Debate: Should we support a Universal Basic Income?
8 October 2018
SUGGESTED
Government and Institutions
8 October 2018
Brexit
9 October 2018
Economic Theory
25 June 2024
Across the political spectrum, support is growing for the idea of a Universal Basic Income (UBI) – broadly defined as an unconditional payment from the state to its citizens, regardless of their wealth, employment or marital status.
Yet UBI ‘divides the crowd’, often triggering strong and visceral reactions. For many, government funding to stimulate entrepreneurship in good times or guard against starvation in bad ones, seems like an obviously humane measure. Others consider such payments abhorrent, both wasteful with taxpayers’ money and likely to disincentivise work.
In today’s debate blog, we weigh up the pros and cons. Is UBI a good idea in principle, and could it really work in practice?
Ben Ramanauskas, Policy Analyst at the Taxpayers’ Alliance, is sympathetic to UBI – though not wholly sold on the idea. He sets out the positive case here:
Anyone can find themselves unemployed – often through no fault of their own. Given the high cost of living in the UK, many will not manage to put enough money aside to support themselves for lengthy periods if they find themselves unexpectedly out of work. As such, they have to apply for benefits. It often takes a long time for the money to trickle through, leaving individuals and their families in a precarious state. A Universal Basic Income (UBI) would provide a true safety net in such situations.
UBI could simplify our complex welfare state. Universal credit has helped in this regard, but there are many improvements still to be made. It takes time to apply for benefits, and claimants have to commit to regular meetings at job centres as they fill out endless forms and receive patronising advice from the staff. Such a system is inefficient and infantilising. A UBI, in contrast, would allow people to focus on finding work while potentially reducing the size of the State. Simplifying the functions of the DWP could mean significant savings for taxpayers and release DWP staff to the private sector where they could undertake more meaningful work and help to plug the skills gap.
A UBI could lead to a more highly trained and productive workforce. Due to our current welfare system, many people are stuck in jobs they do not enjoy, and which offer little opportunity for advancement. A UBI would give them the opportunity to retrain and learn new skills, which they would then use to advance their careers and be more productive at work.
It could also allow people to care for sick and elderly friends and relatives. The vast majority of people cannot afford to give up work in order to take care of their relatives, and so are dependent upon a heavily-burdened social care system. A UBI would give people the freedom to work fewer hours in order to undertake caring activities, while also reducing the pressure on the social care sector. For similar reasons, UBI could also increase the number of people undertaking voluntary work.
Finally, UBI could make the country more entrepreneurial. Having a guaranteed income would encourage more people to risk starting their own business. New enterprises challenge established players, increasing competition and improving standards and lowering prices for consumers. They also create new jobs and have the added benefit of bringing in revenue for HM Treasury.
There are obvious questions about the viability of funding UBI. However, there is no reason why it could not be delivered in a way that is affordable – or even revenue-neutral – if the money was clawed back through taxation based on the earnings of recipients.
The other potential objection would be that it would remove the incentive to work. However, there is scant evidence for this. Although one trial of a negative income tax did lead to a decrease in maternal labour participation, other studies have shown that where direct cash transfers have been made, people are more likely to work longer hours.
Dr Stephen Davies, Head of Education at the Institute of Economic Affairs, argues against UBI
A Universal Basic Income is an idea that periodically enjoys attention (it was first presented in a worked-out form over two hundred years ago by Thomas Paine) and is having quite a revival at the moment.
Interestingly it has supporters and critics on left and right, it divides both socialists and advocates of free markets. It is easy to understand how, confronted with the disastrous workings of the present British welfare state, and the much-feared challenge of widespread automation, the idea of replacing all existing income transfers and benefits with a single unconditional payment to all adults would be attractive. It is indeed a seductive notion and I confess to having succumbed myself many years ago when I wrote a pamphlet in its favour, for the CPS.
