21 Universal Basic Income Pros and Cons

In the next two decades, about 1 in 3 workers face the risk of losing their job to some form of new technology. Those who are in positions of a repetitive nature where the work they do is the same routine every day could even see their employment opportunities start to disappear sooner than that. Although other forms of automation have brought new jobs into the marketplace to offset these losses in the past, this time could be different.

The jobs that will come because of the new wave of artificial intelligence will be highly skilled and technical positions that only an educated few would be eligible to fill. That means an unprecedented crisis could soon be developing in the mature economies of the developed world.

When there are unique problems that we face together as a society, then there must be ideas for solutions that fall outside of the box. One of the ideas that is being proposed is the concept of a universal basic income. Even Presidential candidates like Andrew Yang are promoting the idea of offering families a guaranteed payment each month with no questions asked. As long as you meet specific qualifications, then you receive the money.

Yang proposes a guaranteed amount of $1,000 per month per adult, which would mean a married couple would receive $24,000 per year from the government. Some officials are proposing amounts that are about 50% of that idea. Here are the pros and cons of a universal basic income to consider.

List of the Pros of a Universal Basic Income

1. It would eliminate the stigma of receiving cash benefits from the government.
Under our current systems, especially in the United States, there is a negative stigma attached to the idea of receiving money from the government. People are encouraged to work for their paycheck instead of receiving something for free. Because a universal basic income would apply to every adult regardless of their current income, the result would be a general acceptance of this form of support. Instead of creating different categories of people in society because of their wealth, everyone would be given the same initial starting point.

2. It would encourage people to continue working.
One of the most significant arguments against the idea of a universal basic income is that there is a fear people would leave the workplace because they receive money for free. The reality of today’s economy is that $12,000 will not get someone very far if they choose not to work. Even married couples would struggle at the $24,000 level. Because children are ineligible for this benefit, there would be no incentive to follow the “welfare queen” track that some critics promote with the current benefits system.

Research from MIT and Harvard suggests that the only demographics who would work less with a universal basic income in place are high school kids who reach the age of 18 and new mothers. Graduation rates climb when the presence of additional income is present. In some instances, workers even put in more hours with their access to this benefit.

3. It would create a buffer against technological unemployment.
According to artificial intelligence expert Kai Fu Lee, up to 40% of the world’s jobs could one day be gone thanks to AI and robotics that are capable of completing automated tasks. That means white collar and blue collar positions are at risk, with some professions facing the possibility of being entirely eliminated. Driving, chauffeurs, wait staff, and even farmers all could find themselves out of work because technology can create more efficiencies. Providing households with a universal basic income would help these people who find themselves being replaced by AI to retrain workers into the new positions that would develop.

4. It would allow people to have more freedom to move.
One of the primary issues that people in abusive relationships or family situations face is a lack of mobility. They are scared to get out of the dangerous situation that they are in because there may be zero income supports for them should they leave. Each year, about 4,000 women die because of domestic violence, with up to 75% of these incidents occurring at the point of separation. With a universal basic income present, it becomes possible to move further away from the abuse, stay financially afloat, and begin the process of starting a new life.

5. It would allow families to take care for those with illnesses or disabilities.
As Baby Boomers begin to retire and move out of the labor force, there is a growing need for Millennials and Gen X’ers to care for their growing physical needs. In a household where a set of aging parents require full-time care, a husband-and-wife team could combine their earnings with their relatives who need the attention to create a substantial level of income under one roof. Four adults in the same home, regardless of age, would qualify for $48,000 in some of the universal basic income plans that are in place. That level of income would allow one person to stay in the home full-time without suffering a complete loss of their lifestyle.

6. It would help to expand the middle class, especially in the United States.
Over the course of a single generation in the United States, the bottom 50% of earners went from being responsible for 20% of the total income earned to just 13%. As for the top 1% of earners in the country, their share rose from 11% to 20% at the same time. Unlike most of Europe, there is not a VAT (value-added tax) in place in the United States. The income that is currently going to the top earners would effectively transfer to the bottom, equalizing the income process to stabilize communities. It would not require an additional tax on personal income to create this result if the process is implemented correctly.

