least effective way to fund UBI as the increased cost of living would be greater than any benefit UBI could provide.

Another concern is that some who receive this guaranteed income might see this as an opportunity to work fewer hours or quit their job entirely. This could hurt the economy as you have fewer workers in the workforce since they would no longer be looking for a job.

Basically, creating an incentive to “be lazy” and do nothing all day, especially if all your living expenses are paid for.

The Beneficial

The benefits of UBI are quite unique, for those struggling to pay rent, buy food, or pay off other bills UBI will help them get out of the hole and can get people out of poverty.

Those who don’t need the money to survive will have the option to invest the money in the market, spend the money on luxuries, or now have the capital to start their own business; all of which would help grow the economy and benefit society as a whole.

While the argument for people working fewer hours or quitting their job entirely is a common argument against UBI, this would be a lot less frequent than you may think.

Most people can’t sit around all day not doing anything, all human beings need a purpose in life, whether that’s finding the cure to a deadly disease or being a greeter at Walmart everyone has a purpose.

So, the more people who don’t need to worry about their next paycheck to survive would seek out jobs and opportunities and their purpose in life which would benefit everyone.

The best part of UBI is that everyone receives the same benefit. It provides equal opportunity for everyone, regardless of income, net worth, single or married, race, or gender.

Our other welfare programs in the United States decrease, as your income increases which disincentivizes getting a better job and work harder, UBI on the other hand will never decrease no matter how much your income increases.

The ‘Universal’ part of the Universal Basic Income is what makes it so great and paves the road to a more equal opportunity and united society.