We've been getting a lot of questions about the universal basic income (UBI) these days.
The concept is simple. Under a universal basic income system citizens (in some proposals, residents) of a country would regularly receive an unconditional sum of money from the government.
Under almost all UBI schemes everyone would get the UBI regardless of whether they work, how much they make or their net worth.
Most UBI proposals suggest that only adults (usually 18 and older) would qualify, but other proposals include kids of all ages.
The amount given varies quite a bit depending on the proposal, but tend to range between $2500 and $20,000.
The idea of UBI is not new. Thomas Paine proposed an UBI in 1795 and more recently, economist Milton Friedman advocated for one in 1962.
The renewed interest in the UBI is being driven in large part by a growing concern that automation and technology is going to eliminate many jobs.
This, UBI supporters suggest, means a guaranteed income will become required for most people to achieve a middle class life.
While the idea of UBI sounds great, there are a number of problems.
The first is cost.
As the Wall Street Journal article Revival of Universal Basic Income Proposal Ignores Needs of Labor Force points out, giving all adult Americans $10,000 a year would cost about $2.4 trillion.
This would be about 70% of Federal budget and exceed the total amount of current social transfer payments (see the WSJ chart to the right).
Adding roughly 100 million U.S. kids to the program would, of course, raise theses costs substantially.
The huge cost is the main reason why most mainstream economists, including the current White House chief economist, oppose the concept.
Others oppose it because they believe it will greatly reduce productivity due to people dropping out of the workforce or working less.
The other issue the UBI faces is to pay for it, pretty much all existing social welfare and safety net programs would have to be eliminated.
Good luck getting Congress to do that.
Between the costs and the political issues, we think the chances of a UBI being implemented in the U.S. beyond small test cases over the next decade or so is extremely unlikely.
But that does not mean it's not a good idea. It also doesn't mean it is a good idea.
As FiveThirtyEight's extensive article What Would Happen If We Just Gave People Money? points out, there's so little data on this topic we don't know what the impact of a UBI program would be.
Key quote:
The economic uncertainty surrounding basic income is huge, and the politics of bringing such a program about on a large scale are daunting. But something makes this radical proposal so exciting that people and governments are increasingly willing to try it. Basic income challenges our notions of the social safety net, the relationship between work and income, and how to adapt to technological change. That makes it one of the most audacious social policy experiments in modern history. It could fail disastrously, or it could change everything for the better.
We expect many UBI experiments will be conducted in the coming years. A good example is the UBI research being conducted by startup accelerator Y-Combinator.
As studies such as this one are completed we'll be in a better position to evaluate the merits of the a UBI.
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