Give a Buck is Mashable’s deep dive into Universal Basic Income — an idea gaining currency in a time of pandemic and mass unemployment. Now more than ever, our future depends on whether we can pay the bills.
What does the pope have in common with former presidential candidate Andrew Yang, extreme free-market economist Milton Friedman, and Martin Luther King Jr.? Trust us, it’s not the punchline to a hackneyed Dad Joke.
Ding ding ding: At some point, they’ve all advocated for policies approximating a universal basic income.
But what exactly does that mean? The concept of a universal basic income, regular and unconditional cash payments to those residing in a particular territory, isn’t new. In recent months though, with intense economic upheaval spurred worldwide by the coronavirus pandemic, calls for a universal basic income (UBI) have grown even more urgent.
It sounds like such a simple solution — you just give cash to everyone, right? — but understanding the meaning of universal basic income takes some unpacking. To explain the basics of UBI, we talked to Dr. Ioana Marinescu, an associate professor of economics at the University of Pennsylvania who studies UBI, and Dr. Jennifer Burns, an associate professor of history at Stanford currently working on a book about Milton Friedman.
What is UBI?
On its face, the definition of a truly universal basic income is pretty straightforward: It’s an amount of cash given to everyone within a geographic area that’s then distributed unconditionally regularly, and on a long-term basis, as Marinescu describes it. (Although, the most recent UBI trials have focused on those with low incomes. There are varying opinions about whether the wealthy should also receive UBI payments, or whether they should be distributed on a sliding scale based on income.)
Though it sounds simple, the wording matters, and understanding the term requires breaking down some of the definition’s key phrasing. The crucial conditions are highlighted above, so let’s unpack them.
First, the funds distributed must come in the form of direct cash, as opposed to something like conditional welfare, which requires certain obligations be met, or food stamps. A universal basic income program would mean that the cash received as a result of the program has no strings attached. Those who receive it can choose to spend the cash however they want.
Next, for a policy to constitute UBI, rather than any other kind of cash distribution program, the same cash payment has to be given to everyone within the geographic area, Marinescu notes. So, in order for, say, the state of California to claim it has instituted a universal basic income, the state would have to distribute a set amount of cash (say $1,000/month) to every person living within that territory. This means that everyone residing in California would have to get the same cash payment, regardless of their income or employment status. (Of course, UBI could also be instituted at a smaller scale, such as by county or by city).
A universal basic income program would mean that the cash received as a result of the program has no strings attached.
This is what makes the cash unconditional: It’s not subject to a means test, in which there are determined qualifications one must meet in order to get financial assistance or relief.
Finally, in order to be a UBI program, these payments must be regular and long-term. This differentiates UBI from the checks sent to Americans in Congress’ stimulus package, Marinescu points out. If the stimulus checks were instead part of a UBI program, it would mean the cash distributed would come on some kind of regular interval (say, monthly), and that monthly cash transfer would be in place for an identified — and longstanding — period of time. (They would also not differ based on income.)
With these basic working parts, the way these cash payments would get distributed to individuals might differ, Marinescu notes. For instance, the amount of cash, the intervals between cash transfers, or the length of the program overall could all vary depending on government decisions.
How does it work?
Yes, in a nutshell, UBI basically consists of just giving everyone cash. But how a UBI program would actually work in reality depends on the political logic motivating the program, Burns and Marinescu explain.
Universal basic income is a rare economic proposal in the sense that it has acquired an eclectic coterie of supporters across the political spectrum, as Burns notes. In Marinescu’s telling, there are two main obstacles to implementing UBI, and how a given program might overcome them rests largely on its underlying logic.
First, there’s funding. Marinescu notes that most proposals for funding UBI involve increased taxes on some people or entities, such as increasing wealth, carbon, income, or sales taxes. In the U.S., for instance, a country-wide UBI program in which every resident over 18 gets $12,000 per year is predicted by U.C. Berkeley economists Hilary Hoynes and Jesse Rothstein to cost around $3 trillion. (For a point of reference, the Defense Department asked Congress for $705.4 billion for its 2021 budget.)
