Introduction

Universal Basic Income ('UBI') is a proposed system which is supported by many different people and groups for a number of different reasons.  In essence, it is a regular, unconditional payment given to everyone on a regular basis, perhaps every month.  It is unconditional, so everyone receives it regardless of their income, wealth or employment status.  The proposed details vary, but 'everyone' often means every adult citizen living in the country, or every registered voter; child citizens may receive a lower amount.  The amount is, in concept, enough to give people a 'basic income' - enough to live on, but not enough to indulge in expensive habits - which is the objective of the 'living wage' in the UK.

UBI guarantees a basic level of financial security for everyone, and ensures that nobody 'falls through the cracks'. It can support people doing unpaid work, such as caring for children or disabled or elderly relatives. It can support people as they set up their own business, or try writing a novel.

UBI is, in essence, a tax reform, but it has significant implications for social security.  It can be seen as a natural development of the welfare state, which removes many of the complexities and injustices of the present system while providing better care for people and boosting the economy.

Various forms of UBI have been operated in recent years, and the results are in the public realm, so there is a substantial body of real world experience which can inform the detailed implementation in any given society. To understand UBI more clearly, there are perhaps three basic questions.

  • How would UBI be implemented?  It can be done in a 'big bang' approach, but this would cause rapid changes which many people and many organizations would be unprepared for, so it would probably be better to phase in UBI over some time to allow the adjustments to take place - maybe ten years, but this has the disadvantage that it would not then take place within the lifetime of one UK parliament. However, many of the required reforms make sense whether or not you are aiming to implement UBI in the long run, so it would be possible to start the formal process from a long distance down the road from where we are today.
  • What would a society operating UBI look like?  It would change a number of basic economic assumptions, and part of the benefit would come from the social and cultural changes which it would make possible.
  • What are the advantages and disadvantages of UBI?  If we compare with the current system of taxation and benefits in the UK, how does a UBI system differ?

There are a number of common objections to UBI, which are mostly answered in the links below.

How To Get There

Some of the concerns about UBI relate to the chaos and disruption which implementing UBI is expected to cause, while other concerns relate to the political difficulties of persuading a political party to promise and then implement it - and, therefore, the difficulty of persuading enough people to vote for it (or not vote against it) in order to make this possible.

There are two possible implementation timescales, and two possible strategies: it can be implemented in a single step or as a process; and it can be adopted explicitly as a chosen goal (as the welfare state was in the 1940s) or implicitly as a logical (and desirable) development of principles and strategies which have been already accepted in essence, in which case the idea of UBI may never actually be discussed.

Implementing UBI can be compared with implementing universal suffrage: in some countries, it happened in many small stages; in others, it happened in a single step.  Stable countries tend to develop by evolution rather than revolution, so the progression of suffrage developed by evolution in many countries.  While there were inevitably many bitter and complicated arguments, the process itself is very simple: you allow another group of people to vote, see how it goes, discover that the world has not fallen apart, and then start to consider allowing another group to vote.

In the UK, every political party recognizes the need to reform the Social Care system - and has recognized the need for some years.  But nothing has actually been done about it, partly because the system clearly needs much more money, which creates great political difficulty, and partly because nobody can agree on the changes which should be made.  Any system based on means tested benefits will create a poverty trap which discourages people from doing what you want them to do, and removing benefits from those who need them only creates suffering and crime: the only way to effectively and ethically motivate people to work is by giving them income which will not be taken away when they earn money for themselves - and as soon as you recognize that, you are on the way to some form of UBI.

What It Might be Like

Different UBI proposals would, of course, produce different outcomes, so in looking forward to a society operating with UBI we need to make some assumptions.  Do feel free to question these, but we need to start somewhere.

UBI would not replace all benefits, although the introduction of UBI would enable them to be reviewed.  Child Benefit would become the child's UBI, paid to the child's parent or carer; other benefits would be paid on top of the UBI.  Because you are never paying people on the basis that they are not working, the 'benefit cheat' would be no more, and all the systems required to detect such people would also disappear; the cost of prosecution and punishment for these people would also go.