However, as the the seductee may experience subsequent regrets and second thoughts, so I have come to have doubts about my previous position. These do not centre so much on the practical difficulties, which I think are exaggerated, but rather on the fundamental idea and the way it would almost certainly work in practice.
There are three big objections.
The first is the politics. Almost certainly the level of a basic income would become a big political issue and parties would compete to offer higher basic rates or more generous add-ons for specific groups. Once these had been given it be impossible to pull them back so the long run tendency would be for the UBI to rise to an unsustainably high level.
The second is the psychological effect for many people of receiving a guaranteed income with nothing expected in return. This a common objection to both doles (unconditional payments with no time limits given to those not working) and unearned income from assets or inheritance. Quite simply such incomes erode the incentive or reason to have any kind of purpose or goal in life. For this reason, some people advocate combining a UBI with a work requirement. This, however, raises serious civil liberties issues and also undermines one of the main advantages of UBI for its advocates, which is precisely that it breaks the link between productive work and income and so frees up people to follow their fancy.
The third is that we would reasonably expect a UBI at the margin to undermine the incentive to do any kind of work. The higher it was set, the greater this effect. If it was set so low that the effect was negligible then most recipients would still be poor, which defeats the object. For most people structured and cooperative work is not only a way of getting an income but a psychological necessity, which gives meaning and structure to life.
For that reason, many would continue to work even with a UBI and the high taxes on additional income that would entail. However, for many, the incentive to do this and have a purpose and meaning in everyday life would be significantly weakened. This would have very serious social and psychological effects. A UBI is worth thinking about, even if as an exercise, but doing so makes us confront some difficult and challenging issues.
Yet UBI ‘divides the crowd’, often triggering strong and visceral reactions. For many, government funding to stimulate entrepreneurship in good times or guard against starvation in bad ones, seems like an obviously humane measure. Others consider such payments abhorrent, both wasteful with taxpayers’ money and likely to disincentivise work.
In today’s debate blog, we weigh up the pros and cons. Is UBI a good idea in principle, and could it really work in practice?
Ben Ramanauskas, Policy Analyst at the Taxpayers’ Alliance, is sympathetic to UBI – though not wholly sold on the idea. He sets out the positive case here:
Anyone can find themselves unemployed – often through no fault of their own. Given the high cost of living in the UK, many will not manage to put enough money aside to support themselves for lengthy periods if they find themselves unexpectedly out of work. As such, they have to apply for benefits. It often takes a long time for the money to trickle through, leaving individuals and their families in a precarious state. A Universal Basic Income (UBI) would provide a true safety net in such situations.
UBI could simplify our complex welfare state. Universal credit has helped in this regard, but there are many improvements still to be made. It takes time to apply for benefits, and claimants have to commit to regular meetings at job centres as they fill out endless forms and receive patronising advice from the staff. Such a system is inefficient and infantilising. A UBI, in contrast, would allow people to focus on finding work while potentially reducing the size of the State. Simplifying the functions of the DWP could mean significant savings for taxpayers and release DWP staff to the private sector where they could undertake more meaningful work and help to plug the skills gap.
A UBI could lead to a more highly trained and productive workforce. Due to our current welfare system, many people are stuck in jobs they do not enjoy, and which offer little opportunity for advancement. A UBI would give them the opportunity to retrain and learn new skills, which they would then use to advance their careers and be more productive at work.
It could also allow people to care for sick and elderly friends and relatives. The vast majority of people cannot afford to give up work in order to take care of their relatives, and so are dependent upon a heavily-burdened social care system. A UBI would give people the freedom to work fewer hours in order to undertake caring activities, while also reducing the pressure on the social care sector. For similar reasons, UBI could also increase the number of people undertaking voluntary work.
Finally, UBI could make the country more entrepreneurial. Having a guaranteed income would encourage more people to risk starting their own business. New enterprises challenge established players, increasing competition and improving standards and lowering prices for consumers. They also create new jobs and have the added benefit of bringing in revenue for HM Treasury.