7. It would work to help end poverty in the communities where it is implemented.
According to Poverty USA, there are over 40 million people who are currently living in the United States. That means the 2016 rate for the population was almost 13%. The current official poverty threshold in the U.S. for a family of four is about $24,000 per year, which is the exact amount that some officials would offer in universal basic income for people in that situation. If there are two adults in that household, then this idea would effectively double their income.

The poverty rates are even higher for some demographics in the United States as well. The poverty rate for married couples was just 5%, but for single-parent families with the mother as the head of household, the rate is over 26%. People living with a disability are in poverty 21% of the time. Having a universal basic income would help to correct this imbalance.

8. It would help to encourage employers to pay better wages.
If a universal basic income were part of the global society, then business leaders would no longer be able to use the income from a job as a bargaining chip. People could decide to fall back on their guaranteed amount instead of working long hours at a minimum wage job. Companies would be stopped in their race to the bottom in labor expenses because workers would get to flip the script, using the same tactics against businesses that have been used against them for so long.

9. It would lead to additional job creation opportunities.
When there is more money available in society, then there are more job opportunities being created through the increase of consumption. A universal basic income would give people a resource that could help them to find a job which suits them. It could be used as funds to offset tuition costs or pay for existing student loans. It would reduce issues with food insecurity, help with financial stressors, and potentially improve mental health. There would be benefits in the housing, health, and entrepreneurial sectors as well.

10. It would help to offset the issues of worker retraining that exist.
Existing data for large-scale worker retraining programs has found that they are not overly successful when implemented. The Trade Adjustment Assistant program helps displaced manufacturing employees and has only helped 37% of its members find work in the area where they received training. Michigan implemented a program that they called No Worker Left Behind, but it then found that over 30% of its members remained unemployed after the program, which was similar to the unemployment rate of those who did not enroll in the program in the first place.

11. It would not lead to an increase in poor spending habits.
When cash is given to the poor without any strings attached, there is not a correlative increase in the purchase of items like alcohol or illicit drugs. Although there are some people who do use these funds in that way, the majority of individuals use the extra currency to support themselves in a treatment program that can reduce their dependencies. It is not unusual for families to put this money into educational accounts for their children. The idea that people who are poor will be irresponsible with their money is a mischaracterization of poverty. People are not struggling financially because they have a lack of character. These families simply lack the cash that they require.

List of the Cons of a Universal Basic Income

1. It could reduce the motivation of some people to enter the work force.
If a universal basic income were offered to all adults, then there would be a small percentage of the population that would decide to stop working. They would keep the money that was given to them, and then make the best out of that situation by limiting their spending. In a case study that came out of Manitoba, a trial of this idea found that there could be a modest reduction of workers in the labor force if $12,000 per adult were available.

The case study also noted that there were fewer mental health problems in the sample group as the universal basic income became effective, which eventually led to fewer hospitalization needs within the community.

2. It could change the approach that society takes to buying and spending.
One of the primary ideas of capitalism is that money is something that you earn. When a universal basic income is present in society, then currency also becomes something that the government gives you. Critics suggest that providing people with money without any strings attached would create a society where there could be reduced levels of innovation. A compromise between the two extremes of this debate would be to have people work in community service programs or volunteer opportunities to qualify for their monthly income checks from the government.

3. It could still create problems with financial inequality.
A universal basic income would help families take care of their monthly expenses, but it would not be enough to cover all of their bills in most communities. Although the idea is to create equality by offering these checks to everyone, is it really necessary to give someone with a net worth of more than $1 million an extra $12,000 per month? If you are in the top 1% of earners, is the extra income something that would go into investments? There is a fear that those with means would not do anything productive with this extra cash, which could eventually cause the wage gaps to rise because those living paycheck-to-paycheck would still be covering their basic expenses.

