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Universal basic income won’t fix problems but will create new ones

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Mancur

"A rational and humane society will confine its distributional transfers to poor and unfortunate individuals" wrote Mancur Olson, scourge of special interests. UBI should be regarded mainly as the perfect excuse to abolish ALL the infinite privileges, barriers, subsidies, protections, etc, that enrich special interests and slows growth. As Olson explained, special interest thrive on complexity: UBI should be the ultimate simplification: all redistribution discussions are limited to the UBI. The cost of UBI should be considered in the context of all the gains for the economy of abolishing all the concessions to all kinds of special interests. With UBI there would be no excuse to enrich businessmen, bankers, and all the intermediaries of the "social-spending- complex", paraphrasing Eisenhower: there is UBI.

Curt Welch

The arguments of this article aren't totally wrong, but they totally fail to address the true purpose and need of a Basic Income. They argue that a Basic Income is not a good welfare system -- or that it has just as many problems as the old welfare systems. But a Basic Income should not be thought of as welfare, and there's where the arguments all fall apart.
Welfare systems are built on the assumption that capitalism works well, and that sometimes, people fall off the train, and need help getting back on the train. It assumes that when someone is poor or in need, it's THEIR fault, and that we help them get their life back together, with our welfare systems.
But that's not the purpose of a Basic Income. It's not welfare to fix broken people that fell off the train.
A Basic Income is justified because we understand the train itself is broken. A Basic Income is meant to fix a broken train -- to fix a deep systematic, and growing, problem we face with capitalism itself.
That deep systematic problem is the shifting labor and capital share of our economy caused by the rise of advanced technology.
We used to have a labor economy, but we don't any more, we have a rising machine economy. People and animals did all the work, but we don't anymore. Machines do most the work now. When labor rules, about 70% of all economic income was paid to workers, and the rest, or 30% were paid to the capitalists --= the land owners, the factory owners, the people who owned the natural resources, and the social resources like prime land locations and prime technology, like the trains.
When 80% of society sells their labor for a living, and 70% of the economy was paid to workers the workers were well supported by the economy. Even if 1% managed to own 20% of the capital share, which made them super rich, the bulk of society was still well cared for because they could sell their labor for a decent slice of the economic pie.
But with the rise of technology, the labor share has been eroding for decades, and the capital share has been expanding. We are nearing the point where labor and capital now hold equal shares of the economy.
The labor share is well divided across workers, but the capital share is fought over in a winner take all game of capitalism where it ends up mostly in the hands of the 1%. (see the Monopoly boar game for a simple demonstration).
When 70% of society is made to live on a shrinking share of labor income (50% and falling), and 1% of society takes home most the capital share, we have a recipe for social disfunction and revolution. Society WILL fall apart if we don't fix this.
Capitalism can no longer support society, because the labor share is what allowed society to survive under capitalism, and the labor share is falling quacky as smart technology drives down the value of and drives up the income for the 1%.
A labor dominated economy, like we once had, feeds everyone,. A capital based economy, which is what has been rising for 40 some years now, only feeds the 1%.
Society can not survive if we assume capitalism will feed everyone when we have machines doing most the work, and only the 1% owns the machine, and the land, and the oil, and the patents, and the factories.
This is what a Basic Income will fix. It takes all that economic wealth what once went to pay for labor, but now only exists as profits and interest and rents and capital gains for the 1%, and turns it into a shared resource to feed everyone,
By the end of this century, labor income will have fallen to such an insignificant level as to be worthless -- and certainly way below what is needed for most people to support themselves with. The machines will do all the work and the 1% will receive all the income from the machines. This we can't allow to happen of course. We need to start a Basic Income system to correct the inability of a capital based economy to support the people.
We will still need some welfare systems, to help the people that have special needs. But many of the current welfare systems are just there to fix this core economic problem, and not to actually help the people with special needs (disability, unemployable, the young, the old, the sick, etc). Our broken economy created people with needs that aren't at all helpless, they are just don't have the-money they need to bootstrap their lives, and a Basic Income will fix those.
The correct approach here, is to start a small Basic Income and grow it steadily but slowly over time, and allow it to fix what is wrong with capitalism, then, we can overhaul welfare systems that will only need to help the true special case problems that our new train of capitalism+BI is failing to address. As the BI system grows, many of the current welfare systems will no longer be needed, or their size and magnitude should be reduced.