She notes that the sticker shock that arises from figures like these means that implementing such a policy becomes a “political battle” of how to address the cost: If you’re left-leaning, do you emphasize the social benefits, and downplay the increase in taxes? If you’re right-leaning, do you argue that a reduction in poverty could reduce government spending, or that the policy could incentivize market participation?
While the basics of UBI rest in its definition, its implementation is typically more complicated than its fairly straightforward premise.
Then, there’s the question about UBI’s role in welfare policy more broadly: Would UBI be replacing other aspects of the social safety net, like unemployment insurance or SNAP, or would the cash transfer arrive in addition to other programs? Burns notes that answering this question also typically varies based on political beliefs. Those who advocate for UBI that are right-leaning might want it to be the only form of financial assistance from the government; those who are left-leaning might want UBI to serve as an additional supplement to existing welfare programs. While the basics of UBI rest in its definition, its implementation is typically more complicated than its fairly straightforward premise.
What’s the history behind it?
To understand the growing chatter about UBI today, Burns notes that it’s useful to track its passage through ideologies over time, particularly in the context of the U.S.
During the Great Depression, Milton Friedman, an economist with a reputation for being a radical libertarian, in Burns’ telling, started thinking about how to implement what he was calling a guaranteed minimum income, which was primarily focused on providing enough money for nutritional needs. At the time, Burns notes, Friedman was not well-known, and the idea gained little traction.
He later proposed a negative income tax, a system in which individuals earning below a particular threshold receive funds from the government, rather than paying taxes. The concept of negative income tax helped lay some of the groundwork for conceptualizing UBI.
Aspects of Friedman’s ideas caught on more in the 1960s: In 1969, President Richard Nixon presented the “Family Assistance Plan,” a poverty alleviation program that would have given working and, notably, nonworking poor families a form of negative income tax. Unlike other programs comprising the social safety net, providing cash to nonworking families would have marked a major step towards implementing a program like UBI, since a common means test (employment) wouldn’t have impacted one’s ability to get aid.
Ultimately, the plan was killed by the Senate, Burns notes. With Nixon’s plan scrapped, Marinescu adds that conversations around UBI largely stalled until much more recent talks, starting with a (since rejected) proposal to implement a guaranteed basic income in Switzerland in 2016. Marinescu views this as the impetus for many of the conversations we’re having now.
Who’s been involved?
Despite its far-reaching history, the idea of a UBI found legs in recent years due to ideological backing from notable tech leaders, and it most recently found something of a figurehead in former presidential candidate Andrew Yang.
During his presidential run, Yang’s UBI proposal, which he called the “Freedom Dividend,” advocated for “a form of universal basic income” in which every U.S. citizen over the age of 18 would receive guaranteed payments of $1,000 per month (totaling $12,000 per year).
For an old idea, Yang’s reasoning was distinctly modern. His “Freedom Dividend” was proposed as a solution to potential job loss from automation spurred by new technologies, such as AI. His argument throughout his campaign went like this: Though the labor force in the U.S. has withstood previous waves of automation, new technologies like AI could present a threat to jobs in a way that current policies won’t be able to handle.
You know what would have helped before the crisis, during the crisis and after the crisis? Universal Basic Income.
— Andrew Yang🧢🇺🇸 (@AndrewYang) March 28, 2020
Though Yang was far from the first to suggest a connection between potential precarity and the need for UBI, his campaign did bring the concept out of the fringes and into the national spotlight for many. Other prominent tech leaders have also backed the concept in the past, using thinking similar to Yang’s.
Facebook cofounder Chris Hughes is directly funding programs approximating UBI as co-chair for the Economic Security Project, an organization that provides backing for direct cash transfer projects. Among other projects, the organization provided a grant for an initiative that gave 20 black mothers experiencing extreme poverty in Jackson, Mississippi $1,000 per month, for 12 months. (Because there is a means test, this isn’t technically pure UBI.) The program is expanding to 80 women and is set to last until 2021.
