universal basic income definition
André Gonçalves

André Gonçalves - Editor & Head Of English Market

After studying and working in HR, André studied sustainability management at Lisbon's School Of Economics & Management. He is responsible for the English speaking market of Youmatter since 2018.

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What is the definition of universal basic income? Why did it become so popular all of a sudden? How realistic is it? Won’t people stop working once they get paid for no reason? Let’s find out.

Universal Basic Income: How It Became Mainstream

The World Economic Forum’s Annual Meeting was held in Davos in January this year. The purpose of this conference was to discuss how to improve our societies and design a better version of globalization. Apart from some news questioning how eco-friendly the people flying there in private jets were, everything was going reasonably normal. At least until the Dutch historian showed up.

The video of Rutger Bergman saying he felt like he was at “a firefighters conference and no one was allowed to speak about water” went viral in the days following the conference. Bergman was expected to contribute to the panel discussion on inequality by adding the perspective of universal basic income (UBI). Instead, as he recently told Trevor Noah in the Daily Show, the fact that days had gone by and “everyone was avoiding to talk about the T-word”, i.e., taxes and tax avoidance, the historian decided to go for a quite controversial speech.

However, the universal basic income isn’t a new idea, despite its popularity rise over the last years. Some pilot tests have been implemented across the world in specific regions within countries like Finland (whose 2 years program recently ended), the Netherlands, Italy, Canada, Uganda, Kenya or India. In fact, one of the candidates to represent the democratic party in the 2020 United States election, Andrew Yang, has been delivering the promise of giving US$1000 per month to every American if he gets elected president. But what is the universal basic income?

What Is The Universal Basic Income? UBI Definition

The basic income is a policy where unemployed citizens get a certain amount of money during a determined period, with no strings attached. Individuals don’t have to work to earn it and they can spend it however they want. And everyone gets the same no matter what their gender, family structure, housing costs or employment status is. Make this a global policy and you’ll get to the concept of universal basic income.

Some well-known figures have in fact discussed or supported the idea of adopting a universal basic income. From the British philosopher Thomas More (who wrote the famous book Utopia in the 16th century) and the Nobel prize of economy Milton Friedman, to Martin Luter King, the former US president Barack Obama or the business entrepreneur from Tesla and Space-X, Elon Musk.

The Benefits Of A Society With A Universal Basic Income

automation income ubi

UBI supporters stand upon different arguments to sustain the need to think about developing universal basic income policies. One of the strongest has to do with the fact that AI and automation is coming and between 400 million to 800 million jobs worldwide might be automated by 2030, and 75 million to 375 million may need to switch occupational categories and learn new skills, according to McKinsey. In this way, the tech-caused unemployment argument defends UBI as a way of transition to a society where people work more on a part-time basis and have more spare time. All this, while getting a certain amount of money. It can also be useful, according to Yuval Noah Hariri, the author of the famous book Sapiens, as a way of making sure people get a living during a transition period in which they need to develop new hard skills to work in a mostly tech-based job market as they’re jobs get automated.

Then there’s also the argument that apart from this transition role, the universal basic income could also help fight many of today’s economic problems. That’s why economists and policy analysts are interested in how UBI would affect, apart from employment, society as a whole, due to the effects of people’s security regarding their income, according to O’Malley’s and Rothstein’s report. It might, for instance, increase the bargaining power of workers by leaving them more comfortable to look for fairer working conditions. Furthermore, a basic income of USD $12,000/year for every American would make the economy grow around 13% by 2025, according to data from the Roosevelt Institute.

And what if people started leaving their unpleasant jobs and dedicate extra time in art activities such as music or painting, or even risk opening their own companies, developing recreative communities… simply because they have a UBI backup in case things go wrong? This would improve both people’s well-being and their entrepreneurial mindset. And it seems to be what happened in Finland, where despite the fact employment didn’t improve, the life quality of the participants did, poverty was eradicated and entrepreneurship was boosted. This is not to speak of hypothetical improvements in health, especially due to depression reduction. Oh and people might even get smarter, as they overcome their mental scarcity Bergman defends so much and gain 13 IQ points, studies suggest.

Concerns On Universal Basic Income

work universal basic income

But won’t people stop working? You might ask. Perhaps it’s still too early to tell with full certainty. But this 2016 study suggests this is not the case and that transfer programs don’t discourage work. At the same time, the universal basic income is likely far from what a reasonable good salary would be like – so people would still need to work to have the chance of enjoying expensive experiences and buying products.

There’s also the worry on a universal basic income that’s spent on drugs and alcohol. The same study from above also says there’s no significant connection between money transfers and increasing on temptations goods such as alcohol and tobacco. In fact, according to Bergman on his book Utopia For Realists, poor people in countries like Kenya and Uganda used their money wisely and even got to improve the living conditions in their villages. Moreover, according to a study from the University of Manchester, programs like the universal basic income will likely mean households will put their money to good use and poverty is likely to decline.

Another concern or motive for disagreement is perhaps the fact that, for instance, in the US, many people still don’t have basic literacy skills while others struggle at completing basic financial forms. Would these people be able to innovate and improve their lives all alone? Perhaps not. Perhaps they’d still need assistance. And what about the people who don’t need the money? Is it fair that rich people get the same amount of money and contribute to emptying the funds from which this money comes from? Is it fair that if UBI replaces medical and social securities and young people who have less health problems take money from the same cake as old people, even though they won’t probably need so much assistance? And we can go on and on, using this point from Milton Ezrati in this Forbes article.

Should We Continue Assessing The Potential Of The Universal Basic Income?

basic income universal

The paper from O’Malley And Rothstein suggests the ongoing pilot studies need some adjustments in order to be truly effective and give valuable insights about the relevance of developing universal basic policies. Specifically,  the authors say it’s important to define better what would be a positive outcome of a UBI pilot, which doesn’t necessarily have to do exclusively with UBI.

Do we effectively want to increase employment? Because the Finish study will say UBI didn’t work for them. Or do we expect UBI to leave people happier? Because it indeed happened in Finland. What social ills do we want to fix? Do we have a common, widespread vision where people will work less (as an effect of automation and economic wealth that’s fairly distributed) and dedicate more time to their education, to develop creativity or to design solutions to fight climate change?

O’Malley And Rothstein suggest that, right now, UBI is proposed as a solution to many different social ills and its details are often underspecified — so it’s not clear who’d get money, how much, or how it would be funded. So questions like how universal basic income would fit with existing programs (or replace them?) and how nations would pay for it needs broad answers backed up realistic solutions. In the end, we can say more experiments will probably need to be done to assess whether a universal basic income would be a good idea. But before running these studies, different actors of society need to meet and co-design how a better future would look like. Otherwise, assessing the impacts of new policies without having agreed on the desired outcome would look like may just be a waste of time. And money.

Image credits to robot on Shutterstock, painters on Shutterstock, wealthy people on Shutterstock and lazy on Shutterstock

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