Have you ever wondered what it would be like to go back to the 1970s soviet country, and return to our times with then-popular maxim: “Down you lie or up you stand, either way you’ll earn a grand”? Every citizen in our country would have full-time employment and a fixed salary regardless of the results of their work, and regardless of whether they would try their best or not. But perhaps we should go even further than that. Let the government pay regardless of employment status. From then on, you would not have to worry about your day-to-day survival. You could spend your time on your education and development, without sacrificing it to make money. You would not have to accept the first job offer that came your way. You would be able to choose the best one instead. Seems encouraging, does it not?
Is it a serious solution to the problems of the modern world, or merely some socialist utopia? Perhaps we bear witness to an impending revolution triggered by an economic proposal gaining in popularity among experts at the Silicon Valley and politicians in the Nordic countries, that is the Universal Basic Income (UBI). Several countries have already experiment with “free money”, while governments face changing labor and strained welfare systems. Let us look closer at the definition, advantages, and disadvantages of the UBI.
What is the Universal Basic Income? It is a simple idea: Let us give a subsistence minimum income for all citizens, making their day-to-day strife for survival a thing of the past. Note that the term “subsistence minimum” is by itself very unclear, with wildly varying levels proposed by its advocates. It is even referred to as the “extreme poverty line.” It accounts only for the needs that cannot be postponed. Consumption below this level leads to biological wasting and is life threatening. The UBI idea has been known and discussed for decades, and it has even been practiced temporarily. The UBI itself is a regular, equal, and non-returnable cash benefit that is received individually by all citizens regardless of their material and occupational situation. It is paid with public money. Other terms synonymous with the UBI include: state bonus, national dividend, social dividend, citizen’s dividend, citizen’s wage, and universal benefit. The idea is that the state transfers the money to everyone without any conditions at all. Not only the largest or the poorest families, immigrants, students, or single mothers pocket the money. Everyone does. You only need to breathe to get your share of the public pie.
We have mentioned that it is not a new idea. It was already discussed in the 1940s in Great Britain (it was then referred to as “social dividend”).1 The concept was abandoned, however, in favor of the classical welfare state ideas of conditional transfers addressed to the poorest. Another opportunity for its implementation resurfaced in the United States era of Nixon and Carter. There were even bills ready to be passed, but once again they were cast-off in Congress. Only rich in natural resources and sparsely populated Alaska managed to implement something roughly similar to the UBI.2 Some classical liberals were interested as well, like Milton Friedman with his “negative income tax.” Although he envisioned it as a way to free the nation from the burden of social spending. There were also some recent experiments with the UBI. During Finland’s two-year basic income trial which ended in 2018 some Finns were getting €560 a month.3 Some African countries as well as Canada’s Ontario made similar attempts. The latter case is, however, off the map, as the UBI proposal was abandoned after change of the political guard. The UBI turned out to be too expensive.4 Another such program was rejected by the Swiss people in a referendum.5 The Italian government will implement basic income as high as €780 per person and up to €1,330 per family in April 20196, and a trial run will be launched in Germany a month later to check how the UBI affects some of its citizens. German government is currently recruiting, expecting to select 500 volunteers for the study.7
Notice that conditions tried in these experiments are different than those of the real UBI. People adapt when they are told: “We will give you free money for a year to try it out.” Aware that there is a time-limit for the money, they are inclined to keep some other sources of income. They respond differently when they hear: “We will give you free money indefinitely.” It is extremely difficult to predict people’s behavior in changed conditions when we base our knowledge solely on their declarations. From the standpoint of philosophy of science alone, microscale experiments fail us as a tool of grasping most macroeconomic and macrosociological effects such as, among others: increase in the share of wages in GDP, increase in the effective demand in the economy, dynamics of private investment or economic growth, or changes in employment rate. These changes have a significant impact on the individual decisions of people. In order to observe and analyze such effects we would need an experiment on the scale of a whole country and lasting longer than all previous trials. The previous trials cannot tell us reliably whether money paid to everyone will support laziness or creativity.
