Understanding UBI

Below are the answers to some common questions that will help equip you to have discussions about Basic Income. Recently we met up with a 2020 presidential candidate to understand how he would implement a realistic policy to make Basic Income a reality and he shared insight into how it can be achievable in the near future.

What is Universal Basic Income?

Universal Basic Income (UBI) is a form of social security that guarantees a certain amount of money to every citizen within a given governed population, without having to pass a test or fulfill a work requirement. Every Universal Basic Income plan can be different in terms of amount or design. 

Why do we want basic income?

Our society has grown out of balance and enough is enough? 45 million Americans live in poverty. 500,000 Americans are homeless. The American Dream has become near impossible for most. The middle class is disappearing and income inequality continues to worsen. Our current economic system is not sustainable. Our social fabric is on the verge of collapse. Over the next decade automation will make this drastically worse. The time for change is now.

Who would get a Basic Income?

It can look different depending on the policy or politician(s) who implement it. At a national level Andrew Yang proposes a set of guaranteed payments of $1,000 per month, or $12,000 per year, to all U.S. citizens between the ages of 18 and 64. 

Every U.S. citizen between the ages of 18-64 would receive $1,000 a month, regardless of income or employment status, free and clear. No jumping through hoops. Yes, this means you and everyone you know would receive a check for $1,000 a month every month.

Citizens 65+ would continue to collect Social Security and would not be eligible for UBI.

How would we pay for a Basic Income?

It would be easier than you might think. We agree with Andrew Yang, that funding UBI by consolidating some welfare programs and implementing a Value-Added Tax (VAT) of 10%. Current welfare and social program beneficiaries would be given a choice between their current benefits or $1,000 cash unconditionally – most would prefer cash with no restriction.

A Value-Added Tax (VAT) is a tax on the production of goods or services a business produces. It is a fair tax and it makes it much harder for large corporations, who are experts at hiding profits and income, to avoid paying their fair share. A VAT is nothing new. 160 out of 193 countries in the world already have a Value-Added Tax or something similar, including all of Europe which has an average VAT of 20 percent.

The means to pay for a Universal Basic Income will come from 4 sources:

1.  Current spending.  We currently spend between $500 and $600 billion a year on welfare programs, food stamps, disability and the like.  This reduces the cost of Universal Basic Income because people already receiving benefits would have a choice but would be ineligible to receive the full $1,000 in addition to current benefits.

2.  A VAT.  Our economy is now incredibly vast at $19 trillion, up $4 trillion in the last 10 years alone.  A VAT at half the European level would generate $800 billion in new revenue.  A VAT will become more and more important as technology improves because you cannot collect income tax from robots or software.

3.  New revenue.  Putting money into the hands of American consumers would grow the economy.  The Roosevelt Institute projected that the economy would grow by approximately $2.5 trillion and create 4.6 million new jobs.  This would generate approximately $500 – 600 billion in new revenue from economic growth and activity.

4.  We currently spend over one trillion dollars on health care, incarceration, homelessness services and the like.  We would save $100 – 200 billion as people would take better care of themselves and avoid the emergency room, jail, and the street and would generally be more functional.  Universal Basic Income would pay for itself by helping people avoid our institutions, which is when our costs shoot up.  Some studies have shown that $1 to a poor parent will result in as much as $7 in cost-savings and economic growth.

What are the benefits of UBI?

Universal Basic Income would transform society in many positive ways and evidence shows this. Trials have led to all kinds of benefits—some expected, some surprising. Here are just a few of them:

