The easy way to distribute wealth: Universal Basic Income

UBI (universal basic income) is a government program that provides a set amount of money monthly to every adult citizen. In other words, a basic income is a government payment guaranteed to everyone, regardless of their wealth. As an alternative to existing need-based social programs that involve more bureaucracy, a basic income system is designed to alleviate poverty.

It varies depending on how much funding is requested, how frequently it is paid, and what policies are proposed. There is no doubt that each of these parameters is pivotal, even if the term UBI (universal, unconditional, individual, regular, cash payment) can be defined in a wide range of ways .

There are many alternative basic income systems that propose that a person receives a certain amount of money if they work in a particular way. When we pay a certain amount and make it conditional, it creates mental and practical conflicts.

Increasing labor productivity controls will only create alienation from work and reduce intrinsic motivation. Therefore, if we try to control wealth distribution in a way that will pay Y amount if X work is done, the human mind will fight it. The results may be reversed. Lower classes will see it as an insult to themselves, not as a helping hand.

Why does Universal Basic Income matter?

There are many factors driving renewed interest in UBI in the United States, including income and wealth inequalities, labor precarity, and poverty.

The growth of technology and the capitalist economic system are two primary causes of the wealth gap. Capitalist systems accelerate the circulation of capital, and this benefits the owners of capital more. The growth of technology allows those who can use it to create wealth and gain a competitive advantage to advance.

Modern civilization faces many risks, including the growing and persistent global inequality gap, which questions its longevity .

A Brookings Institution report from 2019 suggested that automation could threaten one-quarter of all American jobs. According to the researchers, the most vulnerable jobs are those that require routine tasks, such as manufacturing, transportation, office administration, and food preparation.

In reality, the main reason for its revival, including in or around Silicon Valley, is the fear that automation is dislodging workers at unprecedented rates.

What problems does wealth inequality cause?

Often, wealth inequality leads to flawed ideologies. Regardless of who created these ideologies, society is interested in adopting them in order to escape from the present conditions as fast as they are propagated. Therefore, populist policies are popular in democratic countries when wealth inequality is high.

Thus, wealth inequality can be a very dangerous issue for political society due to the damaging effects of flawed ideologies, as the Nazis were a prominent example of massive destruction.

What are the fears of UBI?

Cost is perhaps the biggest disadvantage. Using Andrew Yang’s $1,000-a-month Freedom Dividend as a benchmark, the nonprofit Tax Foundation calculates that it would cost $2.8 trillion annually (minus any offsets from consolidated programs).

Obviously, distributing per capita income to everyone has a huge cost, but we can discount per capita income by only considering the lower deciles. Or we can also limit its duration. Each person should only be subject to it once every five years, for example.

UBI’s impact on economic incentives is the next problem after its staggering cost. UBI is also criticized for creating a disincentive to work by having an income stream that is not dependent on employment. According to Yang, the $12,000 he plans to provide would not be enough to live on. As a result, the vast majority of adults would have to supplement their payments with other sources of income .

What are the alternative systems?

Different UBI models can be considered as an alternative. A cousin of Universal Basic Income, the Negative Income Tax, was famously defended by Milton Friedman. As a result of the NIT, he argued, the price system and market mechanisms would be preserved. In addition, the state bureaucracy needed to determine which poor people’s merit assistance would be reduced .

Of course, Universal Basic Income is a lump-sum transfer, universal and unconditional, while Negative Income Tax is a scheme that is based on an income baseline .

The ethical bases of Negative Income Tax and Universal Basic Income reflect two different concepts of freedom.

UBI may be less efficient in raising low incomes but is more sensitive to inequality, social inclusion, and supporting labor supply and citizenship.

UBI assumes that exploitation exists in wage labor systems, while NIT does not address this issue. Also, UBI provides a more consistent and effective approach to addressing uncertainty in employment, income, and life events, while NIT relies on insurance and social assistance programs.

UBI promotes individual responsibility for decision-making and autonomy, while NIT maintains a paternalistic approach to social welfare. In addition, UBI and NIT represent fundamentally different approaches to social welfare, with UBI emphasizing individual freedom, dignity, and social inclusion while NIT prioritizes work incentives, paternalism, and traditional models of redistribution.

In NIT, poor individuals are financed by middle- and high-income taxpayers, while in UBI, the most affluent individuals redistribute income to middle- and low-income individuals.

Researchers have also suggested that rather than taxes, a better system might be financed by an asset return. Alaska, for example, pays its residents a dividend from its oil fund each year: $1,900 in 2014.

Basic income vs negative income tax

Basic Income (BI) and Negative Income Tax (NIT) are two concepts proposed to address poverty and ensure a minimum standard of living. While both aim to provide financial support to individuals, they operate differently.