In the UK, we have the idea of a minimum wage, which results in a minimum rate of hourly pay.  We also have a tax-free allowance, which is the amount an individual is allowed to earn in a financial year before being taxed.  UBI would replace both these systems: the state would give each individual the minimum wage, so employers could then reduce the salary they pay to the difference between the minimum wage and what they would have paid before UBI was introduced.  This reduces the wage bill, making it easier to employ people - especially  those who are not paid a great deal, which also reduces the barrier to employment for those who currently struggle to enter the job market, such as disabled people.

Individuals would then pay tax on every pound they earned.  Along with UBI, it would make sense to reform the tax system: we needed to use distinct tax bands when tax was calculated by hand, but these days it is all done by computer and we can avoid the distortions caused by the banding system.  So there is no need to start collecting tax at 20p in the pound: the tax rate could be something like 1p in the pound for the first £100 in the year, 2p for the next £95, 3p for the next £90.  For various reasons, the obvious way to go is with a sigmoid curve, where the rate increases slowly at the start and 'end', and more steeply in the middle.  Because you have abolished the annual tax-free allowance, you can easily calculate tax on a monthly basis, so you would never be in a position where a significant amount of tax was owed at the end of the tax year.

The cumulative effect of the changes introduced by or enabled by UBI means that both the cost of living and the overall income for a large part of the population would be largely unchanged by the introduction of UBI.  What would change is the increased security of income, and a far simpler system, so people can plan changes to their lifestyle with confidence that they will not be caught out by unknown complications.

Advantages and Disadvantages

One fear about UBI is that people will pocket their income and sit at home watching TV.  There have been numerous tests, and they have all shown that this does not happen in practice.  If anything, employment levels go up, because employers find it easier to employ workers at low wages, and workers can afford to take low paid jobs.  Also, self employment goes up, because the security produced by UBI encourages people to start their own businesses: if you don't need significant capital investment, you can afford to start a business which makes little profit at the beginning, and learn how to grow it.

Another fear is that UBI will be impossibly expensive to implement, but - as pointed out above - the introduction of UBI will inevitably introduce other changes, which make the project essentially cash-neutral.  And, if you add the benefit of greatly simplifying the tax and benefits systems, these become far less expensive to operate, which enables you to save money on administration and employ those people to do useful things instead.

The disadvantage of UBI, in the eyes of many people, is that the lives of the citizens are more closely tied in with the activity of the Civil Service, but as most adults are already paying tax to the government each month or receiving some form of benefit - or both - the net effect of UBI is likely to decrease the interaction of most people with the Civil Service, rather than increase it.

One advantage, or disadvantage, depending on how you see it, is that low paid jobs would no longer pay enough without UBI, so it would no longer be economic to employ illegal workers - people with no right to work in the UK, who would not receive UBI: the 'grey' economy of cash in hand and no tax paid jobs, using people who cannot get proper jobs, would no longer be economical, as legitimate employers would be able to massively undercut them.  This would not immediately force all employers to pay tax and operate legally, of course, but the benefit of not operating legally would be vastly reduced.  The grey areas of employment would disappear, leaving behind the legitimate employment and the clearly illegal places which operate with slave labour and can generate enough profit from their workers.  The disappearance of the grey economy would make the distinction between these two areas of activity far more obvious, which would make it far harder for the criminals to operate undetected.

