Imagine this: receiving monthly cash payments from the government to cover the cost of basic living expenses. Although it sounds great in theory, a universal basic income (UBI) raises major questions about its feasibility and economic consequences.
In recent years, the idea has generated much interest and countries have been debating over the execution of a UBI. Most recently in 2016, Switzerland decided to hold a referendum over the implementation of a universal basic income. Initially, many people seemed to be drawn towards the idea, however, once the campaigns over UBI began, people seemed to change their mind and the proposal was rejected by 77% of voters. Although the idea of liberation from economic insecurity sounds like a dream, economists and researchers have proved that a UBI would have devastating consequences for the United States, breaking down the economic roots on which America has grown on, and ultimately harming the people who need it the most.
A universal basic income would ruin the foundation of America’s economy and harm economic growth. According to Economist Allison Schrager, economic growth relies on “employing labor and capital more efficiently.” This relies on diligent, innovative workers, which relies on the workers’ motivation. This motivation is the foundation of economic success. Schrager says that “the need to resolve uncertainty” drives motivation. Essentially, uncertainty in the economy drives people to work hard and save up money in order to feel more secure about their future financially. However, a universal basic income takes away this uncertainty, essentially removing the core pillar of economic success: motivation. With everyone continuously receiving a fixed, secure income, there is no need to work hard to save up money, thus people won’t work and will just spend their time relaxing and having fun. This leads to other many problems, including labor shortage (especially skilled labor), overall shattering the foundations of capitalism. As Charles Wyplosz, Professor of International Economics at the Graduate Institute in Geneva best puts it, “if we pay people, unconditionally, to do nothing… they will do nothing.”
Additionally, the cost for the implementation of a UBI would be astronomical. “Based on a Census estimate of 94.8 million households, that would cost $2.275 trillion dollars annually…if every head of household between the ages of 18 and 64 received a monthly $2,000 check…” Even if many federal assistance programs such as federal nutrition programs and federal rental assistance programs are eliminated to offset these costs, it would still cost a whopping $1.4 trillion.
Most people want a UBI to help the people who rely on these government programs, however, by slashing federal programs that low-income people use, a UBI would benefit “everyone” at the expense of the people who need it the most. There are numerous federal programs that cater to a variety of issues, including things such as medical care, childcare, and SNAP (food stamps). By removing these programs (and many more), and instead changing them into universal payments for everyone on the income scale, then essentially income is being redistributed upwards, which in turn would increase income inequality and poverty, rather than reduce them.
Altogether, a UBI would not monetarily provide and make up for the many benefits that these federal programs have, overall harming the people who need it the most, by depriving them of targeted support. By taking away the motivation that drives economic growth, stagnation will occur, slowly leading to a deteriorating economy. And with the United States already in major debt, creating a UBI would prove to be disastrous, radically changing the US for the worse.
Photo: Mathieu Turle via Unsplash