Introduction to UBI
Maximizing welfare for all people in society has historically been a priority of world leaders. It seems universal to us that every human being deserves to enjoy life sufficiently, never having to worry about means to finding the nearest shelter or obtaining the next meal. These appear to us to be basic human rights. However, everything gets controversial when the parameters of these rights are expanded; in other words, how would people react if every individual were given more than just the bare minimum? This further begs the question, what if people didn’t have to work at all to live a sustainable lifestyle?
The means to securing this reality would be supplied by universal basic income (UBI). Simply stated, UBI is a minimum government-funded income, or dividend, given to everybody. Seems like a utopian invention, right? Well, as it turns out, UBI is a relatively grounded concept that may have realistic implications for the present-day world. However, in order to investigate these implications, it is necessary to have a relatively solid idea of what UBI really means. In the political climate of 2019, UBI is becoming an increasingly important area of debate among Democratic presidential candidates. If this concept is relatively new to you, you have clicked on the right article: we ourselves decided to write this article after wanting to know more about this complex (and often misunderstood) idea.
In this article, we will go over a deeper summary of UBI, pros and cons of its implementation, and UBI in a modern context. Without further ado, here is a little history and philosophy lesson on universal basic income.
What is UBI?
UBI is public money distributed equally among the masses, with the intent of granting subsistence. The term “equally” implies that UBI is the same from person to person regardless of one’s occupation or socioeconomic status. Additionally, income tax would not affect this amount; the basic income could be spent on anything of the dividend-holder’s choice. The definition is quite clear, but UBI’s parameters and purposes are a bit more abstract. First of all, how much money should the UBI guarantee to each citizen? As a follow-up question, what purpose should be intended from distributing UBI?
The answer varies, depending on the political leader you’re asking. UBI is assessed by a person’s needs – specifically, needs that must be attended to immediately – and the size of the dividend is determined relative to the minimum amount of money required to meet these needs. This threshold mark, also called the poverty line, is the point below which living conditions are deemed to be inadequate for a feasible lifestyle. Theoretically, dividends could exceed this mark by so much that work itself becomes an option. Dividends that meet or barely exceed the poverty line are called minimum basic income, whereas those that fall below it are referred to as partial basic income.
Regardless of how large dividends are, UBI requires funding. Since the funding is usually facilitated by governments and public money, UBI and socialism have often been used in similar contexts. In truth, there is a distinction between these two concepts.
While the idea of redistributing wealth is included in both UBI and socialism to some extent, the latter places much more emphasis on the power of governments over a country’s economy than the former. Strictly speaking, socialism is implemented when governments control the means of production. In the case of UBI, governments must indeed take control over the initial distribution of dividends, but this does not mean that they would take over any industries or businesses.
In fact, UBI can even be perceived as a form of capitalism. According to Andrew Yang, a 2020 Democratic presidential candidate and champion of UBI, UBI would change virtually nothing in a capitalist market, except for the buying ability of its consumers.
Another concept with which UBI has been frequently compared is welfare. Since some governments are considering UBI as a replacement for welfare programs, welfare has a much stronger association with UBI than socialism. Welfare embodies an idea similar to UBI – the idea that dividends be distributed so that individuals can meet their basic needs. However, welfare is different from UBI because it is needs-based and therefore not equally distributed to all individuals within a population. The theoretical result is that those who can afford sustainable living go on with their lives, while those who need the money most are able to meet their basic needs and snatch opportunities to improve their financial situation.
In Theory? In Practice?
At this point in the article, UBI still sounds like a theoretical concept. Has UBI even been relevant in the world, excluding a few towns or cities? Will the United States, or any country for that matter, adopt these policies, or is UBI just a fantasy within the minds of political idealists?
Well, it turns out that UBI has a history and indeed has a long way to go. We’ll discuss a short history of UBI and ways that it has been implemented in the past. As exotic as it may seem, UBI is not a new concept. It was proposed in the 1940s in the United Kingdom as a “social dividend” with much of the same principles on which UBI as we know it today is built. However, it was discarded in favor of the welfare system, and that is why welfare programs are so well-known today. This is not to say that UBI was never tested.
For instance, in the 1970s, Canada implemented such a system (named “Mincome”) as a temporary experiment. Ultimately, UBI proved to be economically infeasible is these areas, but it was also found that unemployment, initially a notable concern, stayed below one percent and did not affect the economy significantly. Rather than abuse the UBI, unemployed individuals instead spent their time on practical experiences like education and child care. For a first try, the results were promising. More importantly, Canada informed the world that UBI may be more practical for employment than was previously perceived.
Finland was another stepping stone in UBI’s path to publicity. In a two-year trial in which unemployment benefits were replaced by unconditional UBI, the Finnish unemployment rate remained unchanged, but the country’s population was reported to be happier on average. Even though happiness is difficult to quantify, the experiment points out that UBI does indeed have benefits. Even if unemployment remains unchanged, a country’s citizens are collectively better off if they are happier with their living conditions. This serves as a compelling argument for the welfare of the public.
The above two examples were merely trials in which UBI was experimented. However, in one part of the United States, UBI has gained a significant stronghold. In the 1970s, an economic boom in Alaska allowed the state to implement a system similar to UBI. At one point, the government of Alaska was able to provide a $2000 dividend for each man, woman, and child. Despite high unemployment, the state’s population was happy, and poverty was virtually eliminated.
