Money? For Everyone? For Free?

Victor Dubreuil: Barrels on Money (c. 1897) // Public domain

It is not hard to see why Universal Basic Income (UBI) is such a popular idea. It is an idea to pay everyone a fixed amount of money regularly, with no strings attached. According to its proponents, UBI would eradicate poverty, save people from burnout at work, stimulate new businesses, and unleash people’s creative powers. Ultimately, it would save the planet from destruction – less work means less production and less production means less pollution.

However, despite the extensive research, there are significant aspects that are often overlooked in the public discourse. For instance, the experimental results provide far less than UBI’s enthusiasts would like to acknowledge, and the possibility of widespread unemployment due to UBI could have far-reaching implications beyond the economy.

Scientific studies, which are treated with such high esteem in our rationalist political culture, present a complex and contradictory picture. For instance, the Stanford Basic Income Lab, an organization related to the renowned university in nothing but its name, has documented nearly two hundred UBI experiments that are either ongoing or have been completed.

The most notable of these took place in Finland in 2017-2018. Participants received €560 monthly for two years, regardless of whether they had other income. The unemployed were expected to be more likely to take up employment if they found a job without losing benefits. However, no significant difference existed between the groups that did and did not receive UBI. Some call this disappointing, while others suggest it to be proof that UBI will not make people stop working.

Since the COVID-19 pandemic, a wave of UBI experiments has swept the USA, where municipal authorities provide unspent pandemic management funds. According to American researcher Leslie Ford, these experiments are often not designed according to research standards – without randomized sampling, sometimes even without a control group; they do not measure indicators such as the long-term impact on income and only look at the fact of employment without considering whether it is full-time or part-time. This makes one wonder if these studies are designed to make the results look as good as possible.

According to L. Ford, negative income tax experiments in the US in the ’60s, ’70s, and ’80s (the state provides a free supplement to wages up to a certain level of income, whether or not the person is working) showed that people who received money for free worked less. These studies were more carefully designed and measured such statistics as, for example, long-term effects on income after the experiment. It was discovered that, probably because of changed habits and undeveloped skills, the negative impact that benefits had on people’s long-term earnings was so strong that in the long run the group which did not receive the benefit ended up richer.

The results of these studies are not only ambiguous, but it is also questionable whether they can reliably shed any light on the consequences of the introduction of UBI.

In the experiment, people know they will receive benefits for a limited period, so they cannot drop out of the labor market. A two-year experiment says nothing about what will happen in 40 years or the fourth generation. After all, nobody will apply this policy for just two years.

Work is, above all, a response to a lack of material goods. However, according to American psychologist Clay Routledge,  people get much more out of work – for example, they develop skills and make connections. By removing the incentive to act, UBI can have dire consequences for many, but especially for those who already need more skills or confidence – they might not even try hard but meaningful pursuits. The shy would then become even more socially isolated. Activities which create no value for other people may provide recreation, but imagine what it would be like to spend ten years creating paintings not wanted by anyone! Alongside the utopian image of the UBI, one could paint a dystopian one – a society of state-dependent, socially isolated individuals.

And the biggest obstacle to UBI is its cost. It is estimated that it would cost over USD 3 trillion annually to pay each adult USD 1,000 a month in the US. USD 3 trillion – half the current federal budget. In Lithuania, for example, the calculation is as follows: if we split the budget for social security equally between everyone, the monthly payment would be around €290. Vulnerable groups such as pensioners and people with disabilities would suffer. A second budget for social security would be needed if we wanted to maintain current benefits along the UBI. And if we wanted – as proposed – to keep the current guarantees and pay €1,000 each, we would need another three and a half of our social security budgets. This would not be possible without grave consequences for the whole economic system.

Many are familiar with the fairy tale story in which something desirable is received miraculously but it later turns out that some extra strings were attached. Everything one touches turns to gold and so becomes impossible to eat, or we forget to ask for eternal youth when we receive the gift of immortality – the aging body becomes more and more clumsy and sickly until life becomes a misery. If the UBI proponents have their way one day, it will likely be another story like this.

The article was originally published in IQ.

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Augminas Petronis