Additionally, the Silicon Valley incubator Y Combinator launched a basic income feasibility study in Oakland, California in 2016. The initial study ran for a year, with fewer than 10 individuals, though Y Combinator announced plans in 2017 to enroll more pilot participants down the road. (As of 2018, efforts to run a larger study, which won’t start until the needed $60 million in funding is secured, have faced delays, according to Wired.)
Most recently, Twitter cofounder and CEO Jack Dorsey announced that he’s moving $1 billion (which he says is 28 percent of his wealth) to UBI and girls’ health and education programs after first using the money to fund global coronavirus relief.
I’m moving $1B of my Square equity (~28% of my wealth) to #startsmall LLC to fund global COVID-19 relief. After we disarm this pandemic, the focus will shift to girl’s health and education, and UBI. It will operate transparently, all flows tracked here: https://t.co/hVkUczDQmz
— jack (@jack) April 7, 2020
Elon Musk has also spotlighted universal basic income. In 2016, he told CNBC in an interview that: “There is a pretty good chance we end up with a universal basic income, or something like that, due to automation.” In 2018, he tweeted: “Universal income will be necessary over time if AI takes over most human jobs.”
Mark Zuckerberg also voiced support for UBI at the 2017 Harvard commencement address, at which Zuckerberg said: “Now it’s our time to define a new social contract for our generation. We should explore ideas like universal basic income to give everyone a cushion to try new things.”
Then, following a 2017 trip to Alaska, which has a Permanent Fund Dividend, a form of basic income tied to mineral royalties, Zuckerberg voiced support for the driving ideas behind the program, writing in a Facebook post that it provides “good lessons for the rest of our country.”
Where has it been implemented?
Around the world, trials and pilot programs have tested some of the basics behind UBI, with many of these experiments taking place in recent years. Most don’t fully meet the requirement for a pure UBI: In lots of cases, cash payments have been exclusively given to those within a certain demographic in a geographic area, such as those already receiving particular social welfare benefits.
That includes tests in Finland, where 2,000 jobless individuals received €560 per month; Ontario, Canada, where 4,000 low-income participants received an annual stipend ($16,989 in Canadian dollars for individuals; $24,027 in Canadian dollars for couples); and Stockton, California, where 125 residents living at or below the median income line are being given $500 per month. (The Economic Security Project gave $1 million to that program.)
There are a couple of places where a form of UBI has been implemented without a means test, though. As noted in Zuckerberg’s Facebook post, since 1982, the state of Alaska has provided all its residents with a yearly check (typically around $1,000 or $2,000, Marinescu notes) financed with investments of mineral royalties. And in 2011, Iran launched a nationwide cash transfer program in which the government provided monthly payments to each family in response to cuts to certain subsidies, including gas and bread, that individuals were previously receiving.
In Kenya, the charity GiveDirectly started providing payments to a random selection of 20,000 individuals across rural villages in 2016. There was no means test to receive the money, but the villages’ were generally poor. With some recipients getting the monthly payment for 12 years, it marks one of the longer UBI experiments.
Additionally, universal basic income has also been tested in some capacity in:
The Netherlands, where 250 citizens on government benefits received a “guaranteed basic income,” with different methods for distribution to test what worked best.
Namibia, where all residents living in the Otjivero-Omitara region under 60 years of age received 100 Namibian dollars per month from 2008 to 2009.
Germany, where a nonprofit created an online fund that allowed anyone, anywhere in the world, to enter a basic income raffle, in which you receive €1,000 per month for one year. By the end of 2019, 500 basic incomes were awarded.
India, where 6,000 adults and children across nine villages in the central state of Madhya Pradesh received a basic income between 2011 and 2012.
More could soon join the list. In light of the coronavirus pandemic, the Spanish government says it’s looking to implement some form of basic income “soon,” according to social security minister José Luis Escrivá.
When Milton Friedman first started conceptualizing some of the intellectual framework for our current discussions around UBI, the country was in the midst of the Great Depression, an economic downturn that likely matches our current moment. The infrastructural gaps revealed by the pandemic’s havoc, coupled with a changed ideological landscape, have strengthened the argument for UBI for some.
“This is how ideas moved forward sometimes — through unexpected moments,” Burns said. “The idea needs to meet the moment, and then it needs a salesperson to push it through.”