A universal basic income won’t do America’s young any good

Context: Studies suggest that guaranteed universal basic income (UBI) go against public interests.

Case studies on UBI:

• Minneapolis in the US is the latest city to give a ‘universal basic income (UBI) a try. It’s offering $500 a month for 18 months to 150 of its low-income residents with no work or spending restrictions.
• Another widely cited study looks at income paid each year from the Alaska Permanent Fund (based on oil revenue).

Arguments in support of UBI: Based on studies in US states – Minneapolis and Alaska

• May encourage employment: UBI doesn’t cause people to work less and may even encourage beneficiaries to do more part-time work.
• Poverty reduction and income security and inherent benefits.

A critical review of UBI:

• A UBI would be expensive, and once it’s offered, it’ll be very difficult to take away, and doing so can leave people worse off than before.  
• It may discourage people from working, which could inadvertently increase inequality and lead to social instability.
• Increased income risk: Payments from Alaska Permanent Fund, for e.g., are based on the state’s oil revenues and thus vary significantly year to year.

Review of UBI – A comparison with Lottery winners: It concludes that UBI may cause more harm than good by comparing a UBI beneficiary to a lottery winner.

• Contrary to their creativity, motivation and entrepreneurship getting unlocked, lottery winners were found unlikely to start successful businesses.
• Winners were also found to work less and be more likely to switch to lower-paying jobs.
• Many winners were observed to have moved soon after the win to a relatively rural area.
• Nevertheless, there also lies a social benefit whereby lottery winners were more likely to marry and less prone to divorce.

Conclusion: Our current welfare system is imperfect, but giving money may cause more harm than good

• Better alternatives – Make payments contingent on earnings, age or having a child: It will be much cheaper because you don’t have to give money to those who don’t need it.