Charles King-Tenison | @CKingTenison
With Coronavirus dominating the news these days, you might have been hearing more about Universal Basic Income (UBI). But what exactly is it? Here’s everything you need to know about UBI and whether it would actually work.
What is it?
It’s when governments pay all citizens (usually above a certain age) a regular income. Unlike the benefits system at the moment, you’re paid a lump sum every month and not told how to spend it.
The first thought of most people is, ‘where is the money coming from?’ However, in recent years UBI has received support from both the traditional left and right of politics. But critics still have questions, like ‘what good will it bring?’ and is ‘it worth the cost’?
How could it change things?
An end to poverty and a minimum standard of living could be within our grasp, during our lifetimes. Global poverty has shrunk hugely in the last hundred years, and although still exists in abhorrent form, is reducing in size.
UBI could be a straightforward way to end poverty, especially within developed countries. By giving people a regular payment of enough to live on, the government ensures everyone has a minimum standard of living. We would all have the personal security of a guaranteed income to pay bills and buy the basics, and would lead to an incredible improvement in the lives of those on lower wages or in irregular work.
Many of the small studies on UBI report an improvement in mental health as the most prominent and immediate effects. Under UBI, we would all have economic security, receiving a stable income to buy essentials. This gives us more freedom and more control over our lives, as we would not have to work to survive and instead could pursue something that pays less (or not at all) but is much more fulfilling. You could instead choose to support your family, start a business or go into further education – without the risk of having nothing to fall back on.
Many people are predicting many jobs will be replaced by “automation”, in other words, those jobs that can be done by technology will be lost in the future. Speaking in 2017, Bill Gates said: “A problem of excess [automation] forces us to look at the individuals affected and take those extra resources and make sure they’re directed to them in terms of re-education and income policies . . .” In other words, we need to have support for those whose jobs will no longer need to be done by people.
In the UK, we’ve seen the decline of traditional industries since World War Two, often with devastating effects. This trend will only continue as the economy shifts into new emerging industries. So, the workforce must be able to adapt to the new economy- if we don’t, we risk letting this generation become trained in obsolete professions and being left behind.
Another argument for UBI is the “multiplier effect”; an economic theory where increased spending, leads to increased demand, leading suppliers having to hire more staff and expand their business to cope with the demand. This leads to more people with more money, from their newly found wages, which they will, in turn, continue to spend. UBI fits in with the multiplier effect; if the average British person is given £800, they would likely spend a lot of this on the high street. This would give a massive boost to many businesses, in a similar way to Australia’s $900 cash injection saved the country from recession in 2009.
So in the years to come the battle to end poverty and ensure that our workforce can cope with a rapidly transforming economy, UBI could be the solution to solve both of these tremendous challenges.
What are the costs?
Some people think it would mean fewer people would actually want to work. If we simply give money to people, then they will stop working, and the economy will collapse. UBI will definitely stop people having to work in order to survive. However, no study of UBI has shown that people give up on productivity and simply revert to completing every series on Netflix. If anything, the current Coronavrius lockdown confirms that people want to continue their lives and do stuff. UBI may stop the need to work, but no study has shown that it has decreased productivity.
To foot this bill, the cost in taxes alone would be colossal. If the UK were to follow Andrew Yang’s suggestion with a similar proposal of £800 (roughly $1000) per month, it would cost £651bn per year. This is no small figure and an immediate adoption without any changes to taxation and spending would doubtless bankrupt the country.
However, gradually introducing UBI, while phasing out various tax reliefs could be successful. There are 1,156 different tax reliefs, costing £420m, which could be dramatically reduced and UBI could replace almost all forms of benefits once fully introduced (with exceptions for extreme circumstances). This would also simplify a lot of the welfare state. While the economic cost would be great, it is by no means impossible.
So really UBI is an idea for the future. It is not an idea for tomorrow but is one for the next 10 or 15 years. It would have to be meticulously planned, carefully legislated and sensibly implemented. But it could be the solution to universally end poverty and bring freedom. It’s like if life is like the board game monopoly. If everyone started with no cash it would be a long game and would not work. If some people started with no cash and some started with cash, how would you expect those who started playing with no cash to complete?
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