There are obvious questions about the viability of funding UBI. However, there is no reason why it could not be delivered in a way that is affordable – or even revenue-neutral – if the money was clawed back through taxation based on the earnings of recipients.
The other potential objection would be that it would remove the incentive to work. However, there is scant evidence for this. Although one trial of a negative income tax did lead to a decrease in maternal labour participation, other studies have shown that where direct cash transfers have been made, people are more likely to work longer hours.
Dr Stephen Davies, Head of Education at the Institute of Economic Affairs, argues against UBI
A Universal Basic Income is an idea that periodically enjoys attention (it was first presented in a worked-out form over two hundred years ago by Thomas Paine) and is having quite a revival at the moment.
Interestingly it has supporters and critics on left and right, it divides both socialists and advocates of free markets. It is easy to understand how, confronted with the disastrous workings of the present British welfare state, and the much-feared challenge of widespread automation, the idea of replacing all existing income transfers and benefits with a single unconditional payment to all adults would be attractive. It is indeed a seductive notion and I confess to having succumbed myself many years ago when I wrote a pamphlet in its favour, for the CPS.
However, as the the seductee may experience subsequent regrets and second thoughts, so I have come to have doubts about my previous position. These do not centre so much on the practical difficulties, which I think are exaggerated, but rather on the fundamental idea and the way it would almost certainly work in practice.
There are three big objections.
The first is the politics. Almost certainly the level of a basic income would become a big political issue and parties would compete to offer higher basic rates or more generous add-ons for specific groups. Once these had been given it be impossible to pull them back so the long run tendency would be for the UBI to rise to an unsustainably high level.
The second is the psychological effect for many people of receiving a guaranteed income with nothing expected in return. This a common objection to both doles (unconditional payments with no time limits given to those not working) and unearned income from assets or inheritance. Quite simply such incomes erode the incentive or reason to have any kind of purpose or goal in life. For this reason, some people advocate combining a UBI with a work requirement. This, however, raises serious civil liberties issues and also undermines one of the main advantages of UBI for its advocates, which is precisely that it breaks the link between productive work and income and so frees up people to follow their fancy.
The third is that we would reasonably expect a UBI at the margin to undermine the incentive to do any kind of work. The higher it was set, the greater this effect. If it was set so low that the effect was negligible then most recipients would still be poor, which defeats the object. For most people structured and cooperative work is not only a way of getting an income but a psychological necessity, which gives meaning and structure to life.
For that reason, many would continue to work even with a UBI and the high taxes on additional income that would entail. However, for many, the incentive to do this and have a purpose and meaning in everyday life would be significantly weakened. This would have very serious social and psychological effects. A UBI is worth thinking about, even if as an exercise, but doing so makes us confront some difficult and challenging issues.
6 thoughts on “Debate: Should we support a Universal Basic Income?”
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the strongest argument against is that the state is replacing the role of the family. The primary economic responsibility is the division of labour and the redistribution of income between members (spouses/partners, parents and children etc). Basically, ubi supporters are saying that the state should give all those who do not receive an income in their own right an income instead of it being provided by the family. The family is the basic unit of organisation within society, for the state to take over its functions is disastrous.
Markets work best when everyone is compensated for the harm/loss of opportunity others cause to them. When this doesn’t happen, we bake in excessive inequalities and resource misallocation.
In order for this to happen, we need laws, regulations and indeed taxes and re-distributive spending.
In this context, the UBI shouldn’t be viewed at a State handout, but simply part of the compensation we are all owed along with wages and the payment of goods and services.
A loss of opportunity occurs when we are excluded from using natural resources. Harm is done via activities that pollute and congest the environment.
Thus the rental value of natural resources, Pigou Taxes, user fees and other royalties should be collected and paid out as an equal share as part of what we are all rightfully owed.