Comparison Table

Feature	Basic Income (BI)	Negative Income Tax (NIT)
Eligibility	All citizens, regardless of income	Individuals/families below a certain income threshold
Payment Frequency	Regular (e.g., monthly, annually)	Typically through tax system annually
Income Requirement	None	Yes, based on income level
Goal	Ensure a minimum standard of living for all	Support low-income individuals and encourage employment
Work Incentives	Could reduce incentive for some to work	Designed to not discourage work
Administrative Complexity	Relatively simple, as it’s universal	More complex due to income assessments
Cost	Potentially high due to universality	Potentially lower, targeted to those in need

Basic Income provides a universal safety net, ensuring everyone has a minimum income to cover basic needs, which can simplify welfare systems but might be costly.

Negative Income Tax specifically targets low-income individuals, potentially encouraging work and reducing poverty, but requires more complex income assessments.

Both systems aim to reduce inequality and support economic stability, but they do so through different mechanisms and philosophies.

Universal Basic Income Benefits

Government bureaucracy could also be reduced by a guaranteed income, according to libertarian philosopher Charles Murray. The UBI would provide $10,000 annually to individuals, as well as basic health insurance, which he says would allow the government to reduce redistribution programs like Social Security .

Meanwhile, Yang argued that the labor force participation rate – the percentage of Americans employed or seeking employment – had fallen to its lowest level in decades. According to his campaign website, “the Freedom Dividend (UBI) will allow Americans to learn new skills, start their own businesses, go back to school, take care of their loved ones or work towards our next opportunity.”

UBI could achieve more significant equity and egalitarianism by replacing the complex social safety net that expends unnecessary resources on fraud prevention and creating emancipatory effects for welfare recipients who currently experience negative consequences under paternalistic social policies.

A Look at UBI’s Impact on Personal Agency and Social Mobility

The individual-level impacts of UBI extend beyond labor participation, with evidence suggesting recipients make better nutrition choices, experience decreased hospitalizations and substance abuse, and have improved educational attainment .

Exploring the Impact of Universal Basic Income Demonstrations on Socioeconomic Development

Several UBI demonstrations have launched in recent years, including Y Combinator’s randomized controlled trial (RCT) with 1,000 participants receiving $1,000 per month, the City of Stockton’s program with 100 individuals receiving approximately $500 each month, and a project in Ontario enrolling up to 4,000 participants using an NIT scheme.

Other UBI experiments taking place outside of the US include Finland’s two-year basic income experiment with 2,000 citizens receiving approximately $700 per month and GiveDirectly’s planned RCT with more than 21,000 individuals testing four interventions:

• A basic income for 12 years.
• Basic income for two years.
• A lump sum payment.
• A control group without transfers.

Have any countries implemented a universal basic income?

Several countries have implemented or experimented with variations of universal basic income (UBI).

Alaska, United States

Since 1982, Alaska has had a program called the Permanent Fund Dividend (PFD). It distributes a portion of the state’s oil revenues to eligible residents, providing them with an annual dividend. While not strictly a UBI, it has similarities and can be considered a form of basic income.

The Permanent Fund Dividend (PFD) program in Alaska is often cited as an example of a program that shares similarities with universal basic income (UBI). While it is not a traditional UBI, it does provide a form of basic income to eligible residents of the state. Here are some key points about the Alaska Permanent Fund Dividend program:

1. Purpose: The program was established in 1982 with the goal of distributing a portion of the state’s oil revenues to its residents. It was designed to provide Alaskans with a share of the state’s wealth derived from its natural resources.
2. Funding: The dividends are funded through the Alaska Permanent Fund, which is a sovereign wealth fund created from oil revenues. The fund invests a portion of the state’s oil wealth in a diversified portfolio of financial assets.
3. Eligibility: To be eligible for the PFD, individuals must meet certain residency requirements. Generally, residents must have lived in Alaska for a full calendar year before they can apply for the dividend. However, specific eligibility criteria and requirements may vary over time.
4. Annual Dividend: The program provides an annual cash payment, known as the dividend, to eligible residents. The amount of the dividend varies from year to year and is determined by the performance of the Alaska Permanent Fund and the number of eligible applicants. The dividend amount has ranged from a few hundred to several thousand dollars per person.
5. Unconditional Cash Transfer: The PFD is typically distributed unconditionally, meaning that recipients have the freedom to spend the funds as they see fit. There are no work requirements or restrictions on how the dividend can be used.

While the Alaska Permanent Fund Dividend program does share similarities with basic income principles, it is important to note that it is not a comprehensive UBI implemented at the national level. The program provides a regular cash transfer to eligible residents, which can help alleviate financial pressures and provide a degree of economic security. However, it does not guarantee a consistent income for all citizens, regardless of their employment status.

Overall, the Alaska Permanent Fund Dividend program is often considered a unique case that resembles certain aspects of basic income, demonstrating the potential benefits and impact of cash transfers on individual well-being and local economies .

Conclusion

In a capitalist economy, an effective method of income distribution is essential to prevent the dangers that capitalism engenders.

In order to prevent populist politics, proper wealth distribution is required, and flawed ideologies cannot be allowed to flourish.

Hence, UBI can be a suitable option for trial or temporary implementation in a specific geography. Additionally, UBI can reduce government bureaucracy as well as direct wealth distribution that allows people to improve their use of it.

However, in order to determine which version of UBI is the most appropriate for each region, different versions of UBI must be tested in research.

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