As living costs go up and job displacement threatens thousands of workers, many people are faced with the seeming impossible question of how to keep up.
There are many possible solutions to address these crises, yet, one has caught the public’s interest by storm. It’s the simple yet bold concept of giving people free money; a Universal Basic Income, or UBI for short.
What this guarantees is a base amount of money that every adult receives from the government, untaxed and no questions asked. It does not matter how poor or how rich, everyone gets the same amount.
If every Fullerton College student over the age of 18, received a hypothetical $1,000 every month, it would add over $360 million into the pockets of students collectively every year.
The purpose of a UBI is to give people more economic freedom while competing in a growing economy. It can help those transitioning in their careers. Starting a small business, that otherwise would be unaffordable for many people, would become a reality. More could be relieved from poverty and government welfare programs. All of this could potentially happen from the simple concept of giving people free cash.
A recent Gallup poll found that many Americans worry about their economic future. As loans and student debt stifle savings, there is also the threat of many retail, hospitality and transportation jobs being replaced by machines and artificial intelligence.
Automation is the coined term for this phenomena.
Despite this apocalyptic forecast, it does not mean robots will be coming after everyone’s job. There will be jobs created that are inconceivable now, with the possibility of greater creativity and innovation. Yet, the growing consensus is that they will require a native familiarity with technology and some form of higher education. However, for many Americans, those requirements are easier said than done.
UBI is often poised as a solution to ease people into this changing workforce.
Some analysts have projected that implementing a UBI would help offset the number of jobs lost to automation. This increased cash flow would act as a stimulus within local communities to make for a stronger middle class with more economic freedom. Jobs would be created as a result, allowing for more opportunities to invest in ideas that otherwise would not be financially feasible.
Projected costs of implementing a UBI vary, depending on what is defined as a ‘basic’ income. A monthly dividend of $1,000 for every adult American could cost upwards of $3 trillion annually. Presidential candidate Andrew Yang, has proposed a value added tax to help pay for UBI, while pushing for stronger tax laws on tech companies like Amazon, Facebook and Google.
With all of this new money in circulation, will it cause inflation? Perhaps. If everyone received $1,000 automatically, consumer spending could potentially inundate the market with money. Per a study done in Mexico, this initial burst would most likely be fairly minor and inflation would eventually adjust.
Proponents of UBI argue that implementing it would not necessarily cause long-term inflation, because the government would not be printing new money. Rather, it would simply shift money directly into the hands of consumers.
Yang has centered his entire campaign around UBI, calling it the “trickle up economy.” He argues that a UBI would curtail government spending on welfare programs in place of a basic income. It would eliminate many of the restrictions placed on recipients by allowing them the freedom to spend their money as they choose.
Finland experimented by giving a random selection of 2,000 unemployed Finns 560 euros (approximately $670) over the course of two years. Their preliminary results found some correlation to increased well-being and sense of economic freedom. Yet, the results also emphasized that any concrete conclusions were premature.
By giving people free money, the obvious question is how will they spend this money? Will there no longer be an incentive to work? Won’t people just spend their money on alcohol and drugs?
Every person will behave differently. There is no way to control how every single individual spends their money. However, studies have shown that the stereotype of poor people living off of handouts is just that, a stereotype. Like Finland, a similar experiment was conducted in Kenya that reported greater confidence and optimism, with increased long-term investments.
Can a UBI solve all of these problems? The honest answer is that we do not know yet. There has not been enough testing done to know of the long term benefits or consequences.
It is reasonable to be skeptical of implementing UBI, considering the potential costs. For all of its great promises, can UBI holdup under the scrutiny? It is a very expensive and ambitious vision that has the potential for great revitalization or economic catastrophe.
Whether one agrees or disagrees with UBI, most can agree that the current system is not working for most people. Something has to be done to combat wealth disparity, automation, and growing economic woes. It might be a fad issue, but those who believe in UBI are adamant that it is at least worth a shot.
