Money For Nothing: Universal Basic Income

Get your money for nothing, get your chips for free

Jason Hawke for Unsplash+

Like a zombie, Universal Basic Income keeps coming back. The AI craze, with its forebodings of mass unemployment, has once again raised it from the grave of common sense.¹

Universal Basic Income is “…a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.” The homeless and the billionaire get the same cash payment, forever, no questions asked. The amount should suffice to cover essential needs like food and housing.

If you ask, “why do we need UBI?”, proponents respond “because AI and robots will soon take all the jobs”. That’s why UBI is so popular in Silicon Valley. “And UBI is already being tested in many places” they add, nodding reassuringly.

You think about this, and then ask, “why are we testing it?”

“To make sure people will use it to learn new skills and look for a job, or set up their own business.”

Ok, so, we run pilot projects to make sure UBI will not stop people from looking for a job. But…wait…

…you just told me there will be no jobs…

Once unsupervised robots can produce the entire U.S. GDP, by all means, let’s divide the fruits of their labor equally across the population. Then we can all sit at home, playing videogames or engaging in philosophical debates with ChatGPT — get your money for nothing, get your chips for free. That’s easy, no need to run pilot programs. (How people will find fulfillment in that utopian world is a different question.)

The reason people run UBI experiments, of course, is they don’t believe for a second that the machines will do all the work. Which means that to finance UBI, enough people will have to work, produce, earn and be taxed. Hence the concern on how UBI would impact work incentives.

By the way, all these experiments teach us nothing about UBI, because they are structured as something completely different: giving a small monthly payment to a tiny minority among the poor and unemployed, for a limited period. The “income” in these pilot projects is neither universal nor permanent, and often not even “basic”.

Others will tell you: “we need UBI so everyone can pursue their passion. If you’re guaranteed enough money to live with dignity, you can take a risk, become an entrepreneur or an artist, no longer enslaved by the need to work.”

This sounds alluring, but it clashes with two unpleasant truths: First: as long as we need human work, the priority is to make sure everyone contributes to the best of their abilities; Second: these abilities are unequally distributed.

Not everyone can be an entrepreneur or an artist — I speak as a failed basketball player. And our economies also need construction workers, welders, plumbers, electricians, nurses, firemen, policemen, janitors, waiters. Some people go into these jobs with passion, others because it pays the bills—and these jobs need to be done by humans, because robots are busy practicing backflips and dance moves.

We have a shortage of skills across industries. In oil and gas, mining, shipping and a host of other sectors sizable cohorts of experienced workers are about to retire with no pipeline of apprentices to take their place. Meanwhile our economies are littered with college degrees no employer finds useful. This is hardly the time to tell young people they should follow their passion and not worry about job prospects.

There’s another small problem: we don’t have the money. Advanced economies are deep in debt, with a looming rise in pension and health care expenditures ahead. A little arithmetic: UBI is supposed to cover basic needs, so let’s set it at the poverty line, which in the US is just under $16,000 per year. There are about 270 million Americans over the age of 18, so UBI would cost $4.3 trillion. This is almost twice total federal income taxes. If UBI won’t undermine work incentives, doubling personal income taxes certainly will.

“But we’ll claw it back in taxes from those who don’t need it,” is the objection. Ah. Then you don’t really want it to be universal. What you’re really talking about is a social safety net for the vulnerable. As luck would have it, we have one already! We need to improve it, and that’s one of the hardest problems in economics: to help people when they’re down and out without undermining work incentives. That’s why unemployment benefits are time-limited and contingent on looking for work. Human nature is what it is: if you give people money for free, they work less — even the meaningless “UBI experiments” point in that direction.

We need a strong and targeted social safety net. The building blocks are well-known: unemployment benefits, health care for the poor, scholarships for bright low-income students. Improving the social safety net is devilishly hard, but that’s the problem we need to solve—not how to divvy up money we don’t have.

Once this mythical superintelligence can deliver on Silicon Valley’s promise of “Abundance,” I’m with Elon Musk: let’s have a Universal High Income, not just a basic one. A Lamborghini in every driveway! Until then, we need to repair our crumbling basic education and foster life-long learning, skilling and reskilling. Those working in this direction are part of the solution; those grandstanding on UBI are part of the problem.

1. It keeps coming back, and I’ve battled valiantly against it in the past, including a debate at the Oxford Union where our side won against the odds, swaying 22% of the audience to our view. The eternal fight goes on.