Folly or freedom? The case for and against a Universal Basic Income
To make good policy, you should have at least a vague notion of what you are talking about. But when it comes to perhaps the biggest reform proposal around, we don’t. I’m talking about a Universal Basic Income, a system of unconditional cash payments to everybody in a given jurisdiction.
The case for a UBI runs as follows: it would reduce poverty, make people healthier and give them more dignity. It would also ease the transition of workers who lose their jobs to robots or artificial intelligence, so they can retrain for different careers. In general, it lets people bridge periods out of work or in bad jobs so they can invest in their own skills and re-enter the workforce at a higher level.
To get out of a dead-end job, say, they might take a “sabbatical” for adult education. Or they could temporarily contribute in other valuable ways, for instance by homeschooling their children or caring for elderly parents.
Now the case against a UBI: it would devalue work as such and reward sloth. Without an existential need to work, why bother?
A UBI would create a new and permanently dependent underclass, a lumpenproletariat of the Fourth Industrial Revolution. And to provide the nectar that feeds these UBI drones, all those diligent worker bees who still have jobs would have to pay unacceptably high taxes.
This clash between cliches is what the debate has deteriorated to. But how would most human beings respond to “free” money? We haven’t the faintest idea.
Many people have tried to find out. Starting with Canada in the 1970s, various local, regional and national governments around the world have run experiments. So far, however, these haven’t yielded much useful information.
UBI geeks were particularly disappointed that a Finnish project that began in 2017 was first changed, then stopped after only two years. It wasn’t very well thought out – 2,000 Finns who were initially unemployed received a modest €560 (Dh2,423) a month and were compared against another group who continued to receive means-tested unemployment benefits.
To see the macroeconomic effect of a UBI, you want to test it on a representative slice of the whole population, not just the jobless. Nonetheless, as imperfect as the Finnish study was, it did debunk one assumption of UBI opponents. Getting unconditional payouts not only increased the well-being of the participating Finns but also made them slightly more likely to find jobs. In short, they got healthier but not lazier.
Now there is excitement about another research project getting started in Germany. Almost 2 million people from all walks of life have already applied to take part. Starting in November, social scientists will select two groups.
One, consisting of 120 people, will get €1,200 a month, starting next spring and lasting three years. They will be compared against a control group of 1,380 who will be monitored but won’t get any cash.
The twist in this experiment is that the organisers will look for “statistical twins”. So if among the 120 there is a 25-year-old pianist who lives in an urban metropolis, has five years of higher education and good health, she will have a doppelganger in the control group. So will the 40-year-old plumber from the countryside, the gig worker delivering Amazon packages, and so on.
By comparing these statistical twins over several years, says Juergen Schupp, the sociologist who leads the project, it should be possible to single out just the effects of the payments on people’s lives.
The project is a step in the right direction, and a reminder that policymakers in poor and rich countries alike need to keep an open mind. We are in the midst of a digital transformation that will destroy many old jobs and create many new ones, and we need structures to help people adapt.
We are in a digital transformation that will destroy many old jobs and create many new ones