Universal basic income (UBI)— is a governmental public program that can be implemented at local, regional, or national levels that would guarantee all citizens sufficient income to meet their basic needs.
There are many complex arguments for and against universal basic income, but understanding it, in general, can be a good starting point both for rethinking your spending habits and attitude and also in bringing some lessons to help you pave your own path to a stable financial future.
With so much uncertainty still hanging in the air due to the coronavirus and the many complications it has brought with it, it seems like for now only one thing is sure: Stability is not a given for anyone. As of February 2021, the total number of unemployed individuals in the US alone clocked in at 10 million .
It follows that many might be interested in or more willing to rethink the foundation of how our society and economy work and could work as we’re on the road to recovery.
Has There Ever Been a Guaranteed Income in the US?
The short answer to this question is yes, no, sort of, but mainly no. The debate over universal basic income spun up when Andrew Yang proposed The Freedom Dividend, during his campaign for the 2020 Democratic presidential primary, in which he proposed a standard $1,000 monthly payment for Americans.
Yang argued his Freedom Dividend would have increased productivity and boosted economic growth. (For a closer look at Yang’s proposal, here’s SoFi’s previously published analysis on his universal basic income plan.)
But the idea behind that proposal isn’t new, and there’s even precedent to it: Since 1982 in Alaska, for example, there’s the Permanent Fund, an annual payment that “allows for Alaskans to share in a portion of the state minerals revenue in the form of a dividend to benefit current and future generations.”
A similar program more related to sharing resources is Texas’ Permanent University Fund (PUF). Established in 1876, the PUF utilizes revenue generated by oil and gas companies to fund and support higher education within the state.
The only other similar program that’s been rolled out more broadly in the U.S. is the welfare system, or government support for citizens usually intended to ensure that people can meet their basic needs. However, people lose their eligibility for welfare programs (like food stamps provided by SNAP or Medicaid benefits) if they begin earning more than a certain threshold.
While an argument could be made that welfare is a stepping stone to deploying universal basic income, that hasn’t quite happened yet. In the 1960s, Martin Luther King, Jr. called for a UBI to abolish poverty and help diminish income inequality among Americans. That same decade, President Richard Nixon in 1969 toyed with a UBI plan to assist poor families by giving them $1,600 a year—equivalent to roughly $11,600 in 2020.
Before Yang revived the idea, the Green Party in 2010 advocated for a universal basic income to “every adult regardless of health, employment, or marital status, in order to minimize government bureaucracy and intrusiveness into people’s lives.” In 2017, in Hawaii, Hawaii State Rep. Chris Lee published a bill to investigate basic income for his state and explore its viability.
These recommendations are not unique to politicians alone. Facebook Co-Founder Chris Hughes’ 2018 book Fair Shot: Rethinking Inequality and How We Earn argues for a UBI plan financed by taxes on the top, wealthiest 1% of the country.
Before the COVID-19 pandemic, which has reinvigorated some interest in UBI , the biggest general catalysts for UBI have revolved around income inequality—and more recently, concerns over automation and whether job creation can keep pace.
In America alone, UBI has been suggested, debated, and generally always an idea floating in the air at least all the way back to political theorist and revolutionary Thomas Paine in the 18th century, and the publication of the 1795 Agrarian Justice pamphlet (which also is recognized as the first American proposal for pensions). Agrarian Justice discussed the origins of property, and that divisions between the poor and the rich were arbitrary ones that should be actively eroded, if not discarded.
But as the above paragraphs suggest, these calls, experiments, and trial balloons flirting with UBI were largely fruitless. But the coronavirus stimulus checks and historic unemployment have revived curiosity and discussion around the idea of UBI.
Ready for a Better Banking Experience?
Open a SoFi Checking and Savings Account and start earning 1% APY on your cash!
What About the Rest of the World?
Since other countries in the world have a longer history than America, it might not be a surprise to learn that the notion of universal basic income is as well. It has emerged and re-emerged throughout history—dating back at least to the 1500s.
In 1516, English philosopher and lawyer Thomas More published Utopia, a satirical book that posited how a minimum income might cure theft. As time went on, these suggestions have gone from being less radical to more seriously considered.
When Thomas Paine wrote about UBI in the 18th century, historians say French military general Napoleon Bonaparte was sympathetic, making a comment along the lines of: “Man is entitled by birthright to a share of the Earth’s produce sufficient to fill the needs of his existence.”
While Napoleon ultimately never implemented UBI, a good deal of the rest of the world seems to be thinking it’s time to adopt it. Fast-forward to more recent times, and in 2018 British business magnate Sir Richard Branson spoke about the importance of UBI in an interview , saying he believes “it will come about one day.”
South Africa has made repeated calls for basic income. Political parties and economists in Japan support the idea. While there aren’t any national UBI plans currently in practice, there is a growing list of countries that have explored smaller-scale programs to test out the idea.
What are some of the Pros and Cons of UBI?
Like anything, UBI has a number of pros and cons. The arguments for and against can be complex, branching into economic and political factors and ideas. This article provides a brief overview of some of the frequently cited pros and cons.
Pros of UBI
Some of the pros of UBI are straightforward—for example, with consistent and reliable payments from the program, people could choose to spend less time working or pursue jobs they enjoy or those that offer more competitive wages.
Another pro—with this safety net, people would also be better able to take time off of work to care for a family member, should the need arise.
Proponents of UBI say that governments may spend less to administer UBI in comparison to traditional welfare plans. And UBI could help in ending the cycle of poverty that some people on welfare find themselves trapped in.
Another benefit? UBI payments have the potential to help stabilize the economy during a recession.
Cons of UBI
UBI can inspire concerns about inflation. People would be receiving payments and feasibly have more money to spend, which could cause inflation if there is an increased demand for goods and services. And, if there is increased inflation, the payments wouldn’t necessarily lead to an increased standard of living.
Additionally, there are concerns that UBI could squash people’s motivation to work.
While proponents of UBI anticipate that the program would be less expensive than the current welfare system, there aren’t many plans that detail what a potential transition from welfare to UBI could look like in the United States.
The Takeaway
Universal basic income is the idea that each citizen would receive an unconditional universal basic payment from the government to help meet their basic needs. This idea has been percolating for centuries. Proponents of the idea suggest that the program would offer stability for residents and could potentially cost less to administer than the current welfare system. Detractors of the idea argue that UBI could lead to inflation and disincentive people from working.
Whatever you may think of the merits for and arguments against universal basic income, it’s anyone’s guess whether it will become a reality in the United States. In the meantime, you could consider reviewing or making a financial plan. Consider being more deliberate about your plans to spend, save, and earn money.
In uncertain times, one place to start is by evaluating your needs vs your wants. Should you experience an unexpected decrease in income (or an influx!) you’ll be better able to prioritize your spending. No one knows what the future might bring, but you can start building a solid financial foundation today.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
FINRA / SIPC . SoFi Securities LLC is an affiliate of SoFi Bank, N.A. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
SoFi members with direct deposit can earn up to 4.30% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 6/9/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOMN20027
