Universal Basic Income: What It Is, Who Would Pay for It, and How It Could Impact the Economy

Here’s what you should know about the economic policy that gives people money for nothing.

What do you want to be when you grow up? It’s a question you’ve probably been answering ever since you could talk. The answer you give today might be different from your earliest ambitions, but would it change once again if you knew you didn’t have to work to survive? You might wonder how something like that could even be possible.

Enter: Universal Basic Income (UBI). UBI is a prospective model of social security that’s gaining traction as a possible solution to growing wealth inequality and job instability.

It proposes that the government provides every citizen with a lump sum of income every year, no strings attached, paid to every person regardless of whether or not they work. Supporters, like the Basic Income Earth Network (BIEN), say this would reduce poverty, address financial inequality, and protect workers whose jobs are at risk under the advance of technology.

While it sounds like a novel solution to a very modern problem, the idea was first floated by mathematician and political activist Antoine Caritat way back in 1795, and has resurfaced in various guises, notably during the civil rights movement, when Dr. Martin Luther King Jr. pushed for guaranteed income as a central measure of his Poor People’s Campaign.

More recently, Democratic presidential candidate Andrew Yang has centered the issue in his 2020 campaign. According to economist and University of Pennsylvania professor Ioana Marinescu, UBI is looking more likely in the U.S. as fewer benefits are made available to those who are out of work. She says that with automation on the horizon, UBI acts like an insurance policy of sorts, cushioning against potential mass layoffs.

So what’s the catch? Free money and support from across the political spectrum? Sounds fake, but okay! You probably have a lot of questions right now — we do, too. It’s a complex proposal with many noble aims, tricky contradictions, and a lot of unknowns. Here’s your Teen Vogue starter guide to demystify this most utopian vision.

What is Universal Basic Income (UBI)?

UBI proposes a form of social security whereby a government guarantees each adult citizen a certain amount of money each year, no questions asked. The idea has become a hot topic as more progressive economic policies have continued to gain a foothold in the mainstream discourse. While some might consider it a pipe dream, others see it as the only way forward, given how employment could continue to change due to technology.

How much would people get paid?

Amounts that get discussed are generally fixed around the poverty threshold, so in the United States, according to 2018 Census data, that would be around $13,000 per year. But that number might shift depending on who’s advocating for it and what kind of political compromises would be necessary. It also has to take into account the larger context of an entire other debate about how poverty is measured and which average income levels would constitute a fair definition of low-income status.

How would the government pay for it?

A special taxation is usually touted as the main source of funding for UBI. While raising income tax would be widely resisted by conservatives, Professor Marinescu suggests a carbon tax could present a realistic source of revenue, as there are examples of Republicans and Democrats agreeing that taxing carbon is necessary to combat climate change. Some believe the costs of a UBI program could be offset by cutting some or all government-funded welfare benefits, but others view this as risky for those enrolled.

What would happen to welfare benefits?

In theory, UBI should make some social welfare benefits redundant, streamlining means-tested systems that determine if people are eligible for government benefits based on their income level. Cash from UBI would replace methods such as food stamps, affording greater autonomy of spending to those currently enrolled. Many believe that UBI can’t fully replace every form of government entitlement, though; critics argue that federal programs like Medicare and Social Security are more effective at holding down costs than private insurance and pension plans, so they are not interchangeable with basic income and shouldn’t be targeted for replacement.

Who supports UBI?

The idea appeals to people on the left, right, and center of the political spectrum for many different reasons; some are excited by its potential to combat inequality, poverty, and strengthen workers’ rights, while for some, the chief motivation is cutting bureaucracy and accelerating transitions to an automated workforce. It might seem odd that a policy like this would be floated by figures as varied as former presidents Richard Nixon and Barack Obama, communist media personality Ash Sarkar, and tech industry heavyweights Mark Zuckerburg and Elon Musk, but there are a variety of interpretations of the policy, depending on how it’s implemented. Everyone has their own spin and wrinkles on the potential of UBI.

Where has UBI been tried?

Over the past few years, trials of the scheme have launched in parts of Europe and North America.

While not a UBI, the Alaska Permanent Fund works by a similar model, providing residents with a yearly dividend sourced from oil reserve royalties. The amount paid fluctuates every year, but in 2015, each person received around $2,000.

Chicago has been contemplating a wider rollout of its own UBI pilot spearheaded by progressive alderman Ameya Pawar; that program would provide 1,000 families with $500 a month. Chicago would be the biggest U.S. city to implement such a policy to date. Stockton, California, launched a similar initiative in 2019.