Links

[Brian:]  Here are some interesting links for your consideration:

Universal Basic Income Explained – Free Money for Everybody? by Kurzgesagt [Video] https://www.youtube.com/watch?v=kl39KHS07Xc
On the Economics of a Universal Basic Income https://www.intereconomics.eu/contents/year/2017/number/2/article/on-the-economics-of-a-universal-basic-income.html
Furlough was a radical success. Now let’s talk about a universal basic income  by Zoe Williams (Guardian) https://www.theguardian.com/commentisfree/2021/jun/01/furlough-universal-basic-income-covid
Is Universal Basic Income The Key To The Future? | Answers With Joe [Video] https://www.youtube.com/watch?v=c4W8p3b2p58
Why we should give everyone a basic income | Rutger Bregman | TEDxMaastricht [Video] https://www.youtube.com/watch?v=aIL_Y9g7Tg0
Universal Basic Income | Pros and Cons | UBI  [video] https://www.youtube.com/watch?v=WJmnoL3dAcg
UBI Labs: https://www.ubilabnetwork.org/  [Brian:] I found this but haven't explored it thoroughly - be my guest, though - you're welcome.  It could be utter rubbish.  Hopefully it's a bit more than anti-capitalist "Occupy Wall Street" propaganda and rhetoric! So,ohwn no guarantee of quality or real relevance - but I'm interested in what you think?  [Paul:]  I have had a quick look, and what I have seen so far is very sensible and comprehensive.

[Brian:] You will no doubt have noticed how much of the above material is dated around 2015 - 2017 - and not much later.  There was a public vote in Switzerland around that time - but UBI didn't get publicly approved.  They went too quickly and tried for a "Big Bang" approach - it rightly got dumped

Personally, I don't in fact think that a conventional approach to UBI would work sufficiently well - we need to do something else much more radical.

I may well say something against "naive" UBI - or "free money" type proposals. These are unlikely to gain widespread acceptance or political support. Reason? It's too much like turkeys voting for Christmas - or the middle-classes voting for their own disruption and poverty. Instead, the ethic has to be to allow greater freedom, while at the same time recognising _everyone's_ claim to exist above a certain level. Poverty is always relative - so technically, it can't be eradicated. Next best thing is to universally provide a basic level of social support and freedom from hunger/starvation, basic level of education, basic healthcare. There will always be disadvantage in human-defined society

I might hint around what I think might work - but then again, I'm no economist. Perhaps we need to shake the ideas up a bit more?

 

[See also: Money]

 

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Comments

  •  Hi Paul,

    This could be the basis for an exciting and potentially viable proposal for pursuing a UBI-style economy.   Yes, this is primarily a tax reform - but it would have enormous ramifications for the entire economy.   It could offer all sorts of ways of rationalising and simplifying how the economy works.   It could hugely liberate people's lives - as long as the maths works out.   For example, I like the sigmoid curve idea for an adaptively continuous tax rate.

    One way to sell this scheme to voters might be to make a radically adaptive tax rate possible, where the maximum % is bounded.  Everyone would be taxed on their earned income so that individual low-income earners are taxed as lightly as possible.   The hope here is based on making this work for both right and left-wing voters - a genuine win-win.

    Assuming that it works out economically, the big problem is how long a scheme like this would take to implement and how that could be implemented across multiple Parliaments with multiple parties potentially in power.  Although it sounds intractable, the Welfare State reforms giving rise to the NHS were implemented in a single parliament, perhaps showing that immense change is possible, if everyone can broadly be seen to benefit with little downside.

    Interesting.

     

     

  • My thoughts following our Zoom debate yesterday:

    On the face it, Universal Basic Income [UBI] sounds like a great idea. But the implementation would be problematic, and it is not clear that it would ultimately work as a social and economic structure.

    We already have Benefits, such as Unemployment Benefit and Disability Living Allowance, which have now been combined into Universal Credit [UC] - not without some painful teething troubles along the way. (I believe that Statutory Sick Pay is still separate). Does this not cover most of the ideals of UBI? UC is supposed to be designed so that it is always more profitable to work (though this assumes a Minimum Wage). It is supposed to stop people starving and keep a roof over their heads, though, many recipients find that they have no money left several days before the next payment even without misusing it on alcohol or drugs. If we had UBI, how much would it be? Just enough to stop people starving, or enough to afford a car and holidays as well? (In other words, how far up Maslow’s Hierarchy are we willing to finance people’s lives?). The people who currently slip through the net include homeless people and asylum seekers: are we going to include them? Will UBI really be not means-tested at all; if not would even Richard Branson receive UBI? And of course, we have the issue of where all the money will come from. If it comes from taxes, we would be giving with one hand and taking with another – would UBI itself be taxed? And before anyone says “Cut defence spending”, remember that defence spending takes up less than 3% of the national budget, whereas social security already accounts for over 20%. Maybe the idea is that if we pay UBI we will not be paying benefits, but surely to pay everyone UBI would cost more than the current benefits bill.

