What is UBI? (Universal Basic Income)

By David Wolinsky · June 14, 2023 · 7 minute read

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What is UBI? (Universal Basic Income)

Universal basic income (UBI) is a governmental public program that can be implemented at the local, regional, or national level that would guarantee all citizens sufficient income to meet their basic needs.

The goal of this type of program is to reduce financial stress faced by the citizens of a country (or region) and enable them to focus on improving their job skills, furthering their education, or managing personal issues while still receiving enough income to meet their basic living expenses.

Because these programs are either experimental or being developed, there are no criteria for exactly how UBI would work, including how much people would receive and if all or only some citizens would receive the income. However, what follows is a closer look at what we do know about UBI, including the history behind the idea of universal income and the potential pros and cons of UBI.

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. But the idea behind his proposal actually 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.

A broader, UBI-like program was rolled out in the U.S. during the coronavirus pandemic, when many people lost income because their employers either scaled down or shut down operations. As unemployment skyrocketed, the federal government intervened and added to unemployment benefits to help those in financial distress. The government also implemented a widespread economic stimulus package.

Another example of something akin to UBI is the welfare system, which is government support to help ensure very-low-income citizens 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. This is despite the fact that many have tried. 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.

In America alone, UBI has been suggested, debated, and floated as an idea going 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 have not resulted in any kind of universal basic income program in the U.S.

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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.

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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, or UBI, 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 U.S. In the meantime, you could consider reviewing or making your own financial plan. Being more deliberate about how you earn and spend and being sure to put some money aside each month for the future can help you create your own personal financial safety net.

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