Curt Welch in reply to Curt Welch

Because a BI is not welfare help the needy, the cost of a Basic Income should not be thought of as the amount the rich should be willing to pay to help the few that have failed to catch the train. The cost should be understood as the income share that the system system has taken away from labor, and given as a free gift to the capitalists, the 1%, which society needs to take back, and distribute to everyone as Basic Income -- it's money we never should have allowed to the 1% to have in the first place.
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We have lost on the order of 20% of the GDP from labor, and it's been mostly turned over to the 1% as free rent income for them to fight over. We can expect to take back, something in the same range and turn it int a UBI for everyone. In the US, that would amount to about $1000 a month for everyone as a UBI (20% of the economy).
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But a UBI will cause prices and wage share to shift, so it would not be wise to just take all that back suddenly without giving people and businesses and the economy time to rebalance. This share was lost over 40 years, it's not wise to pull it all back suddenly in 1 year. So we should start small, maybe 5% or less, and let it grow over many years and give the economy, and society plenty of time to adjust.

Peace Love and Understanding

I wonder (and forgive me if I am off-base here) whether when we say that UBI would leave people below the poverty line, if we are factoring in that the poverty line itself would change from such a massive reorganization of human wealth....

Because the reduction in relative inequality from the massive redistribution required to make this work would lower the cost of living substantially. The rich would not be able to drive up housing and other prices so high if they had a lot less money to throw at those things relative to their less well-off counterparts. It would create a strong deflationary pressure on prices...would it not?

Just the opposite. I'd expect that the basic and popular stuff would rapidly become more expensive. No reason not to double the price of milk if everybody can afford it. There would be an inflation phase, until the poorest (the ones with only the UBI) wouldn't be able to put pressure on the market anymore.

The rich would not be able to drive up housing and other prices so high if they had a lot less money to throw at those things relative to their less well-off counterparts.
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A UBI couple would be targeted by the fly-by-night mortgage companies to buy a house, driving prices higher.
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Remember The Great Credit Expansion of the early 2000's where we had people buying houses with NINJA loans, among other types?
(No Income, No Job/Assets)
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Non-prime UBI loans will replace sub-prime NINJA loans.
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Then there's credit card debt - to fill the house with goodies.
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Household Debt/GDP:
1999: 68.3%
2007: 97.9%
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"Those who fail to learn from history..."
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NSFTL
Regards

Ed Zimmer in reply to Comte Arnau

Comte Arnau: Why would basic stuff (like milk) become more expensive if those who now can't afford it suddenly became able to? So far as I know milk (and other groceries) are not in short supply. From what's being exported and wasted, I find it hard to believe that such increase in demand could not be easily supplied. Or are you thinking that the suppliers will raise prices simply because they have more customers?

Comte Arnau in reply to Ed Zimmer

"...are you thinking that the suppliers will raise prices simply because they have more customers?"
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Yes. More customers -> more demand -> price increase.
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Do you really believe that the cost of living would decrease if the UBI were to be implemented?

Ed Zimmer in reply to Comte Arnau

Comte Arnau: Not the way it works. More customers -> more demand -> short supply -> price increase. More customers -> more demand -> plentiful supply -> no price increase.
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Except for our government insisting on inflating prices (2-3%/year), cost of living would decrease regardless of UBI or no-UBI because of the deflationary effect of technology.

Isn't that greatly oversimplifying supply and demand?

Ultimately the equilibrium price is not based on the number of people buying something.......it's based on who will pay the most for a scarce resource relative to its level of scarcity. As far as food prices go, I'm not too worried because we are so massively oversupplied in that regard that we feed our people almost for free anyways. For things like housing, I would suspect that it would drive down the price the wealthiest interests are able to put into housing which would actually make it relatively more affordable for the people on UBI.

For sure UBI would be fundamentally disruptive to a market based economy, though.

B. Hotchkiss

A universal basic income is an income redistribution scheme. Economics imposes no limit on the amount of a UBI up to the point at which the country's total production is divided equally among everybody. There are, however, policy reasons that the amount provided should probably not exceed "basic", and political reasons that are likely to cause even more stringent limitations.
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One possibility that I haven't seen explicitly mentioned is that the better-off majority of the population might adopt an attitude that in effect says "we're giving them an income, and if they can't live on that, to hell with 'em".

Bruce1253

I think many of the problems outlined in the article are the result of a basic assumption: People can't be trusted. I believe this to be wrong. I would address this issues with a couple of changes: I would set a floor, a basic living wage below which the state would not allow people to sink. If in any month a person's pay dropped below that minimum, they would be compensated to bring them up to that minimum, no questions asked, no taxes imposed. If a person's salary was above that minimum, there would be no payment. This would dramatically lower the cost required over a true UBI.

