The Merits of Universal Basic Income

By Ben Barberie

Future economic prospects for those in the middle class and lower are quite clouded. Artificial intelligence and other technological developments could create millions of new jobs that don’t presently exist. These same developments could also spawn mass job displacement. In such a world, the value of postsecondary education and highly specialized skills could increase, but how many people will be able to overcome the ever-increasing financial burden of acquiring an education or skill set? After pondering issues like these, I believe many Americans will need economic assistance to mitigate the perils of massive societal shifts that could be on the horizon. It’s become clear to me that America needs to have a serious discussion about the merits of Universal Basic Income.

Before examining the benefits of the idea, it is important to understand the terms of a policy like Universal Basic Income (UBI). In order to avoid confusion, it may be most essential that I clarify what Universal Basic Income is not. It is not an income or wage control. It does not cap earnings. It does not aim for a standard, flat salary that workers of all kinds would receive, nor does it come close to that result. UBI is an income adjustor. It is intended to pull individuals out of the lower and middle margins of economic systems by increasing mobility and financial freedom. Universal Basic Income is a measure designed to combat wealth or income inequality, labor market shifts, and all kinds of economic issues.

An American economy with true Universal Basic Income would be one where all individuals (of a certain age) receive a recurring payment designed to offset the expenses of basic living conditions like food and housing. Yes, in a system with true UBI, even Jeff Bezos and Bill Gates would receive regular payments. That might rub a lot of people the wrong way, but it is also what makes the system universal. It is not a means tested program, making it different from many other types of welfare programs. The only condition to receive it would be one’s age. Most proposals target the age of 18 for when individuals would begin receiving UBI. 

The obvious question of how to fund such a program is pressing, and it may be the largest fault of the massive welfare program. Trillions of dollars (yes, that’s with a T) of tax revenue per year would have to be generated in order to fund a UBI program where everyone receives $1,000 per month. That scale of revenue cannot be generated easily, so it likely means budget cuts on things like defense spending and existing welfare programs, increasing progressive tax rates, and possibly even the implementation of a value added tax on goods. Cutting existing welfare programs would be a major negative of some UBI proposals. Aside from revoking the benefits many millions of Americans receive currently, a comprehensive welfare program would remove the patchwork of existing programs that at present make it incredibly difficult to cut welfare entirely. Such a large program would be vulnerable to changes in political conscience. Trillions of dollars changing hands each year might bring concerns of inflation, and those worries are valid. It is difficult to measure the impact of UBI on prices and just how much it would actually increase purchasing power. Despite some apparent faults, I believe Universal Basic Income’s merits are greater.

If appropriate shifts are made to progressive tax rates, the burden of funding a UBI program would fall mostly on the ultra-wealthy. Even in a market impacted by inflation, it is highly unlikely that cost of living increases would outpace increases in income, meaning net benefit would still exist. If the tax load is avoided by the middle class and especially poor Americans, receiving a regular monthly payment from the government could be truly transformative. 

One of the most intriguing differences between Universal Basic Income and other more traditional welfare programs is the level of individual freedom. Restrictions exist for how benefits can be used under many existing programs, and they can be difficult to even qualify for. Giving an individual $1,000 per month, no strings attached, allows them the ability to allocate it how they best see fit. Sure, there’s a nonzero chance that money could be spent on unnecessary purchases, but I believe there is an even more real possibility individuals will use that allowance to ensure their own economic security. 

In a world where artificial intelligence could displace millions from their work, economic security matters. UBI could help serve as a safety net for those who lose their jobs or are forced to transition into other areas of work. It could also reinvigorate the economy as a whole. A little extra money each month might motivate someone to pursue a long-held passion or start a new business because it finally becomes economically viable for them to do so. One might save up to make a home purchase, cover student loan debt, or travel. When the basic needs of food and housing are always ensured to be met, the stress of living paycheck to paycheck is mitigated. Socioeconomic factors certainly influence attributes of both mental and physical health. By reducing economic stressors, we could possibly increase happiness and wellbeing across the country. 

Generally, I believe Universal Basic Income has aspects that appeal to both liberals and conservatives. From the liberal perspective, UBI would be a more comprehensive or complete social program than any that has ever existed, and it may also prove to be highly useful in combatting a host of economic issues. From the conservative perspective, UBI would represent a major reduction in bureaucracy from current welfare programs, as there would no longer be means tested methods and separate departments for distribution of benefits. Ironically enough, the administration of a basic income to every American could be easily automated. This system would also keep free market principles intact and allow individuals to choose for themselves what they value. 

As I conclude, it is important to note that I do not believe Universal Basic Income to be a panacea. I recognize that there are structural issues that exist within our American economy; ones that often leave the marginalized behind in a vicious, generational cycle of poverty. Our game is one that needs fixing, and it will certainly take a detailed, deliberate audit of the rules to ensure we create a system that is fair for all. It will take time and effort to diagnose and treat the ailments of our broken economy. That means more than just one policy as a fix-all. However, that does not mean we should dismiss structurally inventive solutions. Ideally implemented, Universal Basic Income would foster an economic system where everyone has something; a capitalist, free-market system that ensures individuals have zero chance of having nothing. 

Ben Barberie is a McConnell Scholar in the Class of 2021. He is studying political science and economics at the University of Louisville.

Commentary presented here is not necessarily a reflection of the McConnell Center. Thoughts are those of the author.