Universal Basic Income (UBI) Trials in England: Pros and Cons of a Transformative Social Policy
Universal Basic Income (UBI) has been in the headlines this week, as two “micro-trials” are being planned to place in England. Unfortunately, neither of those trials will be in Yorkshire, they’ll be run in central Jarrow (in the north east) and in East Finchley (in northern London).
This is the first time trials like this will have been run in England. The idea is to give 30 people £1,600 per month for 2 years, and closely monitor them to see how it impacts their lives.
A control group will also be recruited and monitored – but they won’t be paid anything. I can’t think of worse outcome to applying to receive a free £38,400, other than being selected to be in control group!
There will be no requirements or restrictions on what the trial participants spend their money on, or whether they must be working in order to receive the cash.
The reaction played out in the press and on social media has been particularly divisive. So, in an attempt to cut through the politically charged melodramatic responses to any serious consideration of UBI as a concept, let’s look at some of the pros and cons.
Pros of Universal Basic Income
Top of the list is alleviating poverty. UBI has the potential to significantly reduce poverty by providing a guaranteed minimum income to all. That means that every citizen, no matter what their employment status, has access to basic necessities.
This safety net offers a dignified life and alleviates the financial, mental, and emotional stress faced by the most vulnerable members of society.
Next up, economic stimulus. Putting money into the hands of consumers is one of the best ways of stimulating an economy. Increased demand for goods and services leads to economic growth and job creation. And, with UBI as a safety net, more people have the financial stability necessary to take risks, by starting businesses, or investing in their education, further growing the economy.
That segways nicely into the next pro point for UBI: increased social mobility. Giving people the financial freedom to pursue their goals and aspirations by providing a guaranteed income, means that people can take jobs based on their interests and opportunities, rather than just because they need to put food on the table.
This means it’s not just the children of the rich who can afford to get into competitive fields like fashion, media, or art. Imagine how many more talented people we’d have pursuing their passions if the majority of us weren’t forced to work full time just to survive!
Next, UBI offers us the chance to replace the current welfare systems. Traditional means-tested benefits like universal credit, state pension, disability benefits etc. are generally horribly inefficient and come with high bureaucratic costs.
If we replaced all of benefits with a universal income, the need for complicated and intrusive eligibility assessments disappears. No more minimum number of jobs to apply for. No more obligation to take any form of offered employment (no matter how unsuitable or badly paid it might be).
Some estimates show that eliminating the cost of running current benefits schemes would actually pay for majority of a modest universal basic income, just by getting current budgets into the hands of people, rather than spending it on administering the system.
Cons of Universal Basic Income
The cost: implementing UBI on a large scale requires a lot of money. Critics say the expense would be unsustainable and would need increased taxes or massive government borrowing.
Balancing the financial burden of UBI without destabilising the economy is important. But it’s not completely unobtainable...
Some back of an envelope maths shows that giving every UK citizen over the age of 18 £1,000 per month would cost roughly £650 billion per year. We already spend about £265 billion a year on universal credit, pensions, and other welfare schemes.
Progressive taxes focused on those who’ve benefitted most from the recent spikes in inequality are very capable of making ends meet. Taxes on financial transactions, capital holdings, land value, carbon taxes etc. are all viable options. Implementing them to fund a UBI would have the secondary benefit of preserving social and societal peace and stability, something which is threatened by the continued rising inequality.
Plus, all that extra economic activity stimulated by UBI spending would help to create the tax revenues to fund the scheme.
Next is disincentivising work: critics claim that getting money for nothing will just mean that people become lazy and that getting anyone to do difficult, dirty, or dangerous jobs will become harder.
I have to say that if rolling out a UBI means that people have more leverage to be paid properly for unpleasant work, or get better working conditions and equipment, then it’s working as intended. Without the threat of poverty to coerce people into certain jobs, maybe we’ll see a reordering of how we value the roles of certain people in society.
Inflation: one of the more pertinent concerns about the potential impact of UBI is that it would just be to spike cost of living. If every citizen receives a fixed amount of money, why wouldn’t prices just increase? Careful economic management and effective price control mechanisms would be crucial to mitigate this risk.
We’re nowhere near running trials large enough to understand the inflationary risks associated with implementing UBI. But we’ve just run an unprecedentedly massive money printing experiment in the live production version of the world’s economy – so I’d argue that anyone refusing to even consider UBI due to the inflation concerns is either under-informed or being wilfully ignorant.
And the final criticism of UBI? It’s a sticking plaster on the structural problems within capitalism: this surprising line of attack comes from those who advocate for a more genuine redistribution of wealth.
Critics from this end of the political spectrum say that with all the owned wealth concentrated in a small class of elites, UBI is just a temporary fix to keep the majority of us quiescent. They say it’s another example of the now classic “you’ll own nothing and be happy about it” warning of a dystopian future bearing down on us…
They would rather see a more radical political and economic shift. Some of them make excellent arguments about why radical reforms are essential to give us even half a fighting chance of successfully confronting massive challenges like climate change.
I have a lot of sympathy with the points they make. But I have no practicable ideas about how to make such radical changes without devastating short term consequences. So, I find myself a fan of UBI as a steppingstone to iterate towards a post-scarcity, and possibly post-work world.
What do you think of universal basic income? Pie-in-the-sky student economics? Or “an idea whose time has come?”