Definition and Examples of Universal Basic Income
A universal basic income is a government-sponsored program in which every citizen or eligible resident would receive a flat monthly payment. The idea behind this type of government benefit is to reduce the financial stress faced by a country's residents, which would allow them to focus on education, improving their job skills, or dealing with personal matters while having enough income to meet basic living requirements.
Because these programs are either experimental or being developed, there are no criteria for who exactly receives the income. Some proponents believe that all citizens should get it regardless of what they make, while others believe that only those below a specific income should receive it. Some believe that a government-sponsored income is not necessary or fair to all people.
- Acronym: UBI
Universal basic income is different than guaranteed basic income (GBI). GBI provides income to specific groups based on financial needs, whereas UBI is given to everyone.
How Universal Basic Income Works
The core idea behind a universal basic income is to use government tax revenues to create programs that pay all people within that government's jurisdiction. A state or federal government would divert a certain amount of tax revenues to this program and disperse the funds to the residents.
For example, economists Kalle Moene and Debraj Raypropose a payment system tied to a country’s economic output. They suggest that 10% to 12% ofgross national incomecould go directly to universal income payments. This setup would cause payments to rise or fall in relation to the country's income level and inflation.
Another method proposed by economist Milton Friedman in 1962 was anegative income tax.However, Friedman's idea aligns more with GBI, in which only specific people would receive the benefit. In his idea, those below an established income level would receive a tax credit. It would be paid for with the taxes collected from families earning above a specific level.
What Is UBI Designed For?
A universal basic income would provide everyone with a level of income to ensure they could meet basic needs such as food, housing, and clothing while giving them additional support if they needed it during challenging times.
An example of this occurred during the COVID-19 pandemic. Many people lost income because their employers scaled down operations to follow mandated safety protocols. As a result, unemployment soared, and the federal government stepped in and added to unemployment benefits to help those in financial distress. It has been argued that a UBI might have reduced the need for the government to supplement people's incomes with unemployment insurance during events like a pandemic.
Some believe that a UBI would negate the need for unemployment insurance or social programs like the Supplemental Nutrition Assistance Program (SNAP), federal housing assistance, or Temporary Assistance for Needy Families (TANF).
How Much Would Universal Basic Income Cost?
In July 2022, there were 164 million Americans in the labor force. A GBI of $12,000 per year ($1,000 per month) for each person in the labor force would cost $1.968 trillion per year. Many supporters argue that UBI would not need to be an addition to current welfare spending; a basic income would allow the government to cut redundant programs and reduce associated bureaucratic costs.
A UBI would cost even more—with more than 300 million Americans, $12,000 per year would cost more than $3.6 trillion per year.
Difficulties Facing UBI
Passing a plan robust enough to make a real impact would be difficult in the U.S. Over half of Americans opposed universal basic income in a 2020 Pew Research Center survey. Many would only support it if tech companies paid for it through increased taxes, Gallup reported. Even raising the U.S.minimum wagehas been difficult, even though 62% of Americans favor increasing it to $15 per hour, according to a 2021 Pew poll.
Proponents of universal basic income vary widely in their views of how to fund and execute the program. For example, some plans call for a tax increase on the wealthy, while others saycorporations should be taxed.
History of Universal Basic Income in the U.S.
There have been several attempts at getting UBI off the ground in the U.S. For example, in 1968,President Johnson'sadministration launched a test of the negative income tax in New Jersey and Pennsylvania. It found that those who received negative income tax benefits reduced their work effort, even though they were offered additional incentives to increase earnings. A higher-paying program was tested in Seattle and Denver. Results of both studies did find a reduced incentive to work.
Today, theearned income tax creditis a form of guaranteed income. It provides a percentage tax credit for every dollar of earned income up to a maximum credit. Since the credit increases along with income, it promotes the incentive to work. But as the income reaches a maximum level, the tax credit phases out and decreases.
Critics argue the earned income credit creates a disincentive to earn more, which is also an argument made against universal basic income.
In 2019, Stockton, California began a two-year GBI pilot program. It gave $500 a month to 125 local residents. Among other results, the experiment found that GBI allowed many recipients to find full-time employment, put food on the table for many, and reduced income volatility in some lower-income households.
Pros and Cons of Universal Basic Income
Workers could wait for better jobs or better wages
Freedom for people to return to school or stay home to care for a relative
May help remove the "poverty trap" from traditional welfare programs
Free income may not incentivize people to get jobs
Could perpetuate falling labor force participation rate
Money for the comfortable
- Workers could wait for better situations: An unconditional basic income wouldenable workers to wait for a better jobor better wages.
- Freedom for people to return to school or stay home to care for a relative: More financial stability means workers could take time to go back to school. If they needed to take time to care for family, they would feel less pressure to work if a relative needed care.
