How does a guaranteed income for life sound? No, we are not talking about a “Lucky for Life'' win from CT Lottery, but rather the idea of universal basic income (UBI), most recently popularized by the 2020 presidential candidate Andrew Yang. In his campaign, he promised every American above the age of 18 a monthly income of $1,000, or $12,000 a year, no strings attached. His proposal essentially characterizes what UBI entails: unconditional, regular, and cash payment to all adults.
This idea sounds fantastic to me! Wouldn’t it be able to immediately wipe out poverty, solve many of society’s most pressing problems, make everyone feel happy and secure? What is the catch?
To answer such and many other questions, a lot of people and places have done experiments to test out the idea, the most notable of which is the Finland basic income experiment. In the world’s first national study of UBI that lasted from 2017-2018, a group of 2,000 randomly picked, initially unemployed people received a guaranteed, unconditional, and automatic cash payment of €560 ($632) per month instead of a standard unemployment benefit. The outcome of the experiment released last year received mixed receptions. Some view the trial a failure due to certain flaws in the experiment designs (1). Still others say the experiment shed light on the possibilities of the social security system (2).
The initial aim of the study was to see whether basic income would encourage employment. According to this article from University of Helsinki (3), “Basic income comes with the idea that unemployed people know what is best for them, and that without obligations and sanctions they will be more equipped to navigate the labour market. As people are able to keep the money they receive from basic income even if they get a job, the programme comes with significant benefits.” Contrary to this hypothesis, the result shows basic income does not appear to stimulate employment.
However, the effects on participants’ well-being are encouraging. McKinsey & Company released its own assessment of the outcome last year, and believed the basic income “A huge boost to well-being.”(4) Participants reported large improvement in mental health, physical health, employment and trust, all of which key drivers of well-being.
The catch is also the most fundamental question- what is the price tag? how will the UBI be funded? Who is to pay for it? Given the huge stake on the line, more experiments (better designed) will be needed to really answer these and the earlier questions, before we can conclude whether the idea of UBI is indeed a political fantasy or a possible reality.