The Critical Evaluation of the Universal Basic Income

In a world where income equalities are growing larger, technological advances are threatening jobs, poverty levels are increasing, job security is less certain and the wealthy are getting wealthier there is a large calling for an alternative, effective re-distribution system. In today’s economic and political climate government intervention, large social welfare and socialist policies are seen not to be efficient. A radical redistribution of income named ‘Basic Income’ has been proposed as a solution to these problems. Basic income has been defined by Belgian political economist and political philosopher Philippe Van Pariijs as “an income paid by a government at a uniform level at regular intervals, to each adult member of society”. Basic income is unconditional, it is paid regardless of an individual’s employment status, marital status, ability to work or income level. It is paid as long as you are a permanent resident of the country employing the system. This essay is going to critically evaluate the system and come to a conclusion on whether this system could be an effective solution or not.

Basic income could provide an effective distribution of opportunity, especially to minorities. Women’s income and job options are heavily impacted as they are usually left with the burden of performing most of the labour in the household. Basic income could compensate women for this and ease the pressure of multi-tasking employment and managing a busy household. Basic income could also protect women in vulnerable and uncertain times such as domestic abuse or marriage collapses. The basic income grant trial in Namibia from 2007-2012 resulted in the findings that basic income “reduced the dependency of women on men for their survival”. Canada’s basic income trial in Mincome in 1974 resulted less emergency room visits for domestic abuse. Basic income could provide millions of children in third world and developing countries with the means to achieve an education. The main problem in these countries is that children cannot attend school because of the financial situation of their families. The basic income trial in Namibia from 2007-2012 resulted in school dropouts reduced from 40% in November 2007 to 5 % in June 2008 to almost 0% in November 2008. This was due to parents being able to afford to pay school fees and to buy school uniforms which encouraged attendance. Basic income could also compensate unpaid care workers. Basic income would allow care workers to support themselves, reducing public spending on care workers and encouraging family members to care for their ill relatives full-time.

Basic income could significantly reduce poverty and income equality. Namibia’s UBI trial from 2007-2012 led to household poverty rates falling from 76% of the participants to 37% after one year. In 2015 Alaska jumped to being ranked number two in the United States for income equality after being ranked number thirty in 1981. This was mainly due to the introduction the Alaska Permanent Fund, a UBI trial introduced in Alaska in 1976. In addition, the “Permanent Funds Dividends and Poverty in Alaska” report released in 2016 revealed that Alaska’s basic income kept 15,000-25000 residents (2-3% of the state’s population) above the poverty line every year since 1990, providing the most value to rural residents, Alaska natives and children.

Technological advances have threatened low-income, physically demanding jobs like truck drivers to be lost to automation. The McKinsey Global institute has reported that 800 million jobs around the world could be lost to automation by 2030. Many of these workers only have a basic second level education and would struggle to be re-employed in today’s technologically advanced and competitive market. Basic income could compensate these people by giving them the means to enter into training programmes developing and improving their skills to find employment.

There is a strong case that basic income could improve the economy. Basic income could stimulate entrepreneurship as employed persons could re-invest their basic income into innovation and new business ideas. This could potentially create thousands of new employment opportunities. Basic income would also eliminate government social welfare spending, for example unemployment benefits, subsidised housing and food stamps. Obviously this would be counter-acted by the cost of basic income but could free up time to improve education, health and infrastructure.

There is a strong argument that the introduction of basic income will improve the overall health of population concerned. India’s UBI trial in 2013-2014 resulted in participants saying that basic income improved their health by allowing them to gain access to clean water, reduce anxiety, afford medicine, eat more regularly and improve sanitation. In addition, Finland carried out a two-year basic income trial giving 2,000 participants on 560 euro a month. The results were that the participants who received basic income were more confident, healthier and happier than their counterparts. Another remarkable case was that Namibia’s 2007-2012 UBI trial resulted in child malnutrition falling from 42% to 17% in six months.

There are also many issues with basic income. One the main arguments in opposition of basic income is that it removes the incentive to work and will reduce the supply of labour. This was proven in the 2017 Finland trial which resulted in participants being no more or less likely to find employment than unemployed people who weren’t receiving the basic income payment. Switzerland rejected the introduction of basic income in a referendum which saw 77% vote against it and only 23% for it. One of the main reasons for this was that voters believed the country’s labour and skills shortage would worsen. This argument can be proven by the results of basic income trials in New Jersey and Pennsylvania, Iowa and North Carolina, Seattle and Denver and Indiana that were carried out from 1968-1974. These trials resulted in average working hours being reduced by 5-7.9%. Furthermore, there is a risk that the cost of labour would rise due to people having higher job demands, for example paid leave, jobs with advancement potential and favourable scheduling.

