The idea of a Universal Basic Income (UBI) is becoming more and more popular, especially in the hard times of the Coronavirus. Millions of people have suddenly lost their jobs and may be wondering how to support themselves now and in the future. While governments are offering financial help, some are promoting a UBI as the answer.
Pope Francis recently wrote in a letter to the World Meeting of Popular Movements, an organization representing global grassroots efforts, that now “may be the time to consider a universal basic wage” for every man and woman “to get you through this hard time.” Many proponents of the concept are informing anyone who will listen that governments would not have to borrow money to shore up the economy if a monthly minimum payment was in place. Are they correct? It is complicated.
Lawmakers on Capitol Hill are spending trillions of dollars, while policymakers inside the Federal Reserve are printing trillions more. To survive the Coronapocalypse, they are churning out short-term relief packages with money America doesn’t have. Nobody knows how long this situation will last, but many do acknowledge that things have permanently changed – for better or for worse.
Spain is planning to roll out a basic income to repair the economic damage from COVID-19. Are we in the beginning stages of establishing a UBI for the rest of the global economy?
Before the pandemic, the U.S. government was spending more than $1 trillion annually on welfare programs; state and local jurisdictions also were doling out about $700 billion. Over the years, officials have pointed out the waste and fraud associated with welfare. A 2016 study by the website FiveThirtyEight found that most welfare dollars do not even go to the people in need. Not to mention the administration needed to distribute the funds to the correct recipients.
Would it not be simpler and more affordable to initiate some form of UBI instead of maintaining the present welfare state? Yes, but only if you adopt the original intent of a guaranteed income: dismantle the entire welfare system and replace it with a monthly cash payment to every American adult. There is no way the United States could afford adding a UBI on top of everything else.
Today, there are about 210 million American adults. If the government gave each person over 18 years of age $10,000 annually, the price tag would top $2 trillion.
Basic Income Drawbacks
While a UBI replacing the entire welfare state would have its advantages, there are also drawbacks.
Should the UBI be implemented tomorrow, it may begin with an arbitrary sum of $10,000 a year. Many Americans would welcome regular cash injections. As time goes by, more Americans will say this amount is not enough and that it should be raised to $15,000 per year because it is now a human right to receive free money. Before you know it, there is talk of $30,000 and then $50,000 – there is no ceiling.
The labor market would be overhauled, with many of the low-wage and unskilled positions becoming automated. Since people would receive a UBI, they may not feel the necessity to work as a stockboy or a cashier, forcing employers to do one of two things: raise their compensation offer to attract workers or accelerate automation efforts.
The final concern is that a UBI would encourage dependence on the government. Today, if you are in desperate need of $10,000, you could apply for a second job, clock in more hours at work, or sell your services in the gig economy. In the future, if you need $10,000, you will be lost without the government holding your hand.
It now seems inevitable that universal basic income will become a reality. Therefore, it is a good time to take a look at the costs and benefits before America decides whether to try out this experiment.