The renewed interest in the UBI is motivated by the threat of losing livelihoods by those who could be pushed out of the labor market by globalization or automation. Automation may be seen as a boogeyman used as a pretext for the UBI. Some fear that the development of robotics might make human work obsolete or less needed. The UBI advocates argue that in such case it might be necessary to update the ways in which the society distributes income. According to Michael Munger, transaction costs in the economy of tomorrow will tend to zero, making basic income necessary.8 Let us consider closer this worrisome prospect that prompts us to look for other ways of income distribution. What are the arguments for the UBI?
The Basic Income Europe Fanpage on Facebook gathers more than 41 thousand enthusiasts. Among the greatest supporters of the UBI are Silicon Valley’s technical titans like the head of Tesla Elon Musk and the head of Facebook Mark Zuckerberg. Ray Kurzweil, futurist and engineering director at Google, is very hopeful about the UBI as well. According to the famous British entrepreneur Richard Branson, the UBI “is really important” and “that it will come about one day”.9 In 2016, he said that “inequality is probably the biggest prohibitor that we face to creating a sustainable and equitable future for all of us”.10 What are the advantages of the UBI according to its advocates?11
Getting a job – more and more often a temporary, unreliable, “junk” job – is associated with a huge opportunity cost.12 Besides having to pay income tax, when you become employed you lose the social benefits you were getting earlier. As you are required to exert yourself working, you may earn scarcely more money.
In contrast to many existing social benefits, the UBI would be much more transparent and there would be no need to give it up after getting a job. The UBI could lead to a reduction of poverty rate and of inequality and insecurity. Money for nothing could give some leeway to the employees whose job is threatened by automation. It would increase their social security by reducing their dependence on the labor market situation.
The UBI is considered to be one of the simplest tax models that can reduce bureaucracy. It could help simplify taxes as well as reduce the red tape associated with circulation of tax documents.
The UBI could remove the adverse incentive for mere formal adherence to the administrative requirements needed to obtain specific benefit. Defrauding disability benefits with fake documents could become a thing of the past. There would be no need for bureaucrats to control whether any conditions were met by people receiving benefits, because basic income would be unconditional.
Thanks to the UBI, many professionally inactive people could start their own small businesses.
People would no longer have to accept the first available job offer, and this could increase their “socioeconomic independence” and bargaining power on the labor market. They could take time to look for a job, invest in their education and development, set up their own business, or work less and use the time for other purposes.
The main arguments made by the UBI’s advocates are ethical ones. For them the arguments pertaining to the economic efficiency are not as important. Social and ecological justice and the elimination of poverty remain their primary concerns. As they say: Giving money to everyone unconditionally puts moral pressure on people to act responsibly.
The UBI would increase everyone’s individual human potential and social capital. As some studies show, feelings of insecurity reduce cognitive ability.
But are there any disadvantages and risks associated with the UBI?
The biggest objections to the UBI are its costs and impact on the labor market. Even conditional social benefits put a considerable burden on the budget. Moreover, redistribution is a rather flimsy foundation for human dignity.
The UBI could weaken employees’ motivation to work, thus reducing their productivity. If the UBI discourages people to work, then how will society produce wealth? From the perspective of employers, the UBI’s harms their interests in two ways: it increases wage pressure put by the employees, making them less inclined to work at the same time. In addition, as employers usually earn higher incomes, they would also be particularly affected by the tax progression.
Another argument against the implementation of the UBI is the lack of observed negative impact of automation on employment. When some jobs are made obsolete by automation, other professions, often more pleasant ones, are created in their place. Similarly, far from being a job destroyer, globalization is a job creator. Concerns about automation leading to rising unemployment seem unfounded. In the last century, technological progress has created more jobs than it has eliminated – and the scale of the progress was historically unprecedented. An increase in the wealth of society increases its demand for more luxurious services, such as those fulfilled by artisan chefs, craftsmen, artists, interior decorators, or private teachers. Among the least vulnerable to automation are social workers, choreographers, doctors, psychologists, computer system analysts, anthropologists, and archaeologists.
The widespread implementation of the UBI could also lead to increased migration to countries with the highest basic income, which in turn could further increase the tax burden on those who work and produce wealth. Because economic migration is a significant threat to the UBI, ensuring effective protection against people coming from abroad only to receive the basic income would become a necessity. As such protection has its own cost, the uncontrolled access to basic income could further threaten the financial security of the country.
Designed as a response to already ineffectual social welfare systems and overregulated labor markets, the UBI itself only furthers government intervention in the market (and requires more taxation).
