A Look at Universal Basic Income – The Pros and Cons

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Economics Piece by Josh L. Ascough

Universal Basic Income has become a hot topic in recent years; propping up in the news and mentioned by politicians from time to time.

The standard definition of UBI is a government program where every adult citizen receives a set amount of money on a regular basis; either weekly or monthly. The goal; as stated by supporters of the measure is to alleviate poverty, and to ensure every adult; even if unemployed, has some form of income to support them.

It is quite standard for the majority of supporters of UBI to be of a, Social Democrat position. There are however some Conservative-esque arguments in favour of UBI. These Conservative-esque arguments tend to be more based in deterministic elements of automation, and tend to believe UBI a possible ex-post rather than ex-ante; with the basis of: “if automation is inevitable, there should be a UBI on the table when that time comes.”

There are standard arguments against UBI to do with the ethics of redistribution, but I’m only interested in briefly talking about the economic pros and cons.

This pro/con dynamic really can be broken down to ideal and practical.

The pro of UBI, would be if we got rid of everything and replaced it with UBI. When I say get rid of everything; I mean abolish the NHS, Disability Benefits, Child Tax Credits, Government/Public Schools, and every other form of the welfare state, and replaced it with a UBI program, which gives people the finances and allows them to decide how they’re going to use it, based on their own ordinal ranking and marginal utility.

We would still have the ethical problems of redistribution, however, if it were an automatic program of transferring income to person A, the program would be less costly than all the current programs we have. Most of our welfare programs take up a lot of time and therefore resources, due to lots of bureaucracies and civil servants involved; so instead of welfare 1 going to person A, form 1 for welfare 1 goes to civil servant 1, to be forwarded to bureaucrat 5, so form for welfare 1.5 can be signed by civil servant 7 etc.

This means the idealistic pro of UBI, is that we would in principle have less civil servants and bureaucrats; thereby reducing the overall cost of welfare.

The con of UBI is very much a practical problem. There are other cons to UBI such as the effects of price increases, particularly if the program sees MV (money velocity) rise, but since our pro is an idealistic one, it comes logically that our primary con is a practical one.

The practical problem of UBI is that it is very unlikely that these other programs would be abolished and replaced with a single, simple UBI system, because it would be political suicide. Even if a politician explained to people very clearly and said: “We’re getting rid of the welfare state, including the NHS and replacing it with a UBI. This way money goes directly to people so they can choose for themselves where they want it to go, in terms of what they need to support themselves. All the money is going to go directly to the citizens.” It would still be political suicide, because then bureaucrat’s and civil servant’s jobs would be at risk. Under a UBI, there would be little argument in favour of having so many bureaucrats and civil servants, since money goes directly to people rather than to programs.

The likelihood is, if UBI was instituted, it would be on top of all our current programs; adding to the overall cost rather than seeing a reduction and a simplification in the idealistic.

Libertarians aren’t against welfare per se, it all depends where said welfare is coming from; for example a government program is coerced on to people, and forced extraction; or, extortion breeds resentment among people and violates property rights; whereas charity is voluntary and breeds compassion.

The UK is a very charitable country. The most recent, everyday example being the late Captain Tom Moore, Captain Moore raised roughly £32.8 million on a JustGiving page for the NHS, simply by walking back and forth in his garden. This was a sum of money raised in a nation with a progressive tax system, and under circumstances where large numbers of the population had become unemployed due to lockdown; imagine how much more could’ve been raised with a low flat tax system, and where large numbers of people weren’t forced into unemployment. It’s more than likely at least £100 million could’ve been raised.

As stated above, the UK is a very charitable nation, but one problem facing people receiving help is the absence of information; people don’t know there are charities out there that can help them. It’s anecdotal, but I recently came to the discovery of a private healthcare charity in the UK called The Benenden Charitable Trust; because humans aren’t omniscient, it is more than likely there are charities out there that could help people, but those people don’t know they exist.

This is where local government could play a role.

Local governments could advertise charities that operate within their borough, to help people become aware of charities that could help them. This wouldn’t do anything about the apparent stigma attached to asking for help however; nor is this something the government should get involved in because this would result in government’s watching what people spend and knowing every tiny private detail, and forcing them into accepting help. The stigma is something that could theoretically be lessened if people see what help is out there.

This short piece should not be seen as any form of argument for or against UBI, it should be seen purely for what it is; looking at the costs and benefits of a UBI program.