Many of the concerns seem to be that the populace would stop working if a UBI were implemented. True there would be some who would do so, but not the majority. I think most people want to contribute to the greater good of society. They may not do so in their current job, but they will want to find a way of doing so. I do think that some sort of UBI would lead to a revolution in the work place. People would no longer need to put up with substandard working conditions or abusive bosses. They could quit and not starve. Companies would quickly become believers in employee involvement and satisfaction or they would not have a workforce. Imagine what your workplace would be like if everyone there was happy with their job. What would happen to productivity and innovation? What would happen to the economy?

The other thing I would expect to happen is an explosion in the arts, learning and literature. The 'starving artist' would no longer have to choose between their art and eating.

One of the criticisms of such a plan is the cost. Even a pared down version such as I have proposed would still be enormously expensive. This would require some tough decisions: For example, it would not be possible to engage in endless wars all over the world and still provide a living wage to the people at home. Personally, I do not view this as a problem, but those whose livelihood is tied up with death and destruction will object.

The City of Stockton, CA in the US is going to try a version of UBI. It will be interesting to see how this plays out. It is clear that the concept of a UBI is under serious consideration in many places, it will be interesting to see how this plays out over the next few years.

guest-aaawwwmj in reply to Bruce1253

The City of Stockton, CA in the US is going to try a version of UBI.
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We all know how well Stockton is on financial matters.
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Judge approves Stockton bankruptcy plan; worker pensions safe
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Beginning in the 1990s, the city and employee unions negotiated such high salaries and benefits that pay packages were more than 25% above what other cities were offering, said Kathy Miller, a Stockton city councilwoman.
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Police and firefighters could retire at 50, while other city employees could retire at 55. All employees received free medical care in retirement with plans that didn't require co-pays.
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Stockton's promised pensions for police and fire employees are some of the highest paid in the state, according to an analysis by Franklin's expert. The city is now paying the equivalent of 41% of police salaries to CalPERS for future pensions – an amount that will increase to 57% in five years.
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http://www.latimes.com/business/la-fi-stockton-pension-court-ruling-cuts...

Ed Zimmer

From the article: "The main source of conflict is the ongoing attempt by politicians at balancing four competing objectives: providing an adequate minimum income that protects the poor from destitution; incentivising that same group of citizens to get a job and climb up the pay ladder, so they eventually achieve financial independence; simplifying the means of administering this system; and limiting the size of the resulting bill that taxpayers are asked to meet."
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The 2nd and 4th objectives are based on last-century beliefs that are no longer applicable to today's society. Most of today's young no longer have an option to "climb up the pay ladder". Today's reality is an irreversibly shrinking job market resulting from both automation and globalization. And the IRREVERSIBLE needs to be stressed. The loss of both blue- and white-collar jobs to automation will not stop by sticking one's head in the sand and hoping it will go away. And protectionism will not stop globalization. Globalizaton is sound business and businesspeople will find a way around whatever deterrents are thrown in their path.
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The 4th objective's image of the "bill that taxpayer's are asked to meet" stems from the obsolete view that a monetary sovereign's spending is limited to what it can raise from taxes and borrowing. Those clinging blindly to that view need to give up their pet cliches and educate themselves in the reality of a fiat economy. Any undesired consequences from its spending over its revenues is a function NOT of the spending but of HOW it's spent.

latkanme in reply to Ed Zimmer

A Universal Income was proposed by Jeremy Bentham in the late 18th Century. Redistribution and guaranteed Basic Needs are OLD concepts NOT new ones. Successful historic Social Safety Net Regimes like the Inca Empire required WORK and subjects had to WORK on projects selected by the Elite, not themselves. Given the absence of choice of WORK, innovation at the personal and even communal level was not possible. Communist Bread, Land and Peace promises were Orwellian LIES. People had to GIVE more than they received and they had NO incentives to innovate or to maximize their productivity. Given the DISMAL RECORD of Guaranteed Bread and other necessities ( a VERY slippery term), the persistence of such FALSE PROMISES schemes is Testament to the Stupidity and inherent Laziness of Humanity. Enough of such Bad Economics and WORSE History.

fredhoylelives

typical politicians article and shame on frank field ,not ONE number in his article
BTW a UBI might be made to work if it was drafted by prople who can add up ( and do long division without a calculator)

john4law

Why Work?? It used to be a stupid question but now it has become an increasingly SMART one. Entitlements NEVER die but economies supporting them do.

john4law

Why Work?? It used to be a stupid question but now it has become an increasingly SMART one. Entitlements NEVER die but economies supporting them do.