Besides, one of its more serious drawbacks is that once implemented it becomes very difficult to withdraw from. The result could be a stagnation that lingers on until the complete shutdown of the economy.
Let us summarize our knowledge about the UBI. In this socio-political model of public finances, the government unconditionally pays every citizen an equal and lawfully defined amount of money regardless of their financial situation. The arguments of the supporters and opponents of the UBI focus on improving the quality of life. However, both sides have different ideas on how this goal can be achieved.
For the UBI to make sense at all, two fundamental assumptions must be met simultaneously. 1) The UBI must be high enough to ensure economic existence for all. If it is too low, it will become just another way of pumping demand on the market. 2) In order for basic income to actually influence the economic emancipation of citizens, it also must be unconditional. In other words, people simply have to be entitled to it. The fulfillment of both of these conditions, however, will not make the defects and threats we have mentioned disappear, nor make certain that the BDP is the solution that is needed or most appropriate.
The author of the script is Justyna Ziobrowska from the University of Wrocław
1 Rafał Woś. 2017. To nie jest kraj dla pracowników (No country for employed men). W.A.B.
2 Rafał Woś. “Dlaczego mają dostawać pieniądze za nic?” (“Why should they get money for nothing?”). https://biznes.gazetaprawna.pl/artykuly/1007997,wos-dlaczego-maja-dostawac-pieniadze-za-nic.html. Accessed: 25.01.2019.
3 Patrycja Maciejewicz. “Finlandia kończy najsłynniejszy eksperyment społeczny. Dochód podstawowy się nie udał?” (“Finland ends the most famous social experiment. Has basic income failed?”). http://wyborcza.pl/7,155287,23312025,finlandia-konczy-najslynniejszy-eksperyment-spoleczny-dochod.html. Accessed: 23.01.2019.
4 ”Bezwarunkowy dochód podstawowy (BDP) – wady i zalety” (Unconditional basic income (BDP) – advantages and disadvantages). https://ksiegowosc.infor.pl/zus-kadry/wynagrodzenia/773085,2,Bezwarunkowy-dochod-podstawowy-BDP-wady-i-zalety.html. Accessed: 23.01.2019.
5 Arkadiusz Sieroń. “Money for nothing, czyli bezwarunkowy dochód podstawowy” (“Money for nothing, or unconditional basic income”). https://mises.pl/blog/2016/08/04/sieron-money-for-nothing-czyli-bezwarunkowy-dochod-podstawowy/. Accessed: 25.01.2019.
6 Paweł Orlikowski. “Down you lie or up you stand… Włochy wprowadzają dochód podstawowy” (“Italy implements basic income”). https://www.money.pl/pieniadze/czy-sie-stoi-czy-sie-lezy-wlochy-wprowadzaja-dochod-podstawowy-6339877916182145a.html. Accessed: 26/01/2019.
7 Adriana Rozwadowska. “Niemcy wypróbują bezwarunkowy dochód podstawowy HartzPlus: przez trzy lata 400 euro za nic” (“Germany will try out the Universal Basic Income program called HartzPlus: three years of €400 for nothing”). http://wyborcza.pl/7,155287,24361607,niemcy-wyprobuja-bezwarunkowy-dochod-podstawowy-hartzplus-przez.html. Accessed: 26/01/2019.
11 Adam Turek. “Założyciel Facebooka za gwarantowanym dochodem podstawowym. ‘Obecnie praca oznacza niepewne zajęcie’” (“The founder of Facebook for the guaranteed basic income. ‘Today a job is more often than not just an unreliable gig’”). https://businessinsider.com.pl/finanse/gwarantowany-dochod-podstawowy-w-usa-zdanie-chrisa-hughesa/qnqqp70. Accessed: 27/01/2019.
12 Mikołaj Ratajczak. 2017. “Dlaczego trzeba wprowadzić bezwarunkowy dochód podstawowy? Recenzja książki Guya Standinga ‘Basic Income: And How Can We Make It Happen, Penguin Books 2017” (“Why do we need to implement the Universal Basic Income? Review of Guy Standing’s ‘Basic Income: And How Can We Make It Happen’, Penguin Books 2017”). Praktyka Teoretyczna 2 (24): p. 171.