Another argument against basic income is that it is simply too costly. In 2016 in the UK the Torrie party rejected the introduction of basic income in a parliamentary debate with the minister of Employment saying the costs would be outrageously high ranging from £8-£160 billion “While at first glance UBI may seem desirable, any practical implementation will invariably be unaffordable”. Economist John Kay, Research fellow at Oxford University studied UBI levels in France, Germany, Finland, USA, UK and Switzerland and came to the conclusion that the introduction of basic income would not be feasible “ The provision of a universal basic income which would provide a serious alternative to low-paid employment is impossibly expensive”. Kay says taxes would have to significantly increase and it would not work “Either the level of universal basic income is unacceptably low or the cost of providing it is unacceptably high”. In Finland Ikka Kaukoranta, chief economist of SAK said the Finnish basic income trial is “ unworkable, uneconomical and ultimately useless” saying it basic income would increase Finland’s GDP deficit by 5%. It appears that introducing basic income would have to lead to a huge increase in taxation just to fund it. In the United States a National Bureau of Economic Research working paper found that introducing UBI in the U.S would take up 75% of the U.S current total federal expenditure each year and would require doubling federal tax rates “A universal payment of $12000 to each adult U.S. resident over age 18 would roughly cost $3 trillion per year”. These costs seem astronomical and raises serious issues over the applicability of basic income nationwide.

Another argument against basic income is that it doesn’t solve the main problem of poverty which is social and not economic. Basic income will not be able to solve lack of skills, lack of opportunity, a poor healthcare system, addiction and other complex factors that contribute to poverty. Also, there is a huge potential social problem if persons who received basic income stopped working. There would be lack of structure, socialization and social capital in their lives and this would also take away the lessons of work ethic and responsibility. This could potentially lead to increased drug use, crime rates and delinquency.

In conclusion, basic income has great potential to reduce income equality and poverty significantly. It could provide real freedom to all individuals, harmonise income security and provide job security for those at risk of losing employment at the hands of automation. Basic income would have the greatest impact in third world and developing countries in terms of providing fair income distribution, education and freedom, particularly for women who bear most of the labour in the household. It would also help support unpaid care workers in caring for relatives and in supporting people involved in unpaid charitable activities. The main arguments against a basic income is its cost, reduced supply of labour and therefore productivity levels and reciproicity of benefits. It is difficult to force people to work but out-casting these people from society could be a viable solution. Whilst there are many arguments against basic income its advantages to society in terms of poverty levels and income equality far outweigh these arguments, and basic income could provide a solution to poverty levels and income equality.

References

1. Basic Income Grant Coalition (2014), “Pilot Project” published by bignam.org [ONLINE] Available at: http://www.bignam.org/BIG_pilot.html [Accessed 3rd March 2019]
2. Canada Medical Association (2015), “ National Support for a Basic Income Guarantee” published by cloudfront.net [ONLINE] Available at:https://d3n8a8pro7vhmx.cloudfront.net/bicn/pages/164/attachments/original/1444323422/National_Support_for_a_Basic_Income_Guarantee_%28CDN_Medic [Accessed 3rd March 2019]
3. Cass,0 (2016), “Why a Universal Basic Income is a Terrible Idea” published by nationalreview.com [ONLINE] Available at: https://www.nationalreview.com/2016/06/universal-basic-income-ubi-terrible-idea/ [Accessed 1st March 2019]
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7. Stone, J (2016), “Torries reject ‘unaffordable’ universal basic income” published by independent.co.uk [ONLINE], Available at: https://www.independent.co.uk/news/uk/politics/universal-basic-income-uk-tories-tories-unaffordable-damian-hinds-labour-green-snp-a7307476.html [Accessed 2nd March 2019]
8. Winderquist,K (2017), “ The Basic Income Guarantee Experiments of the 1970s: a quick summary of the results” published by basicincome.org [ONLINE] Available at: https://basicincome.org/news/2017/12/basic-income-guarantee-experiments-1970s-quick-summary-results/ [Accessed 2nd March 2019]