  • UBI encourages people to find work. Many current welfare programs take away benefits when recipients find work, sometimes leaving them financially worse off than before they were employed. UBI is for all adults, regardless of employment status, so recipients are free to seek additional income, which most everyone does.
  • UBI reduces bureaucracy—with no-strings-attached coverage, determining who is eligible is far simpler and the cost of administering benefits is greatly reduced.  
  • UBI increases bargaining power for workers because a guaranteed, unconditional income gives them leverage to say no to exploitative wages and abusive working conditions. Employers can’t push workers around as much.  
  • UBI increases entrepreneurship because it provides for basic needs in the early lean days of a company and acts as a safety net if the business fails. It also gives you more consumers to sell to because everyone has more disposable income. The Roosevelt Institute found that a UBI would create 4.6 million jobs and grow the economy by 12 percent continuously. UBI would be the greatest catalyst for new jobs, entrepreneurship, and creativity we have ever seen.  
  • UBI improves the mental health of recipients because it reduces conditions of scarcity, poverty, and financial insecurity, major sources of stress for millions of people.
  • UBI helps people make smarter decisions. Studies have shown that people in straits of economic insecurity have a reduced cognitive ability equal to 13 IQ points. UBI would provide the security people need to focus on important things like their families.
  • UBI improves physical health. With increased economic security, people are less prone to stresses, disease, and self-destructive behavior. A UBI experiment in Canada saw hospitalization rates go down 8.5%.
  • UBI increases art production, nonprofit work and caring for loved ones because it provides a supplementary income for those interested in labor that isn’t supported by the market.  
  • UBI improves labor market efficiency because fewer workers are stuck in jobs that are a bad fit. National productivity will improve because people will be able to seek work that is more rewarding and promote higher job satisfaction.
  • UBI improves relationships by reducing domestic violence, child abuse, financial stresses, and sources of conflict. It ensures that everyone has an optimistic sense of his or her own future and has the mobility to get out of abusive relationships.

It’s amazing what a steady source of money can do to transform people’s lives. We can experience it here in America if we adopt Universal Basic Income and make it real; we are the wealthiest and most technologically advanced society in human history. It’s time to invest in our people.

Imagine your life and that of everyone you know with an extra $1,000 per month – how would you spend it? How would things change?

Is there evidence to support the case for UBI?

Experiments with unconditional cash benefits around the world have proven to be one of the most successful ways of reducing poverty. The fear that cash recipients would waste their money on drugs or alcohol, stop working, or have more kids have been disproven by the World Bank. Many of these behaviors were actually reduced.

Since 1998, there have been a total of 461 research papers published on the topic. You can view them all here.

In the last 50 years, there have been more than 30 cash transfer programs studied. Here are a few of our favorites:

The data is clear – giving people money enables them to live better lives. But put aside the data for a moment and just think about it for yourself. What would you do with an additional $1,000/month? How about your family and friends?

Universal Basic Income is real and will transform our society for the better; we just need the courage and will to both care about and invest in our people.

Where does the idea of UBI come from and who else supports it?

The idea of guaranteeing every citizen an income from the government is an old one, first recorded during the Renaissance. In America, it was picked up by founding father Thomas Paine, who referred to the payments as a “natural inheritance.”

UBI and similar cash programs began picking up steam in the mid 20th century during the industrial revolution as early as 1918. With developed countries producing more than ever, the idea resurfaced with intensity being backed by numerous Nobel-Prize winning economists such as Milton Friedman and F.A. Hayek.

In the 1960s, Martin Luther King Jr. gave his support, alongside over 1,000 economists from over 125 universities who signed a letter to President Nixon requesting income guarantees.

The idea of a guaranteed income floor was pushed into a bill under President Nixon in 1970 where it passed the United States House of Representatives. It died in the Senate because Democrats sought a higher guaranteed income.

Today the idea has gained support from Mark Zuckerberg, Robert Reich, Elon Musk, Bill Gross, Richard Branson, Ta-Nehisi Coates, Noam Chomsky, the conservative Cato Institute, and many others.   

Universal Basic Income is not new – it is an old idea whose time has come.

Here are some of the people who have supported Universal Basic Income over the years:

Martin Luther King Jr., 1967: “I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”

Richard Nixon, August 1969: “What I am proposing is that the Federal Government build a foundation under the income of every American family . . . that cannot care for itself–and wherever in America that family may live.”

Milton Friedman (Nobel-winning economist), 1980: “We should replace the ragbag of specific welfare programs with a single comprehensive program of income supplements in cash — a negative income tax . . . which would do more efficiently and humanely what our present welfare system does so inefficiently and inhumanely.”

Bernie Sanders, May 2014: “In my view, every American is entitled to at least a minimum standard of living . . .There are different ways to get to that goal, but that’s the goal that we should strive to reach.”

Barack Obama, October 2016: “as AI gets further incorporated, and the society potentially gets wealthier, the link between production and distribution, how much you work and how much you make, gets further and further attenuated . . . we’ll be debating unconditional free money over the next 10 or 20 years.”

Elon Musk, February 2017: “I think we’ll end up doing universal basic income . . . It’s going to be necessary . . .There will be fewer and fewer jobs that a robot cannot do better. I want to be clear. These are not things I wish will happen; these are things I think probably will happen.”

Mark Zuckerberg, May 2017: “We should explore . . . universal basic income so that everyone has a cushion to try new ideas.”

