Fiction writer and socio-political satire, Thomas Moore, shared in his book Utopia the idea of a guaranteed income for everyone. This became the first-ever example and foundation of the idea of universal basic income (UBI).
Between 2015 and 2019, the Google searches for “universal basic income” have grown to 50 times. The thought of having ‘free cash for everyone’ sounds beyond possible, but influential figure tech billionaire Elon Musk believes that universal basic income may really be a reality.
What would you think life would become if every person would receive free money that can cover life’s basic necessities? Perhaps, people would have greater freedom to find and pursue their passion since they won’t have to spend most of their time working tirelessly to support their needs.
However, will the basic universal income really work in the real world?
At the time of writing, many countries are still having doubts about the idea of universal income, but some countries around the world are already testing out their UBI experiments, entertaining the possibility of the vision.
To answer the latter question, let’s go over the concept of universal basic income, its advantages and disadvantages, and existing real-world experiments.
What is Universal Basic Income?
Universal basic income (UBI) refers to the cash payments that get given to a certain population with little to no requirements for obtaining the money. According to International Monetary Fund, this idea was to help people increase their income.
Let’s put things simply.
Have you tried playing Monopoly back in your childhood? If you have, you must be quite familiar with the term ‘Pass Go and collect $200.’ This is similar to what universal basic income is.
Like the classic fast-dealing property trading board game Monopoly, everyone receives the same amount of money to work with forthcoming payments. Everybody would get to receive an income regardless of how much (no matter how big or small) they are earning in their career.
This is pretty similar to programs that will benefit the elderly, the poor, and the unemployed. The only difference is that other programs establish particular conditions to meet, and UBI doesn’t.
Traveling back in time to the year 2020, the unprecedented pandemic caused a lot of people to lose their job and struggle to make ends meet.
To assist people who had a hard time dealing with the situation, the countries including Hong Kong, the Philippines, Germany, Italy, Canada, India, United States, etc., come up with the idea of releasing ‘free cash’ to help them get through the hardships of the pandemic.
The wrenching pandemic is the epitome of the need for universal basic income.
Andrew Yang, a democratic party candidate for the presidency in 2020, made universal basic income one of the main bases of his political campaign. He called calls his plan the “Freedom Dividend,” which is to be given to all American citizens 18 and above. The amount of money that will be freely given is about $1,000 every month.
“Thirty percent or more of Americans couldn’t afford housing cost last month, that’s with un-extended unemployment benefits and other measures. So, we need to think much bigger about how we can make this economy work for so many Americans. And for me, that’s putting economic relief directly into their hands,” Yang expressed.
However, there is another reason why a lot of people are calling out for a universal basic income.
Automation adoption is growing steadily, so a lot of people are worried about getting replaced by robots any time soon. In 2017. McKinsey & Company estimated that about one-third of the American workforce must learn new skills and shift into another career because of the great automation transition by 2030.
In contrast, research reports from Gartner state that artificial intelligence (AI) would create more jobs than it stamps out.
Moving away from a model where jobs are essential to living is the heart of the universal income. It provides relief for people’s everyday necessities, a financial cushion to unexpected events, and freedom to pursue whatever they want to pursue in life, without worries about how they can afford to live.
Pros and Cons of Universal Basic Income
In Moore’s Utopia, there’s a part where characters discussed how thieves are hanged for their crimes. One of the characters expressed:
“No penalty will stop people from stealing if it’s their only way of getting food. Instead of inflicting horrible punishment, it would be a far better point to provide everyone with the same means of livelihood, so everyone’s under the frightful necessity becoming, first, a thief, and then a corpse.”
Surely, the hanging punishment that is well-implemented before no longer exists now. However, the basic point of this argument still stands— by giving people funds for their basic needs, there wouldn’t be a need for them to resort to illegal activities to survive.
Overall, universal basic income can income inequality, poverty levels, fight tech-related unemployment, and improve mental health. With monthly free money, it’s more likely that people can spend time helping and collaborating with their communities since they can lessen their time at work
This idea isn’t as simple as it seems, though.
Despite the fact that it has a fair share of great benefits for the public, it still has its share of drawbacks.
Some believe that implementing the universal basic income would intensify the already existing inequality since even rich people will be receiving the same amount. It could also decrease people’s motivation to work hard for their daily living. And obviously, UBI would be very expensive.
In the United States, the estimated amount that is needed to give every citizen $1,000 every month is about $2.8 trillion every year.
Universal Basic Income Experiments
There are countries that have already tested the waters of UBI, so to have an idea about the effectiveness of this proposal, let’s look at how their trial is going.
In Alaska, United States, the government pays their locals with an annual dividend of about $1,000 to $2,000 since 1982 through the Alaska revenue fund. This fund is backed by oil revenues.
As opposed to the claim that people will be demotivated because of the ‘free money,’ people receiving the annual dividend in Alaska didn’t stop working at all according to the investigations of economists. Research has shown that the UBI-like program didn’t impact employment, but rather led to a 20% reduction in poverty rates.
Manitoba also tried implementing the same program between 1974 to 1979, and Ontario from 201 to 2018. Both countries have seen good results in terms of improvement of mental health. But both programs got suspended when another candidate came into power.
The implementation of UBI programs in province-limited places. Let’s look at the impacts of the nationwide execution of this program.
Iran is the very first country that has tried testing the waters of universal basic income on a large scale to compensate for the elimination of some subsidies. Studies revealed that it has lowered the working motivation levels in the country.
Regardless, other countries that have enforced UBI trials including Kenya, Finland, Germany, Spain, Netherlands, and Brazil, have seen good results in contrast to Iran.
Should We All Get Free Money?
We have tackled the benefits and real-time impacts of free money in the mentioned locations, but we can’t say for sure how results would unfold in other places. But for now, it’s pretty safe to say that universal basic income has the potential to fight off poverty and change how people live in many aspects.