UBI is an idea with the potential to radically reshape society.

By Daniel Herborn


Posted on April 1, 2019

To its advocates, it could help usher in a happier, healthier new era of humanity. To its detractors though, it is an ill-conceived utopian folly. The CEO Magazine spoke to the experts for an in-depth look at UBI.

Universal basic income (UBI) has a number of different variants, but it is essentially an unconditional periodic cash payment made by the state to all individuals.

It is not a new idea – it could date back as far as the work of Thomas More, but it has increasingly been in the news. In the US, Andrew Yang has overtaken a number of far more established names in betting markets while running essentially as a single-issue candidate and UBI advocate. Indian Opposition Leader Rahul Ghandi has also promised to implement a form of UBI if elected, guaranteeing income to 250 million of the poorest people in the country.

Even without much support from mainstream political parties, backing for UBI is growing quickly. A survey in the US in 2018 found almost half of respondents supported the idea. Similar surveys in the UK and Australia have found the idea appeals to a majority of respondents, while an extensive European survey saw UBI gain majority support in Slovenia, Belgium, Poland, Ireland and the Czech Republic. Young people and supporters of progressive parties are far more likely to be in favour of the concept.

UBI has also found support among thought leaders including Elon Musk, Mark Zuckerberg , Sir Richard Branson and Nobel Prize winning Economist Sir Chris Pissarides.

A recent two-year trial of UBI in Finland saw a number of unemployed people receive an automatic and guaranteed government payment. Those in the program reported an uptick in their health and happiness, though their employment prospects did not substantially improve. This exercise had some obvious limitations; not only was it concentrated in one area of one country, but it was also not a true example of UBI as only one socioeconomic demographic participated. One of the defining features of UBI is that every citizen receives the money, be they unemployed or a billionaire.

The implementation of UBI would be one of the most ambitious and far-reaching policy ideas ever implemented, with profound implications for poverty, the workforce, healthcare, the welfare state and more. Even in the driest annals of economic and policy debate, it is a concept that sparks fiery passion. Its advocates see it as a major step towards improving the quality of life of many individuals and increasing the net happiness of broader society. Those opposed to it see it as an abomination and a dangerous idea. Interestingly, those on opposite sides often cite essentially the same reasons for their position.

UBI is gaining acceptance as the future of work becomes more clouded

As concerns mount over the future of work, specifically the possibility that AI, automation and robotics will disrupt the workforce, UBI has gained traction as an idea, with some positioning it as an important component of providing economic security in a future where many current jobs have disappeared.

Projections on how these disruptive new technologies will impact the job market vary wildly, however. AI expert Kai-Fu Lee believes the processes could make 40% of current jobs redundant in just 15 years. Similarly, an oft-cited study by Frey and Osborne found that 47% of US jobs were under threat due to advances in machine learning and robotics. Other research, such as a report from the World Economic Forum (WEF) have reached far more positive conclusions; the WEF, for instance, forecast a net gain of 58 million jobs by 2025.

Tim Hollo, Executive Director of the Green Institute, tells The CEO Magazine that the spectre of a job market in flux has pushed UBI further into the mainstream of political debate but the loss of jobs expected with these new technologies may be overblown.

He sees the appeal of a UBI as having far greater utility than just acting as a direct corrective for job losses. He says it challenges the old accepted wisdom that we should all work harder and longer. Instead, he says, “we can build a system where automation does some of the work that we don’t like doing and we focus on caring and creative work that computers can’t do.”

Dr. Elise Klein, a Senior Lecturer in Development Studies at the University of Melbourne, says that “one of the most radical and interesting things about the basic income other than it giving people an economic floor and economic security to live with, is its potential to redefine how we understand work and de-link economic security with work and formal employment.” Freed from this structure, Klein argues, people could spend more time in productive activities instead of what Anthropologist David Graeber has termed “Bulls*** jobs”.

While not specifically mentioning UBI, fast-rising US Congresswoman Alexandria Ocasio-Cortez recently touched on this idea when she said that we should not fear the impact of automation on the job market and forecast that it could instead free people up to make more enjoyable use of their time.

Advocates of UBI also believe it could help address the concurrent problems of overwork and underemployment, which are both rife in developed nations.

What social and health benefits could a UBI deliver?

“When you have greater autonomy and a feeling of greater control over your life, your wellbeing increases”, Hollo says, citing both the recent trial in Finland and a Canadian trial that took place in the 1970s. “This has implications for mental health, but also your physical health improves. That is a really central part of the goal of UBI, to get people better quality of life”.

In an email to The CEO Magazine, Dr. Nicholas Biddle, Associate Director of the Australian National University’s Centre for Social Research and Methods, says that a UBI would “be likely to improve the wellbeing of the most vulnerable segment of the community, improve their ability to make long term decisions that are in their own best interests, and improve their ability to provide a stable environment for their children.” In the recent Finnish trial of UBI, recipients did indeed report lower levels of stress, partly attributable to automatically receiving a payment rather than engaging with a bureaucracy to receive their income support.