Why is now the time to implement UBI?

Since 2000, technology has replaced the jobs of four million American manufacturing workers and decimated communities throughout the Midwest. With new developments in technology, experts are predicting that one out of three Americans will lose their job to new technology in the next twelve years.

Truck driving alone is the most common job in twenty-nine states with 3.5 million drivers – 94% of them male – and an additional 12 million workers supporting them in truck stops and motels across the country. What happens when the trucks start to drive themselves?

We are experiencing the greatest economic and technological shift in human history, and our institutions can’t keep up. Without Universal Basic Income, we will see opportunities shrink as more and more work gets performed by software, AI, and robots. Markets don’t work well when people don’t have any money to spend. Universal Basic Income is a vital step to helping society transform through the greatest automation wave in human history.

What impact would a UBI have on our economy?

The Roosevelt Institute found that adopting an annual $12,000 basic income for every adult U.S. citizen ages 18-64 would permanently grow the economy by 12.56 to 13.10 percent—or about $2.5 trillion by 2025—and it would increase the labor force by 4.5 to 4.7 million people.

This is because putting money in people’s hands grows the economy, particularly when those people need the money and will spend it. Imagine a small town in Missouri with 5,000 qualifying residents. A $12,000 UBI would bring an extra $60 million of additional income into the community, most of which would be spent locally. Then imagine that playing out in every community in the country, big and small. Communities everywhere will have more vibrant local economies, creating more jobs and leading to new businesses. 

Wouldn't UBI just cause inflation?

The federal government recently printed $4 trillion for the bank bailouts in its quantitive easing program with no inflation. Our plan for a Universal Basic Income uses money already in the economy. In monetary economics, leading theory states that inflation is based on changes in the supply of money. Our UBI plan has no changes in the supply of money because it is funded by a Value-added Tax. 

It is likely that some companies will increase their prices in response to people having more buying power, and a VAT would also increase prices marginally. However, there will still be competition between firms that will keep prices in check. Over time, technology will continue to decrease the prices of most goods where it is allowed to do so (e.g., clothing, media, consumer electronics, etc.). The main inflation we currently experience is in sectors where automation has not been applied due to government regulation or inapplicability – primarily housing, education, and healthcare. The real issue isn’t Universal Basic Income, it’s whether technology and automation will be allowed to reduce prices in different sectors.

Wouldn't people just become lazy and spend their money on dumb things like drugs and alcohol?

The data doesn’t show this. In many of the studies where cash is given to the poor, there has been no increase in drug and alcohol use. In fact, many people use it to try and reduce their alcohol consumption or substance abuse. In Alaska, for example, people regularly put the petroleum dividend they receive from the state in accounts for their children’s education.  The idea that poor people will be irresponsible with their money and squander it seems to be a biased stereotype rather than a truth.

Decision-making has been shown to improve when people have greater economic security. Giving people resources will enable them to make better decisions to improve their situation. As Dutch philosopher Rutger Bregman puts it, “Poverty is not a lack of character. It’s a lack of cash.” 

Won't people just stop working?

Decades of research on cash transfer programs have found that the only people who work fewer hours when given direct cash transfers are new mothers and kids in school. In several studies, high school graduation rates rose. In some cases, people even work more. Quoting a Harvard and MIT study“we find no effects of [cash] transfers on work behavior.”
In our plan, each adult would receive only $12,000 a year. This is barely enough to live on in many places and certainly not enough to afford much in the way of experiences or advancement.  To get ahead meaningfully, people will still need to get out there and work.  

What about variations in the cost of living? Wouldn’t major cities need much more money than rural areas?

Every eligible UBI recipient, regardless of location, would receive $1,000 a month. Varying the dollar amount by location would add expensive layers of bureaucracy. Plus, UBI would actually help many more Americans live where they want to. The Census Bureau shows Americans are moving between states at the lowest levels on record, contributing to a stagnant economy and labor market. Moving requires a lot of money up-front, and Americans are increasingly strapped for cash. UBI would make people and families much more mobile and improve the dynamism of the labor market as people seek out new environments and opportunities.  
$1,000 a month goes farther in some places than others. A UBI would lead to a revitalization of many communities as people take advantage of lower costs of living in certain areas instead of piling into expensive metro areas.

Why would you give UBI to the wealthy?

