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Have you ever wondered what it would be like
to go back to the 1970s soviet country, and

return to our times with then-popular maxim:
“Down you lie or up you stand, either way

you'll earn a grand”?
Every citizen in our country would have full-time
employment and a fixed salary regardless of

the results of their work, and regardless
of whether they would try their best or not.

But perhaps we should go even further than
that.

Let the government pay regardless of employment
status.

From then on, you would not have to worry
about your day-to-day survival.

You could spend your time on your education
and development, without sacrificing it to

make money.
You would not have to accept the first job
offer that came your way.

You would be able to choose the best one instead.
Seems encouraging, does it not?
Is it a serious solution to the problems of
the modern world, or merely some socialist

utopia?
Perhaps we bear witness to an impending revolution
triggered by an economic proposal gaining

in popularity among experts at the Silicon
Valley and politicians in the Nordic countries,

that is the Universal Basic Income (UBI).
Several countries have already experiment
with “free money”, while governments face

changing labor and strained welfare systems.
Let us look closer at the definition, advantages,
and disadvantages of the UBI.

What is the Universal Basic Income?
It is a simple idea: Let us give a subsistence
minimum income for all citizens, making their

day-to-day strife for survival a thing of
the past.

Note that the term “subsistence minimum”
is by itself very unclear, with wildly varying

levels proposed by its advocates.
It is even referred to as the “extreme poverty
line.”

It accounts only for the needs that cannot
be postponed.

Consumption below this level leads to biological
wasting and is life threatening.

The UBI idea has been known and discussed
for decades, and it has even been practiced

temporarily.
The UBI itself is a regular, equal, and non-returnable
cash benefit that is received individually

by all citizens regardless of their material
and occupational situation.

It is paid with public money.
Other terms synonymous with the UBI include:
state bonus, national dividend, social dividend,

citizen's dividend, citizen's wage, and
universal benefit.

The idea is that the state transfers the money
to everyone without any conditions at all.

Not only the largest or the poorest families,
immigrants, students, or single mothers pocket

the money.
Everyone does.
You only need to breathe to get your share
of the public pie.

We have mentioned that it is not a new idea.
It was already discussed in the 1940s in Great
Britain (it was then referred to as “social

dividend”).
The concept was abandoned, however, in favor
of the classical welfare state ideas of conditional

transfers addressed to the poorest.
Another opportunity for its implementation
resurfaced in the United States era of Nixon

and Carter.
There were even bills ready to be passed,
but once again they were cast-off in Congress.

Only rich in natural resources and sparsely
populated Alaska managed to implement something

roughly similar to the UBI.
Some classical liberals were interested as
well, like Milton Friedman with his “negative

income tax.”
Although, he envisioned it as a way to free
the nation from the burden of social spending.

There were also some recent experiments with
the UBI.

During Finland's two-year basic income trial
which ended in 2018 some Finns were getting

€560 a month.
Some African countries as well as Canada's
Ontario made similar attempts.

The latter case is, however, off the map,
as the UBI proposal was abandoned after change

of the political guard.
The UBI turned out to be too expensive.
Another such program was rejected by the Swiss
people in a referendum.

The Italian government will implement basic
income as high as €780 per person and up

to €1,330 per family in April 2019, and
a trial run will be launched in Germany a

month later to check how the UBI affects some
of its citizens.

German government is currently recruiting,
expecting to select 500 volunteers for the

study.
Notice that conditions tried in these experiments
are different than those of the real UBI.

People adapt when they are told: “We will
give you free money for a year to try it out.”

Aware that there is a time-limit for the money,
they are inclined to keep some other sources

of income.
They respond differently when they hear: "We
will give you free money indefinitely.”

It is extremely difficult to predict people's
behavior in changed conditions when we base

our knowledge solely on their declarations.
From the standpoint of philosophy of science
alone, microscale experiments fail us as a

tool of grasping most macroeconomic and macrosociological
effects such as, among others: increase in

the share of wages in GDP, increase in the
effective demand in the economy, dynamics

of private investment or economic growth,
or changes in employment rate.

These changes have a significant impact on
the individual decisions of people.

In order to observe and analyze such effects
we would need an experiment on the scale of

a whole country and lasting longer than all
previous trials.

The previous trials cannot tell us reliably
whether money paid to everyone will support

laziness or creativity.
The renewed interest in the UBI is motivated
by the threat of losing livelihoods by those

who could be pushed out of the labor market
by globalization or automation.

Automation may be seen as a boogeyman used
as a pretext for the UBI.

Some fear that the development of robotics
might make human work obsolete or less needed.

The UBI advocates argue that in such case
it might be necessary to update the ways in

which the society distributes income.
According to Michael Munger, transaction costs
in the economy of tomorrow will tend to zero,

making basic income necessary.
Let us consider closer this worrisome prospect
that prompts us to look for other ways of

income distribution.
What are the arguments for the UBI?
The pros
The Basic Income Europe Fanpage on Facebook

gathers more than 41 thousand enthusiasts.
Among the greatest supporters of the UBI are
Silicon Valley's technical titans like the

head of Tesla Elon Musk and the head of Facebook
Mark Zuckerberg.