- May help remove the "poverty trap" from traditional welfare programs: Many existingwelfare programsare criticized for keeping people below the poverty line. Often, if welfare recipients make too much, they lose their benefits even if their income is still unequal to the cost of living. A basic income could serve as a supportive springboard rather than a chain to the welfare system.
- Free income may not incentivize people to get jobs: Oren Cass, a senior fellow at the Manhattan Institute, says UBI would make work seem optional.Manyrecipients might prefer to live on the free income and would not acquire work skills or a good resume.
- Could perpetuate falling labor force participation rate: Some people may choose to only accept the payments without working to from ever getting a good job in a competitive environment, thus reducing an already-falling labor force participation rate.
- Money for the comfortable: Universal income means everyone, no matter much wealth they have or how much they make.
- A universal basic income provides everyone with a minimum basic wage, whether employed or otherwise.
- UBI is intended to address poverty, job losses, work transitional periods, or other income gaps.
- Many countries, states, and cities are experimenting with pilot programs to measure the effectiveness of a universal basic income.
Frequently Asked Questions (FAQs)
What countries have a universal basic income?
Aside from now-defunct UBI programs in Iran and Mongolia, no countries offer universal basic income on a national scale. At smaller scales, UBI programs are more common, including a statewide program in Alaska that has all offered citizens annual payments since 1982. In 2021, the program paid all permanent residents $1,114 if they had lived in the state for at least one year.
Who would qualify for universal basic income?
The qualifications for UBI payments vary by the proposal. To be "universal," all permanent residents must have the opportunity to participate. Programs like guaranteed basic income and Milton Friedman's negative income tax are similar to UBI, though they would exclude citizens once their income surpassed a given threshold.
What is universal basic income? ›
Definition. Universal basic income is a proposed government-guaranteed payment that each citizen receives. Its purpose is to ensure all people have the means to purchase necessities and improve their quality of life.Why is universal basic income? ›
Universal basic income (UBI) is a government program in which every adult citizen receives a set amount of money regularly. The goals of a basic income system are to alleviate poverty and replace other need-based social programs that potentially require greater bureaucratic involvement.What states are giving UBI checks? ›
The cities or states getting the UBI Payments are Alaska, Alexandria, Arizona, Atlanta, Birmingham, Cambridge, Chelsea, Chicago, Columbia, Compton, Cook County, Durham, Gainsville, Georgia, Haldsburg, Hudson, Jackson, Long Beach, Los Angeles, Louisville, Lynn, and Marin County.What is universal basic income quizlet? ›
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.Is universal basic income a good idea? ›
The safety net UBI provides could help people at the low end of the income scale get ahead. For example, they could pursue a college degree that would boost their future earnings instead of starting work at a young age. Universal cash payments can also reduce another type of inequality: the gender wage gap.Who pays for universal basic income? ›
Where Does the Money Come From? In most propositions so far, tax revenues would fund a universal wage. Adopting an unconditional basic income would result in an increase in income tax or a higher value-added tax. However, existing programs have used other funding sources, like revenues from natural resources.Can universal basic income solve poverty? ›
A new universal basic income model could cut poverty by more than half at no net cost, reducing it to its lowest level for 60 years, according to a report co-authored by a University of York academic. The report indicates a basic income could reduce pensioner poverty, as well as child poverty and working-age poverty.Can universal basic income help society? ›
Providing a high enough universal payment could ensure everyone has the resources to meet basic standards of living, preventing poverty or destitution. Uncertainty. Many people, particularly those on low incomes, emphasise the importance of having predictable and stable payments.Does universal basic income increase poverty? ›
UBI takes money from the poor and gives it to everyone, increasing poverty. A common misconception here is that more money would be given to top earners and that poverty isn't the only issue that affects the poor. No program is a cure-all, but UBI can help those struggling in poverty find help in other ways.Does UBI replace Social Security? ›
A UBI program could give social program beneficiaries cash with no restrictions. UBI would not replace Social Security or benefits for veterans, and Yang says it could help the economy grow, with the creation of new jobs, too. Yang has actually already created his own basic income experiment with his own money.