By giving everyone UBI, the stigma for accepting cash transfers from the government disappears. Additionally, it removes the incentive for anyone to remain within certain income brackets to receive benefits. If it’s paid for by a Value-Added Tax as in Andrew’s plan, a wealthy person will likely pay more into the system than he or she gets out of it. 

Why can't we just retrain people who lose their jobs?

This would be great – unfortunately the data indicates that retraining programs do not work on a large scale. The Trade Adjustment Assistance (TAA) program, a Federal program for displaced manufacturing workers, was found to have only 37% of its program members working in the field of work they were retrained for. Michigan’s No Worker Left Behind program found that one-third of its members remained unemployed after the program, similar to the 40% unemployment rate of their peers who did not enroll. About half of all Michigan workers who left the workforce between 2003 and 2013 went on disability and were not retrained for a new job. 
Many of the workers who are most at risk for displacement are middle-aged and past their primes. Many have health problems. Retraining will be difficult and many employers will prefer to hire younger employees with lower job requirements.
The goalposts are now moving – by the time someone goes through a retraining program, the job they were retrained for could have changed or been automated. Technology is going to get better and better. It will also be hard to keep track of who merits retraining. If a mall closes, do the retail workers get retrained? How about a call center?
Though training programs are a great idea, we should acknowledge that we’re historically very bad at it even when we know displacement is happening. Retraining a massive population over a range of industries is unrealistic and won’t address the displacement caused by new technologies.

Are robots really replacing us and taking our jobs?

Yes. It's already happening; robots may not exist like you see them portrayed in movies like Terminator and Robocop. It’s when software replaces thousands of helpdesk workers or cars start driving themselves or even when a mall closes down because everyone now shops from their computer. 

We are in the fourth inning of automation. Four million manufacturing jobs have been taken since 2000 and automated trucks are already making deliveries in Colorado. 1 out of 10 American workers works in retail. If we wait any longer, we will be out of time. It took the Affordable Care Act seven years to go into full effect. The time to make UBI a reality is right now, before the unemployment crisis reaches full swing.

If UBI is so great why haven't we already done it?

We came very close in the late 1960s – it actually passed the House of Representatives in 1969 before stalling in the Senate because Democrats wanted a higher floor. 1,000 economists signed a letter saying that it would be the right thing for the economy.
Since then we’ve been brainwashed into thinking that what’s good for people isn’t good for the economy, but what serves big corporate interests is.
The reason we haven’t done it yet is because we’d rather give money to wealthy corporations and hope it trickles down – we trust institutions more than we trust our people. This is what we must change. We must empower our people and rebuild our economy from each individual and family up.

Will this lead to mass immigration to the US?

America has been the world’s most desired immigration destination for 250 years. High demand for citizenship is not new. It’s true, that with UBI in place, the demand for citizenship may rise. However, only citizens can receive UBI, and the US already has one of the longest paths to citizenship in the world. UBI would make citizenship all the more meaningful.  

Isn't this Communism/Socialism?

No. Communism is, by definition, a revolutionary movement to create a classless, moneyless, and stateless social order built upon shared ownership of production. With Socialism, the core principle is the nationalization of the means of production – i.e. the government seizes Amazon and Google. UBI is none of those things and actually fits so seamlessly into capitalism, it is projected to grow the economy $2.5 trillion in eight years.

Really, UBI is necessary for the continuation of capitalism through the automation wave and displacement of workers. Markets need consumers to sell things to. Universal Basic Income is capitalism with a floor that people cannot fall beneath.  

Wouldn't employers start paying their employees less?

Employers are already paying their employees less for doing more. Corporate productivity is up 72% since 1973, but American wages are up only 9%. UBI would put power in the hands of the worker—with consistent, unconditional cash to cover their expenses, Americans will be able to be more selective about the working conditions they’re willing to accept.
With UBI, jobs that people naturally want to do – like being a teacher, or coach, or artist – might pay a little bit less. But jobs that people don’t want to do will actually have to pay more because workers won’t have to necessarily take that job.

This sounds great, what can I do to join the movement?

This is the very reason we've created the BIG Experience, to spur the Basic Income movement. You can get involved by hosting and facilitating a community workshop to lead the grassroots movement. It is designed to create education and awareness. It will equip and empower you to explain some of the biggest issues of our time in a solutions based manner. It will let you talk about solutions to what is ailing our economy in a manner that is down to earth and approachable. It will help you align with a variety of policies and politicians who are champions for the cause. Even if you don't believe Basic Income is the solution this tool is still designed so you can have healthy dialogue around some of the most important issues of our time.