If this was done, taxation of incomes, capital and transactions wouldn’t be necessary. Indeed, a Poll Tax would be the only fair and necessary way to fund the services the state provides.
So citizens all end up getting their exact dues, and so would the state.
This is what the UBI could and should deliver.
If UBI is not going to be either extremely low or unaffordably expensive, it will have to be withdrawn at a high marginal rate as people start earning, probably at least as high as the current 63% withdrawal rate for universal credit. The trouble is that it will no longer be benefit withdrawal but income tax. Assuming we don’t want the standard rate of tax to go up for people on average earnings, we will end up with a marginal rate of tax which FALLS sharply as incomes rise. Can’t see how this could be sold politically.
“Three replies showing lack of interest in such a potent proposal for stabilising the supply demand cycles.
I particularly wonde about John Maloney having nothing to say in response to Benjamin Weenen’s post.”
A HUGE MONUMENTAL MISTAKE.
GIVES THE IDLE AND WEAK WILLED AN EXCUSE TO DO NOTHING. AS FOR DRINK AND DRUGS IT WOULD BE A DEATH SENTENCE FOR THE ADDICTED.
UBI is messy subject. My first view of economy, politics and all of that shenanigans was leave the market alone. Almost like a religious doctrine, same way I thought state should leave any personal affair alone. But here’s why I had a change of heart to those classical clear view. And that’s what Benjamin Weenen said, word by word, you are losing out on the opportunity to use any resource like water, wood, most of land owned by others and oil, and these basic things taken away from you makes you deserve compensation, and it only makes sense that everyone compensates everyone for what they’ve taken and have been taken from. Now this is the first almost argument which is constructed almost like a mathematical proof of our rights. But as is many (not me) find these right oriented politics not empirical enough and followingly too ideological. For these people I’d like to produce a similiar argument from Robert Nozick’s brilliant “State, Anarchy & Utopia”.
Reparations are a big point of contention, my grandpa stole from yours, is that why you’re poor now? Do I have to pay you back for him? Do I have to take into account the worth it had then and now? And how would I do that? Not to mention, what if I’m not sure who stole my grandpa’s stuff, but I know for sure somebody stole everything he had, maybe even his life, made him a slave. This situation is undoubtedly unjust for me, but I am left without any rejoice, because any compensation from a group to a group will also include new wrong doings! The messiness of this can be seen with reparations for blacks in america. Nozick argues because of the new injustices if we tried to fix it we would just make more injustice that we would then have to fix. A viscous government interference cycle. However he said that one could argue for a redistribution of everything to everyone. So we all have the same. But he obviously said this for the leftist comparison and it’s absurdity as political position, but I found it profoundly interesting that even such a writer saw an opportunity in redistribution. Now the argument goes: We can societly compensate for the wrongs that we don’t know of anymore by assuming a small percentage of all gains are of unjust origin, and redistribute the exact amount of capital to everyone on a regular basis to also make up (very slowly) for the past injustices.
In effect this means raising communities of colours and other marginalized communities out of poverty by letting the have capital and worth, which all the data says is wicked important for bringing down crime and raising stability and happiness. MLK pushed also thought this would be a big part of the answer to the race inequity problem.
Lastly, and lastly there are people who aren’t convinced of the pragmatic real meaning of a giant redistribution to the population, these are our dear utilitarians, caring foremost not about rights, but about the actual graspable things we all have. To you I can say this is a question of empirical research, which means we should allude to science, which means allude to authority, in this case macro economists who do real research not just theory. Now you might not like alluding to authority but that is how science works, it’s a social being. And by what I know, Milton Friedman and a thousand economists signed a letter and supported UBI. Even then it’s important to look at only those economists who have actually researched the impacts of basic redistribution, who are predominantly for it. Now if these authorities don’t convince and you’d rather trust your friends, a quick Google search of both sides or a podcast you listen too…. Then I guess you aren’t reading this anyhow ^^