The Wisdom of a Universal Basic Income

This summer, the Wall Street Journal published an article claiming that a universal basic income would be a “calamity” for American society. The author’s warning was clear: “increasingly, young unemployed men are perfectly content to stay at home playing video games.”

Why, then, should we fund the gaming habits of lazy millennials with unconditional welfare payments? This kind of objection is hardly new; a quick Google search will show that universal basic income has been described by its critics as “unconstitutional,” a “utopian fiction,” a “terrible idea,” and perhaps worst of all, “corporatist totalitarianism.”

For those who have missed this particular political debate, a universal basic income (UBI) is a form of social security that would guarantee the unconditional and automatic payment of a standardized income to all qualifying individuals. That’s right; everyone would be paid the same social security provision, in cash, no matter who they are. Rich, poor, unemployed, married, single, old or young; everyone would be entitled to the same monthly benefits.

While no country has ever adopted a full UBI, Finland launched Europe’s biggest ever UBI pilot in January 2017. Over a two-year period, 2,000 Finnish citizens will receive an automatic monthly payment of €560 ($668, or £515). Similar pilots are being launched in Barcelona (Spain), Utrecht (the Netherlands), Glasgow (Scotland), Ontario (Canada), and Oakland (United States).

Arguments for UBI are ideologically diverse and come from across the political spectrum. Some argue that UBI would eliminate poverty, others that it would take power away from governments and return it to individuals and communities, while others claim that a UBI would redefine power relations in precarious labor markets, so as to make employment nearly voluntary. Most recently, UBI has been proposed as the solution to the unemployment crisis that will inevitably result from rising automation.

There is no denying that UBI is a radical political idea. It is hardly surprising that ever since its arrival to the mainstream political agenda, it has often been met with an incredulous stare. Classic skeptical rejoinders include: “Won’t that disincentive people from working?”, “Doesn’t that encourage laziness?” and “How could we possibly afford to fund a welfare program like that?”

The research shows that a UBI could, in fact, produce better-incentivized, happier citizens, and improve the levels of trust and cooperation between them.

These objections, to their credit, seem serious. Serious enough, if true, for UBI to be dismissed as just another utopian political fantasy. Before giving up on UBI, however, we decided that we would inspect some of these psychological claims a bit more carefully. What we found is that many of the assumptions informing these objections turn out to be empirically false. The research shows that a UBI could, in fact, produce better-incentivized, happier citizens, and improve the levels of trust and cooperation between them.

Are critics of UBI right to predict a future marked by laziness and video games? The short answer is no. The worry is that people receiving UBI will have less incentive to work, or find work, because they will receive enough money to live a decent quality of life.

There are several problems with this argument. First, as Abraham Maslow famously outlined, people have high-order needs, such as social belonging, esteem, and self-actualization that cannot be solely fulfilled by regularly receiving basic income. This explains why the behavioral data from pilot studies on UBI in India and Namibia have shown increases in hours worked and entrepreneurship.

Further, a UBI would likely give people the financial security to be more creative and less risk-averse with their entrepreneurial projects; which is, of course, important for the vitality of any economy.

Additionally, a UBI would, by definition, actually remove one of the major existing incentives for not working: unemployment benefits, which are specifically paid to unemployed citizens. In the United States, unemployment benefits usually equate to 40-50 percent of an individual’s previous monthly wage before unemployment. A UBI would remove this incentive not to work. Insofar as it would be paid unconditionally, there would be no extra subsidizing incentive to opt for unemployment over work.

Next, the evidence seems to suggest that a UBI could make us all happier. In fact, the three defining features of UBI—universality, basicness, and income—have all been linked to higher subjective well-being.

A UBI would likely make us happier, and there is strong evidence to suggest that an individual’s subjective well-being is important for their productivity.

UBI is universal: every citizen receives an equal amount of income. UBI, then, would promote actual financial equality by removing poverty traps, promoting greater access to currently exclusive jobs, and improving employment standards. Importantly, studies have found a positive relationship between the subjective well-being of a population and perceived financial equality. This means that a welfare policy that treated citizens as financial equals would likely increase a country’s general levels of subjective well-being.

