Based on a journal entry written on July 30th, 2020.

Normally, I’m in favor of adopting some form of universal basic income (UBI). However, after reading some comments on a Hacker News post, I came across some potential pitfalls of implementing it.

Why I’m in Favor of UBI

The reasons I’m drawn to UBI are twofold:

  1. Support for the Most Vulnerable: UBI could help those in poverty, the homeless, and the hungry by providing a basic income to cover their essential needs.
  2. Opportunities for Unfulfilling Jobs: A UBI could allow individuals in unfulfilling jobs to pursue personal interests, like starting a business, exploring creative fields, or working on other aspirations.

The Problem of Wealth Distribution

The first reason is fairly self-explanatory. There are likely enough resources globally to house and feed everyone. However, history shows a consistent pattern where wealth accumulates in the hands of a few powerful leaders. In the United States, the concentration of wealth has increased sharply, with the income share of the top 1% rising from about 8% in 1980 to around 17% in 2015, according to the 2017 Economic Report of the President.

In 2020, while the U.S. doesn’t have feudal lords or a monarchy, the concentration of power within major corporations and Congress feels quite similar. We may not see immediate changes, as political reform is slow: it would take at least six years for a full Senate reform, enough time to stall movements for change and allow those in power to reinforce their positions.

Lessons from History

As outlined in Why Nations Fail, nations with extractive economic institutions tend to stagnate because they serve only the interests of those in power. This suppresses incentives for productivity and innovation among citizens, since any wealth created primarily benefits a small elite. I’ve seen this dynamic reflected in the minimal efforts by fellow employees, who are stymied by leadership’s reluctance to embrace creative change for fear of destabilizing their own positions of power.

UBI Experiments in the Middle East

Some commenters on Hacker News pointed out UBI examples in Iran and Saudi Arabia, where these countries provide monthly payments to citizens. For instance, Iran’s UBI in 2012 provided about $40 monthly, which is a small amount even accounting for the economic differences between Iran and the U.S. In Saudi Arabia, a $533 million payment was distributed to 10.6 million beneficiaries. However, this amount, too, seems meager if distributed on a monthly basis.

One takeaway from these examples is that a UBI could lead to a reliance on imported labor, as is the case in these countries. If the U.S. were to implement UBI, it could face similar dynamics, where domestic workers rely on UBI while low-wage jobs are outsourced or filled by foreign labor.

Potential Disruptions from UBI Implementation

Implementing UBI suddenly could cause major disruptions. If everyone received an extra $1200 per month, many might quit their low-paying jobs, creating labor shortages and potentially inflating wages in certain sectors. A gradual rollout, starting with a modest amount like $25 per month and increasing over a decade, could allow policymakers to monitor and adjust for emerging issues.

Should UBI Be Means-Tested?

A key debate in UBI discussions is whether it should be conditional or universal. Proponents argue that universal basic income should be unconditional, with wealthier individuals paying back their share through taxes. This simplifies the process and maintains the spirit of universality. Alternatively, to reduce costs, UBI could be scaled based on income, targeting those below the poverty threshold. This scaled approach, however, would need to ensure no one earns less overall by taking a job, avoiding any potential disincentive to work.

Questions for the Future

The future of UBI raises important questions:

  • What will society look like as automation increases and tech centralizes?
  • How can we address wealth and power transfer beyond U.S. borders?
  • How can we garner legislative support, especially from those who would bear the greatest cost burden?

Conclusion

While UBI could address fundamental issues of poverty and opportunity, it also brings challenges—particularly concerning implementation and unintended economic consequences. As with any transformative policy, a cautious, incremental approach might be key to ensuring its success.