A* Evaluation on a Universal Basic Income (UBI)

In this revision video we look at the concept of a universal basic income. What is a universal basic income? Which countries and regions are trialing it at the moment? What are some of the main advantages of this policy idea and what are some of the potential drawbacks? Could a universal basic income be an innovative approach in the face of technology-driven unemployment?

What is a universal basic income?

• A Universal Basic Income (UBI) is when all adults receive a no-strings-attached amount of money from the state to cover the basic cost of living.
• With a basic UBI, the set amount is paid to everyone, regardless of their income or wealth
• Countries such as Kenya, India and Finland have been experimenting with a form of universal basic income
• In Stockton, California (USA), a city with above-average unemployment, the Mayor has introduced an experiment to give 100 people $500 per month.

Advantages of a universal basic income

1. UBI would be a direct way of reducing absolute poverty & lifting personal freedom and security – reducing exposure to very high interest debt and risks of needing emergency food bank support
2. A progressive policy designed to reduce relative poverty – which avoids the stigma attached to many means-tested welfare benefits
3. UBI allows a government to cut welfare spending and reduce the complexity of the tax and welfare system to reduce disincentives
4. UBI is seen as way of getting money into the hands of the working poor, and reducing poverty where the future of work seems increasingly insecure e.g. from robots and artificial intelligence
5. Creativity in the workplace might be improved as people may have greater income stability and be more inclined to take risks.

Risks / drawbacks from a universal basic income

1. Affordability– would people be prepared to give up their income tax free allowance or would higher rate taxes rise?
2. Work incentives – does a basic income diminish or enhance the incentive to search for paid work and be entrepreneurial?
3. Effectiveness– the Finnish experiment found an increase in well-being but little noticeable impact on employment
4. Universality– would it genuinely be an universal basic income for all or would there be some conditions attached?
5. Opportunity cost – money invested in cash transfers cannot be invested elsewhere unless public borrowing/debt rises too
6. Alternatives– which works best? Cash transfers or freely accessible public services such as childcare and transport?