UBI is basic: it provides enough for people to fulfil their basic physiological needs, such as food, water, sanitation, shelter, and clothing. Interestingly, while studies have shown that there is strong correlation between income and subjective well-being in low-income groups, this effect strongly diminishes in high-income groups. A UBI, insofar as it covers only an individual’s basic needs, gets this relationship right. It covers basic provisions, but it does not spend large sums on welfare benefits that barely make recipients happier.

Finally, UBI would provide its citizens with income, free from government intervention. One cross-country study suggests that levels of perceived financial ‘free choice’ is positively associated with subjective well-being. Countries with non-interventionist economic policies like UBI, which promote public free choice, tend to have higher mean levels of individual subjective well-being.

So, a UBI would likely make us happier, and there is strong evidence to suggest that an individual’s subjective well-being is important for their productivity. A meta-analysis found that individuals with high subjective well-being are more successful across multiple life domains including friendship, income, marriage, health, and crucially, work performance. Additional studies have found that better emotional and physical well-being increases productivity in workers. All of this suggests that UBI has the potential to increase a country’s subjective well-being, and, in doing so, it could also increase the productivity of its citizens.

Finally, a UBI would likely make for a more inclusive and cooperative society. First, it would go a long way to reduce the social stigma associated with accepting social security. Benefits stigma is a real problem. For example, researchers from the University of Kent ran small focus groups among 2,423 welfare claimants in the UK and found that 46 percent of participants reported experiencing institutional stigma, a stigma resulting from the process of claiming benefits. Interestingly, social research from Germany has found that when unemployed welfare recipients are re-classified as ‘retired’, rather than ‘unemployed’, reports of stigmatization decline and recipients report feeling significantly happier.

These kinds of results have profound implications for UBI as a vehicle for mass social re-categorization. By granting everyone an unconditional income, UBI would alleviate existing stigmatizing social divisions caused by means-tested welfare systems because, in effect, all welfare recipients would be re-classified from ‘stigmatized’ to ‘normal’.

Hardly a utopian fiction; but rather, a smart, evidence-based policy tool.

This is particularly important because socioeconomic research has found that there is a correlation between social inequality and trust, as well as other measures of social capital, such as cooperation. For instance, in their well-known book The Spirit Level, Kate Pickett and Richard Wilkinson found that there is a strong correlation between the percentage of people in a country who agree with the statement: “Most people can be trusted,” and the levels of income equality in that country. Recorded levels of trust were highest in highly financially equal countries, like Sweden and Denmark, and lowest in countries with lower levels of financial equality, like Portugal and Singapore.

How does this relate to UBI? First, the destigmatizing effects of a UBI would help create a society of perceived equals, with fewer government-enforced divisions. Moreover, UBI would promote actual financial equality and increased public perceptions of equality. All of this gives us good reason to think that a UBI would make us feel more socially and financially equal, and as a result, more willing to trust each other.

Any policy-maker concerned with improving social capital (which they all should be) must take note of how a universal welfare system could make us more trusting and cooperative. Quite simply, a more inclusive society is a better society.

For sure, a UBI would have a profound behavioral impact at the individual and societal level. Despite what the fearmongers might predict, unconditional cash handouts would not compel us all to give up work and switch on the Xbox. Much more likely is that a UBI would produce more inclusive societies with less stigmatization, greater social capital, and happier, better-motivated citizens. Hardly a utopian fiction then; but rather, a smart, evidence-based policy tool, which could be crucial for solving our future employment problem.

Further Reading & Resources

  • Baumberg, B., Bell, K., Gaffney, D., Deacon, R., Hood, C. & Sage, D. (2012). Benefits Stigma in Britain. Turn2us. (Link)
  • Hetschko, C., Knabe, A. & Schöb, R. (2012). Identity and wellbeing: How retiring makes the unemployed happier. VoxEU.org (The Centre for Economic Policy Research). (Link)
  • Pickett, K. & Wilkinson, R. (2010). The Spirit Level: Why Equality is Better for Everyone. London, UK: Penguin. (Link)
  • Howell, R. T., & Howell, C. J. (2008). The relation of economic status to subjective well-being in developing countries: a meta-analysis. Psychological bulletin, 134(4), 536. (Link)
  • Diener, E., & Biswas-Diener, R. (2002). Will money increase subjective well-being? Social Indicators Research, 57(2), 119–169. (Like)