By: Woohyun Song
As poverty and the wealth gap have been on an alarming rise within the past few decades, there has been further consideration about how to reduce the negative impact of these issues or to eliminate them entirely. One of these solutions is the concept of a Universal Basic Income, or UBI. Precise definitions of UBI are often disputed, both by proponents and opponents of the concept, but the fundamental basis of what the UBI is shared by the many theoretical and practical implementations of the concept. According to the Stanford Basic Income Lab, the UBI is: “a universal, unconditional, individual, regular and cash payment”. These implementations of UBI may have differences due to many factors, mostly related to the political, geographical, and historical situations of each region. The differences usually amount to differences in the amount paid, how often they are paid, and how long they are valid for.
Upon hearing this description of the UBI program, one may think to classify this program in the same vein as social welfare programs. However, it is important to distinguish between UBI and social welfare programs because of a fundamental difference between the two: the universality of UBI whereas welfare programs are typically limited to certain groups of people, usually the socially disadvantaged. While many welfare programs have shown their benefit to society through their reduction of unemployment and poverty, they have also been highly criticized by many because of the conditions placed upon the welfare recipients, which often puts people in a sort of “poverty trap”, as described by Professor Greg Mankiw of Harvard University. Among other factors, welfare often leads to a situation where poverty already prevalent in a system does not get eradicated or even reduced, but instead worsens at increased rates.
The unconditionality of UBI mitigates this “poverty trap” and instead provides a platform from which people can begin to raise themselves out of poverty while having a guaranteed and sustained amount of income that they can rely on even when not in the face of immediate poverty. Because UBI is only meant to be a basic platform in which one can remove oneself from poverty or similar situations, there is no need for this UBI to cover the entirety of one’s expenses.
Early 2020 Democratic presidential candidate, Andrew Yang, presented “the Freedom Dividend” a socioeconomic policy that would essentially be a UBI and where the government would provide every adult with a sum of $1,000 every month. Just as described above, this sum of money is nowhere near enough money for many living in the United States to fully sustain themselves for a month, but the extra money provided to them would show to be useful to many who hold many extra part-time jobs or frequently work overtime just to be able to sustain themselves.
However, as automation and AI has been steadily increasing within the past few decades, some have advocated for a system where the UBI provides for the entireties of one’s expenses for necessities, which would make the act of working for a job entirely optional. Although at first glance this might seem to be a bad idea, as it would seem not to motivate people to not work, early experiments in Canada with UBI shows that this is not the case. In those experiments, only around 1% of the population moved out of their jobs, most often to either care for their families or to pursue different careers and education. This would also allow workers to have greater leverage and freedom against their employers, allowing them to advocate for better working conditions or look for a different employer entirely. This would provide freedoms for the worker unlike anything before, and reduce workplace injustices significantly.
One of the greatest criticisms of such programs is that if people are allotted “free money” then they would immediately waste this money on commodities such as drugs, alcohol, and cigarettes. It is not difficult to parse through the abhorrent classism that is apparent through the fact that much of this criticism comes from the more wealthy and directed at the poor or working-class, and on top of that, it should be greatly noted that such criticisms are entirely untrue. According to the paper “Cash Transfers and Temptation Goods” by David K. Evans and Anna Popova from the World Bank and Stanford University, it is incredibly uncommon for many recipients of cash through these programs to spend that money on these unnecessary goods and services, and usually spend that money for the purchase of necessities, such as food, clothing, and shelter. In fact, wealthier groups of people tend to spend more money on unnecessary goods and services than do poorer groups of people.
Another factor to consider is how wealthier people are more likely to hoard and store their money rather than spend it, whereas, in less wealthy populations, it is quite likely for the bulk of that money to be spent right away and for that money to return to the economy. This, in addition to the fact that an increase in income for the entire population would only mean an increase in the spending and demand in the market, would mean a net increase in the overall GDP of a country, rather than a decrease, providing further benefits to the country that has implemented such a policy.
The most recent and one of the larger implementations of UBI has been in South Korea. As COVID-19 brought both the national and local economies to greatly slow down, making many lose jobs and therefore access to their main sources of income, the government of the Gyeonggi province in South Korea had decided to experiment with a UBI policy for its constituents, with a focus on rebooting the smaller businesses within the local economies in the area. Each participant was given around $220 every quarter, with the only limitation of the money being that it has to be spent within their localities. This functioned to greatly increase consumption within the local economies and a net positive for both the small businesses and the constituents of the province as community engagement was significantly boosted due to these policies. Participants of this experiment also noted the greater freedom they felt as they did not have the need to hold multiple part-time jobs just to sustain themselves, and the extra time they were able to spend as a result of this. Some spent this time furthering their education, with an interviewed participant noting how she was able to finish up her bachelor’s degree thanks to this program.
These benefits of UBI, shown both within theoretical and experimental terms, show the amazing effectiveness of this program and lead us to consider such a system for our own communities. As the research is practically only in its infancy, further benefits of the program are yet to be realized and only exist as a limited concept, but hopefully, such systems or similar systems will be used in the future to reduce poverty and suffering not only in this country but also worldwide.