Ray Kurzweil, futurist and engineering director
at Google, is very hopeful about the UBI as

well.
According to the famous British entrepreneur
Richard Branson, the UBI “is really important”

and “that it will come about one day”.
In 2016, he said that “inequality is probably
the biggest prohibitor that we face to creating

a sustainable and equitable future for all
of us”.

What are the advantages of the UBI according
to its advocates?

Getting a job – more and more often a temporary,
unreliable, “junk” job – is associated

with a huge opportunity cost.
Besides having to pay income tax, when you
become employed you lose the social benefits

you were getting earlier.
As you are required to exert yourself working,
you may earn scarcely more money.

In contrast to many existing social benefits,
the UBI would be much more transparent and

there would be no need to give it up after
getting a job.

The UBI could lead to a reduction of poverty
rate and of inequality and insecurity.

Money for nothing could give some leeway to
the employees whose job is threatened by automation.

It would increase their social security by
reducing their dependence on the labor market

situation.
The UBI is considered to be one of the simplest
tax models that can reduce bureaucracy.

It could help simplify taxes as well as reduce
the red tape associated with circulation of

tax documents.
The UBI could remove the adverse incentive
for mere formal adherence to the administrative

requirements needed to obtain specific benefit.
Defrauding disability benefits with fake documents
could become a thing of the past.

There would be no need for bureaucrats to
control whether any conditions were met by

people receiving benefits, because basic income
would be unconditional.

Thanks to the UBI, many professionally inactive
people could start their own small businesses.

People would no longer have to accept the
first available job offer, and this could

increase their “socioeconomic independence”
and bargaining power on the labor market.

They could take time to look for a job, invest
in their education and development, set up

their own business, or work less and use the
time for other purposes.

The main arguments made by the UBI's advocates
are ethical ones.

For them the arguments pertaining to the economic
efficiency are not as important.

Social and ecological justice and the elimination
of poverty remain their primary concerns.

As they say: Giving money to everyone unconditionally
puts moral pressure on people to act responsibly.

The UBI would increase everyone's individual
human potential and social capital.

As some studies show, feelings of insecurity
reduce cognitive ability.

The cons
But are there any disadvantages and risks

associated with the UBI?
The biggest objections to the UBI are its
costs and impact on the labor market.

Even conditional social benefits put a considerable
burden on the budget.

Moreover, redistribution is a rather flimsy
foundation for human dignity.

The UBI could weaken employees' motivation
to work, thus reducing their productivity.

If the UBI discourages people to work, then
how will society produce wealth?

From the perspective of employers, the UBI's
harms their interests in two ways: it increases

wage pressure put by the employees, making
them less inclined to work at the same time.

In addition, as employers usually earn higher
incomes, they would also be particularly affected

by the tax progression.
Another argument against the implementation
of the UBI is the lack of observed negative

impact of automation on employment.
When some jobs are made obsolete by automation,
other professions, often more pleasant ones,

are created in their place.
Similarly, far from being a job destroyer,
globalization is a job creator.

Concerns about automation leading to rising
unemployment seem unfounded.

In the last century, technological progress
has created more jobs than it has eliminated

– and the scale of the progress was historically
unprecedented.

An increase in the wealth of society increases
its demand for more luxurious services, such

as those fulfilled by artisan chefs, craftsmen,
artists, interior decorators, or private teachers.

Among the least vulnerable to automation are
social workers, choreographers, doctors, psychologists,

computer system analysts, anthropologists,
and archaeologists.

The widespread implementation of the UBI could
also lead to increased migration to countries

with the highest basic income, which in turn
could further increase the tax burden on those

who work and produce wealth.
Because economic migration is a significant
threat to the UBI, ensuring effective protection

against people coming from abroad only to
receive the basic income would become a necessity.

As such protection has its own cost, the uncontrolled
access to basic income could further threaten

the financial security of the country.
Designed as a response to already ineffectual
social welfare systems and overregulated labor

markets, the UBI itself only furthers government
intervention in the market (and requires more

taxation).
Besides, one of its more serious drawbacks
is that once implemented it becomes very difficult

to withdraw from.
The result could be a stagnation that lingers
on until the complete shutdown of the economy.

Summary
Let us summarize our knowledge about the UBI.

In this socio-political model of public finances,
the government unconditionally pays every

citizen an equal and lawfully defined amount
of money regardless of their financial situation.

The arguments of the supporters and opponents
of the UBI focus on improving the quality

of life.
However, both sides have different ideas on
how this goal can be achieved.

For the UBI to make sense at all, two fundamental
assumptions must be met simultaneously.

1) The UBI must be high enough to ensure economic
existence for all.

If it is too low, it will become just another
way of pumping demand on the market.

2) In order for basic income to actually influence
the economic emancipation of citizens, it

also must be unconditional.
In other words, people simply have to be entitled
to it.

The fulfillment of both of these conditions,
however, will not make the defects and threats

we have mentioned disappear, nor make certain
that the BDP is the solution that is needed

or most appropriate.
The author of the script is Justyna Ziobrowska
from the University of Wrocław

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Universal Basic Income | Pros and Cons | UBI

413 Folder Collection
王惟惟 published on June 4, 2019
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