4. It could cause inflation to occur in the economy.
If companies are primarily funding the idea of a universal basic income through a VAT, there is a risk that inflation could occur in the economy. Although the businesses wouldn’t be able to skip out on the tax itself, they could raise prices on their products or services to compensate themselves for the losses they incur. When cash payments were handed out to families in Mexico with no strings attached on how they spent the money, prices on basic necessities rose by 0.2%. If the government handed out these items for free, then prices saw a decline of 3.9%. If families are trying to get buy on the bare minimum for any reason, this shift in cost could offset many of the gains that they might be able to see since there are more customers available in the economy.

5. It could add even more debt to the economy each year.
The cost of implementing a universal basic income in the United States is estimated to be roughly $4 trillion each year. Although that seems like an inconsequential amount when the total value of the economy is $20 trillion, a VAT will not generate enough funds to cover the entire expense. Even Yang’s idea to have a 10% VAT would only raise $800 billion in new revenue. Many of the projects are based on the idea that there would be economic growth present that would help to pay for these new activities, which was the same justification that Republicans used to lower taxes after the 2016 election.

There would be a period of initial growth, and then the universal basic income would grow stagnant once again as the economy adjusted. Organizers would need to tie the UBI to inflation to avoid the same problems that the U.S. is currently experiencing with its national minimum wage.

6. It could lead to changes in global immigration.
The United States has been one of the most-desired locations for immigrations since arguably its founding. Offering a universal basic income would only encourage more people to apply for citizenship, work visas, and other opportunities that could help them to get their foot in the door. One of the ways that this disadvantage would be controllable is to offer it only to those who pass a citizenship test after qualifying for a permanent residency visa. Some might argue that the presence of UBI would even make the benefits of being a citizen more meaningful.

7. It could lead to employers trying to pay workers less.
When people are given a guaranteed income from the government, then there will be business leaders who will attempt to argue that this money should be considered part of the worker’s income. They would advocate for lower wages because the government would offer them a check. The reality of the U.S. economy is that worker productivity has already risen by more than 70% since 1973, but the value of wages for American workers has only seen a rise of 9% over that same period.

With workers becoming more selective about their working conditions, it might change how people enter the labor force. It might encourage people to take lower wages to pursue something they love. There is also the possibility that a future government administration might agree with employers and lower the minimum wage to counter the effects of UBI.

8. It could be a system that future governments decide to reverse.
The only way that a universal basic income would become successful from a long-term perspective would be if it were approved through the ratification process. If UBI were not part of the Constitution, then a future government could decide to revoke it or gut the program in ways that are similar to what is happening in the Trump Administration with the Affordable Care Act. Because the threshold for passage is so high with a Constitutional amendment, Americans may never see this idea become a reality unless circumstances become so dire with robotics and artificial intelligence that there is no other option to support the economy.

9. It could be viewed as a new form of socialism or Communism.
Communism is a movement that tries to create a moneyless and classless state by creating social order through mandates offered by the government. Ownership of production remains outside of private control in this system. It would be like the White House being in charge of running Google. The system of a universal basic income is often viewed as a form of socialism because it shifts the view of how money is earned in society. If someone has that perspective and their preference is for pure capitalism, then it would be virtually impossible for that individual to accept the idea of receiving a check from the government every month.

10. It could have a minimal value for those living in urban centers.
The universal basic income does not take into account the variations that exist in the cost of living across the country. Rural areas would benefit more from this program than the major cities in the country because it is more expensive to live in an urban area. When added to the fact that Americans are moving between states at the lowest levels on record today, this issue would create an additional layer of stagnation which would need to be addressed by the program. Although there could be more dynamic movements with a UBI, there is an assumption that people would move to areas with a lower cost of living to take advantage of this program. If that doesn’t happen, then some of the benefits may never appear.

The pros and cons of a universal basic income suggest that there are several advantages that we could experience if everyone received a guaranteed check each month. Some families would use it to cover their basic expenses. Others might invest the cash. It could be funds that are stashed into savings, a vacation account, or something of a similar benefit. There are risks to consider with this idea as well, but most economists agree that the net gains from this idea would offset whatever negatives might occur.