What Is Universal Basic Income?

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Updated on Tuesday, May 5, 2020

Universal basic income is exactly what it sounds like — an income-support mechanism designed to reach an entire population with no or minimal conditions required, according to the International Monetary Fund. While the idea of cash handouts might sound like a utopian proposition to some, universal basic income’s effectiveness and economic impact is a highly polarizing topic among economists and politicians alike.

What is universal basic income?

Essentially, universal basic income policies are a form of social security, guaranteeing a set amount of money to an entire governed population with no strings attached. Universal basic income plans are typically proposed as a program consisting of periodic cash payments distributed to all citizens without requiring them to meet a certain standard of poverty. These types of policies and plans are sometimes also called basic income guarantees, basic incomes or basic living stipends.

There is no agreed upon, umbrella definition of what constitutes a universal basic income plan, with differences of such plans diverging in the details, like how the payments are funded, how much those payments are, how often the payments are made and more. However, according to the Stanford Basic Income Lab, defining characteristics of universal basic income plan payments typically include:

  • Periodic: Payments are made on a recurring basis.
  • Cash: Payments are made in cash.
  • Universal: Payments are distributed to everyone, not just to targeted populations.
  • Individual: Payments are made on an individual basis, as opposed to being household-based.
  • Unconditional: There are no requirements barring you from receiving your payment.

The origins of universal basic income date back centuries, but the policy recently has been gaining traction in the United States. In fact, it was one of the main platforms of former 2020 U.S. presidential candidate Andrew Yang, bringing the once-fringe policy into the mainstream conversation. Yang had proposed a policy in which the U.S. federal government gave all citizens $1,000 per month, funded by consolidating certain welfare programs and implementing a new tax.

Examples of universal basic income policies

There have been a number of basic income experiments conducted in many countries around the world — even in the U.S. — although they vary widely in terms of the amount of the payment that is distributed and its frequency. Any instances could be considered basic income experiments as, for the most part, they aren’t shelling out payments to entire populations or universally.

To show the scope of how varied universal basic income plans can be, here are some of the experiments that have been conducted over the years:

  • Alaska Permanent Fund Dividend: Since 1982, the state-owned Alaska Permanent Fund Corporation has implemented a universal basic income program, giving between $1,000 to $2,000 per year to all Alaska residents.
  • Eastern Band of Cherokee Indians Casino Revenue Fund: Since 1996, all enrolled members of the Eastern Band of Cherokee Indians (located in North Carolina) have been receiving between $3,500 to $6,000 every six months.
  • Finland: As a universal basic income experiment from 2017 to 2018, the Finnish government gave 2,000 unemployed citizens at random a check for 560 euros ($635 USD) per month for two years.
  • Ontario Basic Income Pilot: From 2017 to 2019, the government of Ontario implemented a universal basic income experiment, giving 4,000 low-income individuals and couples in Ontario, Canada, up to $24,027 per year, less 50% of any earned income.
  • Direct Giving Lab: Since 2017, the Direct Giving Lab in Chicago has been giving $100 per month to 70 low-income families.
  • Magnolia Mother’s Trust: From 2018 to 2019, the organization Springboard To Opportunities gave 16 African-American mothers in Jackson, Mississippi who are low-income earners, $1,000 a month.
  • Kenya: What has been deemed the largest universal basic income experiment is currently underway in Kenya. Since 2016, the charity GiveDirectly has been giving more than 20,000 adults across 245 rural villages around 75 cents per day, with payments made monthly for 12 years.

Universal basic income: Pros and cons

Universal basic income policies are not without controversy, and they can be a highly polarizing topic, particularly among political party lines. Here’s how many of the most common pros and cons of universal basic income that are often argued stack up:

Pros

  • A solution to automation: Advocates argue that universal basic income could help offset the consequences of automation replacing the jobs of millions of workers.
  • Reduces wealth inequality: Advocates make the case that universal basic income could help ease the widening gap of wealth inequality. It’s been argued that universal basic income plans can do a better job at reaching poor populations that might face administrative hurdles required for receiving government assistance from current programs.
  • Encourages labor market participation: Experts have argued that universal basic income could actually encourage labor market participation because people will not be required to be unemployed in order to receive the benefit, which is the case for many current welfare programs.

Cons

  • Unsustainable: Critics argue that the fiscal responsibility of providing universal basic income is unsustainable, due to its scale.
  • Rising inflation: A common argument against universal basic income is that it will create rising inflation on a micro level, with more money going toward consumer goods rather than investments.
  • Discourages labor market participation: Another common argument among critics of universal basic income is that it will discourage people from working, as their incentive to work might be diminished.
  • Opportunity costs: An increase in spending on universal basic income might mean that resources are taken away from other government-funded welfare programs that benefit the underprivileged.

Can universal basic income help during the coronavirus pandemic?

As the coronavirus pandemic continues to ravage the U.S. economy, leaving millions of Americans unemployed, universal basic income has been floated as a potential solution.

In April, the U.S. federal government began issuing one-time payments of up to $1,200 for citizens who fall under a certain income bracket, but the effort has been slammed for not being enough. Instead, a strengthened case for universal basic income has been taking hold, with Pope Francis even suggesting implementing some form of universal basic wage.

Experts have said that rolling out a universal basic income in the U.S. could be necessary to survive the economic fallout caused by the coronavirus pandemic. In fact, Spain’s government recently announced its own plans to administer universal basic income and experts expect other countries to follow suit.

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