Who qualifies for basic income grant? ›
The basic income grant is designed to provide income support for individuals between 18 and 59 years old who are struggling and don't have any social assistance.Who would benefit from UBI? ›
Universal Basic Income is a model where income is distributed universally meaning every citizen is given the same sum of money per month. UBI is unconditional, with no strings attached and no work or financial requirements, meaning the 1% and those in poverty receive the same cash (Pinto, 4).What happens with universal basic income? ›
Universal basic income (UBI) means that everyone in a society — rich or poor — gets a monthly cheque for the same amount. At the end of the year, the government uses the tax system to balance out the scales and recoup that extra cash from the higher income earners who didn't end up needing it.Why universal basic income doesn t work? ›
By imposing no obligations on recipients, the UBI gives recipients less of a reason to work, develop their skills, or improve their situation in life. This failure to understand a key aspect of human nature makes the UBI a destructive policy for the very recipients it is intended to help.Does a universal basic income go to everyone? ›
It's a regular periodic payment (for example, every month) and not a one-off grant; it's cash and not food, services or vouchers; it's paid to individuals and not households; it's universal and is paid to all without a means test; and it is unconditional in that there is no requirement to work or demonstrate a ...Has America tried universal basic income? ›
Though, on a federal level, policymakers have never implemented UBI, recent policies have come close. “The most similar thing we have are things like the Child Tax Credit,” says Marinescu, adding that, “that's not literally universal, but for anybody who has kids, it gives them cash without any further conditions.”Is universal basic income cheaper? ›
UBI would be expensive
The gross cost of providing a UBI of $1,000 per month to every person in the United States would be $4 trillion per year; limiting to adults would cost $3.1 trillion. For comparison: GDP is $21 trillion. U.S. federal revenues total $3.5 trillion.
Drawbacks of a Universal Basic Income
One major issue with a universal basic income, raised by those who oppose such a practice, is inflation. It's easy to see how the institution of a UBI may fuel inflation. If every individual is granted an unconditional income from the government, then there is money to be spent.
In contrast to many other welfare programs that you only get when you prove your willingness to work, a UBI would be unconditional in that respect. It would also be unconditional on what money you make, what you have in general and on what contribution you made to finance the UBI.How much would taxes increase for UBI? ›
To fund the UBI and not increase the federal budget deficit even further, the federal government would have to increase taxes by 74 percent.
Can Social Security take away your benefits? ›
Recipients of SSDI and SSI can have their disability benefits taken away for many reasons. The most common reasons relate to an increase in income or payment-in-kind. Individuals can also have their benefits terminated if they are suspected of fraud or convicted of a serious crime.Who is eligible for the 650 cost of living grant? ›
You may get a Low Income Cost of Living Payment of £650, paid in two instalments of £326 and £324, if you have an award for either of the following: Child Tax Credit. Working Tax Credit.
There is no need for people to apply or do anything to receive it – so people should watch out for texts or emails from scammers inviting them to make applications. The payment reference on DWP recipients' bank accounts will be their national insurance number, followed by “DWP COL”.Can the US afford universal basic income? ›
Providing $1,000 a month to every American regardless of income — which some scholars argue would make the policy more palatable than one targeted to people in poverty — would cost $3.1 trillion a year, nearly half the federal government's entire budget in 2021.Why universal basic income does not work? ›
But others worry it's not so simple. A UBI would be expensive, and what if it discourages people to work, which could inadvertently increase inequality and lead to social instability? A new paper suggests that UBI sceptics may be right: the policy may cause more harm than good, and at a very high cost, too.How many countries have universal basic income? ›
Only two countries have had national universal basic income programs: Mongolia and Iran. Those programs only lasted a short period of time before they were discontinued, and there is little definitive information on whether or not they were successful.Does UBI replace Social security? ›
In some places that have implemented UBI, the cash payments replace existing social welfare programs. In others, UBI is supplemental and does not replace existing welfare programs.Does universal basic income take money from the poor? ›
Universal Basic Income (UBI) takes money from the poor and gives it to everyone, increasing poverty and depriving the poor of much needed targeted support. UBI is too expensive. UBI removes the incentive to work, adversely affecting the economy and leading to a labor and skills shortage.Is universal basic income a solution to poverty? ›
There are growing calls for Universal Basic Income (UBI) as a means of reducing poverty and addressing the changing nature of work. UBI involves the provision of a cash payment to all adult citizens, which is sufficient to live on and either does not phase out as earnings increase or does so slowly for higher incomes.How do you qualify for social grants? ›
- Must be a South African citizen / permanent resident or refugee;
- Must be resident in South Africa;
- Must be 18 to 59 years of age;
- Must submit a medical / assessment report confirming disability;
- Medical assessment must not be older than 3 months at date of application;
How does a basic income grant work? ›
A basic income guarantee is a commitment by government to ensure that everyone has a minimal level of income to meet their basic needs. This is done through a regular cash transfer or grant. Not all basic income guarantees are the same. A major point of difference is whether a guarantee is universal or targeted.Does universal basic income lead to inflation? ›
UBI works best in a deflationary environment and should not be used as a fixed amount to compensate for the cost of living. It can raise inflation, decrease inequality, and alleviate national debt.Which country pays everyone the same? ›
Finland's experiment is a variation on the idea of a universal basic income: an unconditional income paid by the government to all citizens, whether or not they're in work.Does China have universal basic income? ›
China becomes one of the first countries to successfully implement provisional Universal Basic Income for "most" of its citizens. The UBI program is funded primarily through taxation of the portion of business revenue generated through industrial, commercial or agricultural automation.