Universal Basic Income: The Perfect Solution or Too Good to Be True?

The notion of a basic income has been around for a long time, even as far back as the 18th century, and has gained popularity particularly in recent years. So much so that Finland is planning an experiment for 2017/2018, albeit a watered down version, to test if a basic income is feasible on a national scale. The main attractions of a universal basic income are that it is unconditional, not means-tested and will provide equal payments for all.

The main reason given by advocates for implementing a universal basic income is that it would combat unemployment by giving the right financial incentives. In other words if you give everyone a guaranteed income that is just enough to be able to afford their basic needs, then people would be more motivated to apply for a low-income job because of less financial strain and the fact that they would be significantly better off being employed versus unemployed with a basic income. The argument is that in the current system, many people feel that they are no better off doing a low-income job without benefits versus being unemployed with benefits. There is no doubt that there are obvious flaws in the current welfare-system, but whether this scenario would actually work in reality is questionable.

It seems that advocates of the basic income largely neglect to look deeper into the actual reasons that many people nowadays tend to avoid employment, especially low-income jobs. It is no secret that the nature of most low-income jobs is very demotivating, physically demanding and mundane at best. Top that up with the fact that minimum wage is often insufficient and needs to be supplemented with benefits and it should be no surprise to anyone that this is a scenario that is doomed to fail. Then there is the fact that education is becoming increasingly more expensive and jobs are becoming more and more scarce in a tanking economy, leading to more people potentially being forced into low-paid jobs.

Perhaps instead of sticking a giant band-aid onto an already festering wound, we should strive to address the actual problems that plague our society nowadays. If we make employment more attractive by for example increasing minimum wage or experimenting with a six-hour work day as we have recently seen in Sweden, then we may not need a universal basic income and we significantly reduce the risk of ‘laziness’ in terms of people who are unwilling to participate in the workforce. Another possible solution would be to make it easier and more affordable for people to start their own business and become self-employed. This not only makes sure that we specifically target those who are actually willing to work, but it also creates more jobs and increases productivity. Not to mention the fact that it will enable people to do the things they are passionate about, which is another reason that is often cited by advocates of the universal basic income. Plus, it would also make it much easier for stay-at-home mums to work from home and still generate sufficient income by running their own small business.

There are obvious reasons why a universal basic income would significantly raise the quality of life for many people. But there are also a lot of unanswered questions that come with this, such as: do children receive a basic income as well? If so, this might mean that we will see a rise in the population, as it would be potentially be more lucrative to have more children. Do we give a basic income to pensioners? If so, then what happens to the current pension system? Do we give a basic income to all (legal) immigrants? In which case we might see a huge rise in immigration into European nations, which would be unsustainable given the already huge numbers of refugees in many European countries. Do we give a basic income to those who are already earning millions and billions? Then there is the obvious question of finance: how do we pay for our basic income? Because the idea that we would simply print more money to afford a basic income seems ludicrous, especially in light of all the recent bail-outs and QE to infinity that we have seen since the financial crash of 2008. This means there would have to be a redistribution of wealth instead, meaning potentially higher income taxes, less government benefits, higher taxes on goods and services, etc. Because after all, nothing is free, so why would it be any different with a basic income?

The conclusion is that while the idea of a basic income promotes equality, standard of living and overall happiness, there may be other more viable solutions which would target the problems of the current financial system much more effectively and prevent the long-term problems that may arise with the implementation of a basic income. Instead of treating the symptoms, we need to find a cure for the underlying illness of our current society.

1 Comment

  1. I would posit that the notion of “free money for everyone” is the product of a financial system wherein everyone knows that the currency is inherently worthless. Might as well just print it up and give it away. I firmly believe that a return to sound money, along with policies that promote liberty, and free markets will be the best way to ensure maximum prosperity. These are time tested principles that have worked very well in the real world for centuries.

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