IEA Senior Research Fellow Jamie Whyte has written in CapX criticising proposals for a universal basic income (UBI) and casting doubt on the value of a new pilot programme run by centre-left group Autonomy.

Jamie wrote:

“The use of a control group gives the impression that the trial is a serious scientific experiment. In fact, it has two central design flaws that will make its ‘findings’ worthless.

“The obvious objection to giving everyone a liveable income, whether or not they work, is that many will stop working. Production could then fall so much that the population will be reduced to poverty. Indeed, even the UBI itself could collapse because the Government will be unable to collect enough tax to fund it.

“A UBI could reduce the incentive to work in two ways. The first is that by increasing incomes in relation to hours worked. When incomes rise, people buy more leisure (among other things). In other words, they work less. Imagine someone who now works 20 hours of overtime a week to increase her income by £400 a month. Give her £1,600 a month, and she will be inclined to reduce her overtime.

“Of course, the current means-tested or conditional benefits system also disincentivises work. When someone on unemployment benefit enters the workforce, the loss of benefits and income taxes means that, in the past, she could have faced a marginal tax rate of 80% or more. Keeping 20% of a (usually) low income isn’t worth the effort. This is the ‘welfare trap’. It is one reason the Government introduced Universal Credit, with its current tapper rate of 55%, meaning an individual can at least keep 45p in every additional £1 earned (post-tax). Moving to a UBI would mean they keep £1 of every £1 earned, and many favour it for this reason.”

Read Jamie’s full piece here.