Ontario, Canada, recently experimented with a three-year pilot program offering a monthly stipend to 4,000 people amounting to around $17,000 Canadian dollars per year for a single person. The program was ended by the province’s new conservative government in 2018.

Finland’s two-year experiment with a similar scheme was the largest of its kind in Europe and came to end in 2018 and wasn’t renewed. A study from Finland’s government found that people with the UBI did report less stress and higher perceived well-being than those without, but others say the structure of Finland’s study wasn’t reflective enough to yield a true projection to begin with.

Why do people think UBI might be necessary?

The onset of automation is partly responsible for the renewed interest in UBI, some seeing it as a safety net for workers who risk losing their jobs to technology, tiding them over if they are out of work or want to retrain to improve their prospects. Some people believe that the policy will be a necessity in the future as robots do more and more manual labor.

And if predictions of a cashless society — that is, one without any paper or coin money — were to materialize, a basic income could soften the blow for households hit by a possible financial crash.

Those who tend to be market-friendly (that is, pro-capitalist markets) see basic income as a way of replacing the current welfare system.

Would everyone stop working?

This is a common concern raised by critics of UBI. But as the figures proposed sit just shy of the poverty line, it’s likely that most people would continue to work in order to afford more than the bare necessities and invest in their own betterment. Marinescu, who studies the labor market and the ways in which policy can promote employment, strongly refutes the suggestion that UBI recipients would sit around idle.

She tells Teen Vogue, “the existing literature [concerning UBI pilots] finds that providing people with a minimal income only has a very small impact on work. First of all, we see it reduces the number of hours individuals work, but not the total number of people classified as employed.” Referencing the model of Alaska, she cites that studies evidenced little change on the labor market; the majority of citizens still worked, just with a small reduction of hours.

One potential source of trouble a UBI could create might be filling less desirable jobs, so employers would either have to pay more or make roles more attractive to fill positions. But the most utopian vision for a future with UBI is that it would enable people to do the work they want to do instead of the work they have to do to survive.

How could workers benefit?

Depending on how it is implemented, UBI ostensibly creates a society in which humans are liberated from work, and the more aggressive demands of late-stage capitalism, as envisioned by Karl Marx in The Fragment on Machines. If the benefits of technological progress were shared between businesses and workers, people could work fewer hours and enjoy the same standard of living. Having a financial cushion to fall back on could give greater leverage to workers and labor unions to negotiate better conditions and pay. Then again, we might be more inclined to walk away from our jobs rather than air grievances.

A most appealing possible consequence is that we would be able to break into careers we are passionate about, or build our own businesses. For example, an aspiring fashion designer could afford to train at a low-paid internship for a few months, or bankroll their own label. However, it’s also possible that our relative independence from labor could simply make the nature of work more precarious.

People whose work is not often compensated under capitalism, like full-time caretakers and homemakers, would have their own means of income, though some might say the social value of their labor is not recognized in any meaningful way under UBI, when a person could sit around all day binge-watching Netflix and eating chips and still receive the same income. The payoff is having a means of income no matter the choice or circumstances of a person’s career.

How could UBI impact women?

Because the payment is allocated to individuals, rather than households, it’s hoped that more women would be able to leave abusive relationships and have some financial stability. At work, some believe women might not have to take prolonged career breaks for childcare, and might wield greater bargaining power in negotiating better pay.

Conversely, without a rebalancing of unpaid household labor, it’s possible that gendered labor divisions would only strengthen under UBI. This extends to part-time roles, which 1 in 5 working women had in 2016, if they became scarce in line with a flexible work culture. However, some envisage part-time work could actually increase under a UBI.

So, will it work?

If contributions were small, like the pilots we’ve seen so far, it’s likely an expanded roll-out would play out similarly to its projections. Financially, UBI is feasible, but the controversy around it as a policy centers on the social aspects that have long been in play when it comes to social entitlement programs.

It’s important to remember that Universal Basic Income does not necessarily come with a universal meaning, and could have different consequences depending on the specifics of any proposal or the surrounding policies put in place. It’s likely that the UBI envisioned by anti-capitalists looks very different from the vision rising from Silicon Valley.

If it’s an idea that appeals to you, you may want to consider what could be lost and gained from implementing such a scheme, and which UBI policies could foster the future you want to see.