    The ideal behind UBI sounds similar to the Marxist slogan of “From each according to his means, to each according to his needs”. Proponents of UBI may deny that it is Marxist in principle, but it’s opponents will certainly accuse it of being so – especially those who would also say that all Benefits including Free Healthcare are Marxist or at least socialist. That is not a problem in itself; I have more respect for Communism than Fascism because Communism at least set out to build a better world by egalitarianism. But of course it failed because attempting to modernise via state control or by syndicalism was unable to generate an improvement in people’s standard of living. For all its potential for injustice, no system other than Capitalism has been able to create wealth, for ordinary people as well as the very rich. The Chinese have bought into that, and so have the Russians, though at least the Russians don’t have the cheek to still call themselves Communist as the Chinese do. I am not supporting Laissez-Faire Capitalism of course; to minimise injustice there needs to be a level of state control that would be labelled socialist by the Rees-Moggs and Sajid Javids of this world.

    The relevance of this to an economy centred around UBI is that such a system must pay for itself, and so enough people would need to want to earn enough money in addition to the UBI that they are prepared to go out and generate wealth. How many people would be prepared to work hard and take risks if UBI removed the necessity of work? Some probably, but enough? Who will want to do the low-paid but necessary jobs (that cannot be replaced by AI), mainly in service and care work, if they could get a decent living from UBI without having to do any work? I spent the bulk of my working life in the NHS, and met many wonderful selfless people for whom money was not their driving force: but I was also painfully aware that we relied heavily on labour from poorer countries overseas, sufficient to give me the impression that most white English people don’t want to do hard and stressful work for low pay (for many years I was the only white male nurse among thirty or so in the local Mental Health Team). Hopefully in a UBI society many people will be motivated to find work for the extra money and the self-fulfilment, but the greater the funding that they get while doing nothing, whether it be benefits or UBI, the greater will be the proportion that will not. It would be great to think that they would spend their time on mind-improving pursuits or voluntary work, but in reality, all too many will either got out and get involved in crime, or spend their days in front of screens being entertained (pretty much a George Orwell predicted).

    In short, it could be a model for a totally re-organised society, but the transition could be painful, and the economic and social results unpredictable. It is rather like the Esperanto debate a few decades ago: some well-meaning people thought that it was a great idea, but most people preferred to stick with what they had despite its flaws and certainly weren’t going to put in any effort to change.

    • Adrian,

      Many thanks for this response.  It articulates many of the fears and concerns people have about UBI.

      I have updated the article with more detail - mostly taken from the information provided in the links - which, I think, addresses most of your concerns.

      One interesting point is the definition of 'universal'.  Clearly, it does not literally mean 'universal': it would only apply to a single country.  And, within that country, there is an opportunity to negotiate the exact scope of the scheme: all citizens, all citizens normally residing in the country, all residents with the right to work, and so on.  But, within that precise scope then, yes, it would include everyone, including the super-rich.  In exactly the same way that today we give the super-rich the same tax-free allowance we give to everyone else.

      But there are actually very few super-rich people, so the cost of giving them money is comparatively small, and the saving from not administering eligibility checks, and not investigating and not prosecuting people who make invalid claims, would be a significant saving, both in finance and in human effort.  As the calculations in the links demonstrate, a UBI scheme would not cost the country overall any more than the current system, and would (I believe) deliver significant benefits.

      I'm not sure why you believe the transition to UBI would be painful?  The process can be taken in stages, each of them no more significant than the government introduces with the budget each year; and if it was part of a planned transition, individuals and businesses would have several years in which they can plan for and adjust to the new economic environment.

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