Arguments For Basic Income
Despite the inspiring prospects of UBI, the concept of free money has faced opposition from individuals across the political spectrum. Universal basic income is an issue upon which the global population is truly split. In our following summary of the positive and negative consequences of UBI, you may decide for yourself which position you support.
UBI has many supporters. A universal basic income would assuredly provide the impoverished with a foundation for future upward mobility. However, the provided income would be too meager to rely on as a sole source of income. For example, Andrew Yang’s most prominent proposal is a $12,000 basic income. A person subsisting off of this salary would fall within the bottom 7th percentile of annual income in the United States. As Americans, we often see unemployment as the fault of the worker, not the economy. The worker is seen as lazy and unmotivated, whose needs should not be attended to until he or she get another job. However, lay-offs are increasingly common in today’s economy, and a crash in a certain market or industry is perfectly natural. So, the means by which people lose jobs – or cannot find them, for that matter – are a part of society. Thus, a universal basic income would help destigmatize unemployment and provide for those who need a cushion while searching for a new job.
A universal basic income can also help level the playing field for low-income workers. Currently, the top 0.5% of the wealthiest Americans earn, on average, about $650,000 annually. In contrast, the bottom 20% earn about $26,000 annually. Although the extremely rich are certainly committed to their work, there is no reason that they should be making 25 times the income of the bottom 20 percent.
This is not to mention that almost all of these 165,000-or-so people probably work one job, while the most impoverished may be working multiple jobs just to stay afloat. This wage inequality, where income in no way corresponds to output or effort, is one major argument behind universal basic income.
Arguments Against Basic Income
Just as numerous as UBI’s supporters are its opposition. Many critics have pointed out the exorbitant amount of money needed to implement the system; this would require raising taxes on, ideally, the richest Americans. Historically, the main problem behind distributing any amount of wealth in America is the obstacle posed by über-rich lobbyists.
Many opponents of the basic income system have mentioned that giving every American unearned money would not offer them any incentive to seek employment or improve their situation. This argument has been applied numerous times to the welfare system; thus, it is unavoidable when considering basic income. Another controversy with a basic income system is the issue of sustainability.
Suppose each and every American – about 330 million – were given $1000 a month. Excluding ineligible recipients (people on social security, people under 18), this system would cost $2.15 trillion per year to implement. However, Andrew Yang proposes in his version of UBI that these expenses would be covered by economic growth, welfare overlap, and other factors to more than make up for the deficit.
However, these estimates are very rough in considering how much each factor will make up for the debt. If the economic growth were not enough to balance out the cost of UBI, the system would be rendered unsustainable. Thus, we must tread lightly when considering broad, overarching ideas that would completely revamp the government, because we may be posing threats to the upkeep of the economy.
Historical Proponents of UBI
In the eyes of historic figures, UBI and similar concepts have had a positive connotation. Colonial philosopher Thomas Paine, famous for his support of American independence in Common Sense, showed an interest in basic income. In his treatise Agrarian Justice, Paine suggested that landowners pay a tax to support disabled, elderly, or non-landowning people. This proposal makes Paine one of the first recorded supporters of basic income.
Andrew Yang is the most notable proponent of a basic income system, touting a monthly “Freedom Dividend” of $1,000 for all adults in America. He created this plan in response to the growing replacement of human workers by automation. This threat of technological take-over, Yang affirms, will afflict serious damage to the job market; thus, a basic income will be needed to provide for those whose jobs are at risk of automation. Additionally, Yang heavily supports giving a dividend to every American – even the richest of the rich. This is intended to destigmatize government aid, as well as demonstrate its role in the economy.
It comes as no surprise that the man who united the world through a global communication system supports greater equality among people. Tim Berners-Lee, inventor of the Internet, has noticed a growing gap between the rich and the poor, and believes a basic income would help fill these gaps. Also, Berners-Lee noted that an income system would be more elegant and simple. He notes that the traditional system has many strange “…ways of giving money to people and really obscur[ing] ways of taxing them, and it all gets too complicated.”
Though he is not well-known for his statements on a “guaranteed income,” Martin Luther King voiced his support for such a system. In a 1967 speech, King asserted that the “…individual will flourish when the decisions concerning his life are in his own hands, when he has the assurance that his income is stable and certain…”
Essentially, King feels that people living paycheck-to-paycheck cannot improve their current standings because they are too busy surviving on the little money they can scrounge. If they were given some sort of financial boost so that they wouldn’t have to worry about staying afloat, they would have the focus and energy to climb out of poverty.
So, is UBI feasible in America?
In recent years, especially in the United States, the idea of a universal basic income has been gaining traction. With unemployment rates and wage inequality growing, some say that it may be time for a new approach. A current issue is the tax cut implemented by President Trump, wherein the wealthiest of Americans now pay less in taxes than the remainder of the population. This has dealt a heavy blow to the economy, and UBI may serve as a solution to this lingering debt. Even if universal basic income proves to be ineffective or too radical, some shift in economic policy may be necessary in the imminent future in order to sustain our economy.
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