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A Quantifiable Criticism of Universal Basic Income

Updated: May 16

In this time of financial uncertainty for millions around the globe due to the COVID-19 pandemic, universal-basic income has been proposed and discussed as a potential method of relieving economic stress. Many have doubted the empirical effects of an unconditional guaranteed income. They cite the danger of an expensive and unsustainable program that fails to generate motivation and economic growth. Proponents, however, say a universal basic income has the potential to alleviate millions above the poverty line. As the debate circulating around universal basic income becomes increasingly politicized, the empirical data behind the various pilot programs warrants increasing attention. So is universal basic income viable from a quantitative standpoint and supported by meaningful data?


Sustainability


There is no doubt that a UBI program would significantly impact government budgets. A program of an unconditional annual dividend of $10,000 in the United States would incur costs of over $3 trillion on the federal government, more than 75% of the cost for existing welfare programs (Social Security, Medicaid, for instance). The argument made here to support the relatively large cost of UBI is the cutting of said welfare programs. However, this would create the adverse effect of a supposed UBI benefit, essentially deepening wealth inequality instead of redistribution of wealth. UBI essentially would reduce benefits for those with rudimentary needs in favor of granting those already with financial security an additional income by eliminating existing welfare programs. The Center for Budget and Policy Priorities estimates that the replacement of all current welfare programs (excluding health care) would only reap $1,582 in funds per person- barely reaching the threshold for lifting a family out of poverty and well below the existing benefits under targeted welfare programs. We would be much better served through the expansion of the existing “safety-net” that is meant for poor Americans. The elimination of means-tested welfare programs would mean a seismic shift in wealth distribution that would likely throw the economically vulnerable into further uncertainty.


Motivation

The most common critique of UBI is that it disincentivizes recipients from entering the workforce, disallowing them from using their dividend to stimulate growth in other sectors of the economy or from experiencing social mobility. This claim, however, lacks significant empirical support. The Manitoba Basic Annual Income Experiment in Canada, a quasi-universal basic income scheme where participants were granted a basic income depending on family size and reduced based on income, led to relatively insignificant data on motivation. Men worked 1% less, wives 3%, and unmarried women 5%- all statistically insignificant and incapable of drawing a concrete conclusion from. Similar experiments in Alaska and Iran mirrored this data, indicating that the implementation of some form of basic income produced no significant unwillingness to work in recipients. This critique of UBI, while popular in rhetoric, seems to be grounded mainly in a theoretical sense.


Conclusion

UBI has been and will continue to be a source of intrigue. The debate regarding the efficiency and drawbacks of UBI will evolve and adapt to the changing socio-economic landscape. However, we cannot attain a full empirical and quantitative measure of the benefits of UBI without a major pilot program yet to be seen around the world. Thus, it is extremely important that we continue to follow the development of UBI as it seeps into the political mainstream and continues to be studied.


Sources


“Universal Basic Income Is the Answer to the Inequalities Exposed by COVID-19.” World Economic Forum, https://www.weforum.org/agenda/2020/04/covid-19-universal-basic-income-social-inequality/.


Simpson, Wayne, Greg Mason, and Ryan Godwin. "The Manitoba basic annual income experiment: Lessons learned 40 years later." Canadian Public Policy 43.1 (2017): 85-104.


“A UBI Would Undermine Work.” National Review, 25 July 2019, https://www.nationalreview.com/magazine/2019/08/12/a-ubi-would-undermine-work/.


Kearney, Melissa S., and Magne Mogstad. "Universal basic income (UBI) as a policy response to current challenges." Report, Aspen Institute (2019): 1-19.


Hall, Ralph P., et al. "Universal Basic Income and Inclusive Capitalism: Consequences for Sustainability." Sustainability 11.16 (2019): 4481.


Gentilini, Ugo, et al., eds. "Exploring Universal Basic Income: A Guide to Navigating Concepts, Evidence, and Practices." (2019).


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