Universal Income Isn’t the Utopia It’s Made Out to Be

Universal Income Isn’t the Utopia It’s Made Out to Be

The long-standing failures of the American welfare state have left politicians and policy wonks searching desperately for answers, including a willingness to consider radical changes to how we as a nation care for the poor.

With little to show from billions in spending for traditional social programs, we do need to reconsider how we will help the vulnerable. However, “thinking outside the box” has brought forth a number of terrible ideas like the “Green New Deal” and federal job guarantees that would be disastrous if implemented. In my view, the false promise of a Universal Basic Income is the worst idea of all.

Universal Basic Income (UBI) is sold as a way to nearly eliminate extreme poverty. But UBI is not a solution to poverty. Putting philosophical concerns aside for the moment, at its core UBI is an extremely inefficient way of giving money to poor people.

Under UBI, everyone receives an unconditional cash transfer (typically around $1,000 per month). By making no distinction between the truly needy and those with some means, only 10 percent of the money will go to those in the bottom 10 percent economically.

Another dilemma UBI proponents face is the fact that our current welfare system is specifically designed to aid people in untenable circumstances, such as the disabled or single parents with children.

If a UBI system is intended to replace the existing welfare state (any honest proposal is designed as such given the exorbitant cost of trying to layer UBI on top of the current system), one of two things must happen. Every recipient must be given enough money to cover costs for the neediest. Alternatively, UBI amounts must be set at a more sustainable level, which would reduce payments to those with more dependents, disabilities, and other factors.

The reality is that neither of these choices are acceptable. As a result, we would be forced to replicate much of the existing bureaucratic welfare structure to differentiate UBI payments based on need, which offsets much of the basic justification for a UBI in the first place.

Apart from its practical limitations, there are also broader political and philosophical implications of UBI.

Proponents argue that giving people money without conditions will free them to pursue other more meaningful and productive ways to spend their time. This, they say, will pay both individual and societal dividends. But there is little evidence that people typically spend their free time productively. If anything, the recent trend for lower-income Americans has been to work fewer hours while spending more time watching TV, relaxing, or sleeping. This sad reality has emerged only in the last generation. As recently as 1979, those in the bottom 20 percent of income typically worked longer hours than the top 20 percent of earners. This should dispel the fantasy that UBI will boost the economy.

There is an abundance of evidence that getting and holding a job provides many benefits for workers, including positive impacts on self-esteem and companionship. The converse is also true – there is strong evidence that being jobless is associated with many negative outcomes, including poorer health and less well-being.

While the relationship between UBI and increased unemployment is uncertain, given how little it has been tried, there is good evidence that increasing government benefits reduces labor force participation substantially.

More troubling, the data suggests there is a good chance that UBI would exacerbate income inequality by widening the gap in hours worked between low and high earners even further. In fact, men with less than a high school education work 37.5 hours per week on average compared to more educated men’s average work week of over 43 hours. And this time gap is not filled with education or other forms of work, but is instead an extra six to seven hours per week spent watching television or playing sports.

We cannot let the false promise of UBI absolve policymakers of their responsibility to address America’s growing issues related to cost of living and joblessness. The danger of UBI is that it threatens to trick an entire group of Americans into thinking they can do no better and should be satisfied with a subsistence income and meager existence. Rather than providing hope and opportunity, UBI is a reckless and expensive waste, acting as a ceiling rather than floor for the millions of people fooled into accepting a standard of living akin to permanent poverty.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.