What is a Universal Basic Income, and why do we need it?
With COVID-19, recession, Artificial Intelligence and the ominous shadow of austerity looming over us, you’d be forgiven for believing there are four horsemen of a distinctly British apocalypse arriving. In this time of biblical uncertainty, can an economic policy endorsed by the Pope himself hold the key to survival?
Universal Basic Income (UBI) is a policy which the political establishment of Britain must explore, before a muscle-memory reversion back to austerity. The philosophy of UBI is that each member of society is given the same amount of money by the government each month – a basic income – which covers what Abraham Maslow described as the essential physiological needs of food and shelter. This is provided to everyone and is not means tested or dependent on your employment circumstances. There have been various interpretations of the scheme, with differing amounts paid to diverse groups.
Rather uniquely, UBI has been sporadically pursued by both economists on the left and right alike. For those on the left, it represents the means to alleviate poverty, reduce homelessness and provide dignity to millions of people who have been denied this during the process of applying for benefits. From a right-wing libertarian standpoint, it gives people freedom of choice, and provides a more efficient way of helping the poor, negating the need for the bureaucracy involved in the modern welfare system. It would also work towards eradicating the ‘welfare trap’, the point at which making more money causes people to lose their benefits and leaves the recipient worse off.
UBI is not a novel idea; it has been around for decades. However, its relevance has only recently been propelled back into the limelight. It was posited by the godfather of conservative thought, Milton Friedman and almost implemented by Republican President Richard Nixon in the 1970s. More recently, it has been adapted as a policy solution for the acceleration of artificial intelligence automation in the world of work, which according to estimates, could claim some 40% of traditional jobs in the next 15 years. In the wake of the current global recession - the like of which many experts claim hasn’t been seen for 300 years - many are turning to the scheme as an alternate system distribution.
There was already a crucial need to repair the social safety net in Britain. The levels of inequality which now exist in this country are exceptional by standards of the past. The share of wealth going to labourers has been plummeting, as more ends up in the pockets of property owners. Resultingly, people now find themselves in a much more vulnerable economic and social position. Austerity and the gig-economy have seen a rise in instability, especially among ‘wage-earners’. This group have suffered disproportionately from the uncertainty of 0-hour contracts, and the instability of an economy, which is hamstrung by eye-watering personal and corporate debt. These are the conditions which pre-existed COVID-19.
UBI has been tried and tested in extensive pilot studies, most notably in Finland, Ontario, Alaska, and North Carolina. In these pilots, 1000 people were provided with an unconditional cash deposit, put directly into their bank account as a basic income. This amount was the same for everyone, regardless of their employment or welfare status, and all members of the community received it. It was provided on an individual basis, so that money was given to every adult, and half this figure was given to children. The programmes ran for 2 years and the results were compared with control groups who were not receiving it.
The results have shown significant consistency. They have revealed a renewed importance of family and the community, demonstrating a fundamental commitment from people to improve their lives. School attendance and performance rates went up, made possible by less stressful family situations which subsequently resulted in an advantageous learning environment. Former Democrat presidential candidate, Andrew Yang, has previously cited studies that showed the IQ of a person drops one standard deviation the moment they have a bill they cannot pay. Moreover, According to Dutch author Rutger Bregman, the residual benefits have caused higher economic growth, lower crime rates, lower health care costs, less infant mortality, less truancy – an abundance of positive social outcomes. Additionally, the money that was invested into society with the UBI was pumped back into the economy through increased consumer expenditure and saved in numerous different expenditures. Studies have shown that, paradoxically, ‘free money’ is the cheapest way of lowering poverty and equality.
UBI is gathering pace worldwide in response to COVID-19. The Spanish government have started a limited roll out of the scheme. A fixed sum, which is not means-tested, has been provided to the one million poorest households in the country. Spanish PM Pedro Sanchez stated that “neither the government nor Spanish society is going to look the other way while our compatriots queue up to eat, something we are sadly seeing now in some parts of the country.” It is also a policy suggestion which Nicola Sturgeon has begun to explore implementing in Scotland.
Lord Alan Sugar was interviewed last week and stated that he saw no alternative for economic recovery other than austerity; this is in neither the publics’ nor the Conservative’s best interest. UBI is anathema to the doctrine of austerity, which starves the economy by cutting funding and public services, and preventing public sector pay increases. A reversion back to austerity would squeeze those already squeezed the hardest. But businesses also inevitably suffer because people have such little disposable income to spend. It is a system which sees our high-street bakeries, butchers and florists replaced with pound-shops, cash-converters and bookmakers. To see the effects of the last recession and the resulting austerity measures, you simply have to compare the present disparity between rich and poor to back in 2008, to see that the void has drastically widened.
Rather, UBI pumps money into the economy, which provides a safety net and dignity for those in poverty. But also provides those getting by, with the added capital to pump back into the economy. This, in turn, creates jobs through which the government can earn money back from taxation, the classic ‘Keynesian Multiplier Effect’. A key measure of success which this scheme depends on is the ‘Marginal Propensity to Consume’ (stay with me here). It is essentially what proportion of an extra pound you would spend if you were given one. The higher the MPC, the more money is driven back into the economy. So those with a tendency to splurge on every ASOS sale, frequent Nando’s, or fancy a couple down the local, would in fact be doing the economy a noble service.
This nonsense, really?
The plethora of criticisms which the idea of UBI invites is characteristic of any revolutionary idea which can offer serious change to the status quo, whether it be universal suffrage, the welfare state, universal healthcare, or the abolition of slavery. All these ideas faced vehement criticism from their contemporaries as fantasies and fundamentally at odds with the received wisdom of the world.
The biggest two criticisms are of funding and of human nature. The first can be characterised by Thatcher’s immortal words that “you eventually run out of someone else’s money”. However, it often seems it is only over the small matters of poverty and equality that the ‘magic money-tree’ stops shaking tens and twenties. For questions of defence and finance, the branches seem evergreen all year round. Whether it’s £205 billion to maintain the Trident Nuclear deterrent, or £500 billion to bail out the very banks who contributed to the recession of 2008. It seems to come down to questions of priority. In this crisis, we need to instead place trust in our people. After all, can they be as irresponsible as our banks?
Hand in hand with questions of financial capacity, are fundamental queries of trust and human nature. How do we know, that under this system, our young adults will not morph into the archetypal ‘welfare kings and queens’, witnessed on the endless stream of poverty-porn TV programmes? Studies have shown that UBI has no negative effect on employment. It won’t make people lazy but will galvanise them to work more. It promotes altruism, dynamism and confidence. It prevents people being chronically insecure and living one pay-cheque to the next. Perhaps the most prudent way to approach this, is to ask yourself what you would do with the money from UBI. Would you stay at home and free-ride? Or would you use it as added security to improve the economic standing of you and your family, or even try something new? Then, apply this rationale to how others would likely act.
Moreover, in addition to the economic and social merits of UBI, for the incumbent Conservative Party, it might be what will win them the next election. Boris Johnson now has the unenviable task of squaring the circle between the financial needs of two naturally incongruent sections of his electoral base. In the 2019 general election, the Tories smashed the ‘Red Wall’ of Labour strongholds in Northern England, gaining vital seats in these post-industrial areas, which had been most ravaged by austerity. If Johnson wants to keep his new friends in the North, any reversion back to the austerity he claimed to end – would be a calamitous miss-step in securing the seats needed to win the next election. UBI would offer the kind of radical change which could help the economy recover, without placing those most vulnerable in an even more precarious position.
Johnson, once a historian himself, might want to take one or two lessons from history.