An Australian Parliament House report into UBI raised a recurring criticism of such payments; that they would somehow weaken the social contract, encouraging idleness and self-absorption as people become disengaged from the state and our current ideas of community.

Hollo sees this argument as being based on “a very narrow and outdated view of the social contract” and says a properly implemented UBI instead has the potential to “actually broaden and cement the social contract by saying it is the responsibility of the state to look after all of us and ensure that we don’t slip into poverty.”

Klein also says there is a feminist aspect to UBI in that it would recognise that much of the work currently undertaken, such as care labour, is unpaid.

Would UBI act as a disincentive to work?

One recurring criticism of UBI is that it would reduce the incentive for people to undertake paid work. Think tanks opposed to UBI have argued that it ignores the value of work.

To advocates like Hollo, however, painting UBI as a disincentive to work is based on a “very narrow conception of the world”. He believes that it could instead free people up to do work they enjoy more or work that has greater social utility, like caring roles. He also sees the potential for UBI to facilitate people undertaking more education, re-training to work in different fields and setting up new enterprises they otherwise may not have attempted.

Biddle is also sceptical of the notion that a UBI would see people drop out of the workforce en masse. “It is unlikely to reduce the incentive to undertake paid work, unless the increase was very large and/or wage growth remained flat or became negative,” he reasons.

Professor John Mangan of the University of Queensland is of another school of thought. He told The CEO Magazine that he believes that the UBI’s impact on the labour market would ultimately act as a disincentive to supply labour. For this reason and others, he anticipates the corporate sector is unlikely to support the UBI. This sector would be directly and massively impacted by a UBI; under Andrew Yang’s proposal, for instance, a 3% corporate tax levy (to be reduced over time) would be introduced to fund the program.

UBI
Above: A group dumped coins in Bern, Switzerland to protest the possible implementation of UBI

Would UBI drive inflation? Would it be unaffordable?

The most commonly advanced argument against implementing UBI is the incredible cost involved. Prominent US Hedge Fund Manager Ray Dalio had his firm crunch the numbers and concluded that providing every American with US$12,000 annually (enough to lift them above the poverty line) would cost US$3.8 trillion each year, a figure that represents a whopping 78% of current tax revenue.

One of Biddle’s ANU colleagues, Associate Professor Ben Phillips, completed detailed modelling on the economics of UBI and concluded that for every adult in Australia to receive the equivalent of the current age pension (A$23,000) and for every child to receive A$5,500 annually would cost some A$265 billion each year.

“I can’t see how a UBI could ever be cost neutral without eliminating the universal or the basic components of it,” Biddle says. “That doesn’t mean it is prohibitively expensive, just that we would have to accept much higher taxes at some points on the income distribution.”

Klein points out that other massive injections of cash into an economy have not necessarily had any inflationary effect, including instances of the US economy being stimulated to the tune of trillions of dollars. Similarly, the Alaska Permanent Fund has not been shown to have led to inflation.

After creating models for a number of three different versions of UBI, US think tank the Roosevelt Institute concluded that the macroeconomy could sustain such an injection of cash and would actually be likely to grow.

Mangan said the question of whether or not unconditional payments from the government would have an inflationary effect would depend on the form of the UBI. If it replaces existing welfare programs, he believes it may not cause any inflation. A UBI paid for by “quantitative easing” and the government going further into debt would likely cause a “money multiplier impact on inflation”, he says.

He also believes that “Having a significant group of people on a fixed, relatively low income will further skew consumption patterns and force up the prices of “basics””.

Advocates of a UBI say the massive costs of implementing the system could be offset, at least partially, by efficiency gains from our existing welfare systems, which are often extremely inefficient. Further, the cost of a UBI could also be mitigated by savings in areas such as healthcare. Klein says that focusing on the gross cost of UBI is a mistake and that the net cost could be massively different.

“I think the bigger question is: ‘What is the cost of not going down this path?,” she says.

Where to now for UBI?

Trials of UBI have been fairly limited to date and in some cases arguably shouldn’t be called UBI as they fall down on the universality element. Many have been cut short when governments change, further limiting their usefulness as case studies. Leading UBI advocate Karl Widerquist has written of the “inherent limitations of social science experimentation” which restrict the efficacy of trials.

With this in mind, Klein says “my feeling, along with quite a few others, is that it’s probably just best to just implement it”. One possible avenue to determine the effectiveness of unconditional payments without plunging into a full UBI would be to introduce it for a certain age group, such as young adults or pensioners and incrementally move it towards being a universal payment.

Others in the field, such as Mangan, feel that UBI seeks to address some vital issues for the future workforce but will never be the most equitable or efficient way of doing so. “The universality of the concept is its weakness,” he says. “It reduces the ability for governments to target areas of specific need and treats all persons as equally deserving.”

For now, UBI is likely to continue gaining currency as an idea and inspiring debate. The contours of this discussion will be in large part be shaped by the impact of technology and how much this helps or disrupts the job market.

Beyond that, however, UBI is likely to continue to be a fascinating and deeply polarising topic, touching as it does on some of the most fundamental questions about our society, like what role the state should play in our lives and how much our lives should be structured around paid work.

Header image credit: Collison Conf