What is Universal Basic Income? A Guide to the Elon Musk and Mark Zuckerberg-Approved System
Universal basic income is the hottest talking point among the tech world’s brightest minds, with everyone from Mark Zuckerberg through to Elon Musk pledging their support to the social security system. With there being a big push from economists through to Silicon Valley experts to implement the system, there are still many question marks surrounding its finer details, and how it could be successfully introduced.
As such, we’ve provided a breakdown of the pros and cons of basic income, along with an explanation as to why many believe it’s a solution to the west’s poverty problem, and why it’s hoped that it would improve our economic stability.
What is universal basic income?
Universal basic income is a proposed system that would see a cash sum handed out to everyone on a periodic basis, which would be granted to citizens without them having to undertake a means test prior to receiving it. Supporters of basic income typically fall into one of two camps: those who believe full basic income should be implemented, and those who support partial basic income. There is no clear definition of these forms of basic income, though as their names suggest, a full basic income would see more money being dished out while a partial basic income would involve less money.
The basic income system would effectively eradicate the need for various current forms of social security, though there are still question marks surrounding which programs basic income should replace. If a full basic income were to be implemented and various current social security measures were brought to an end, the cash handed out to citizens would need to be high enough to ensure that it would cover the systems that had been replaced, while also not being so high that it would remove the urge for many to seek other income and give back into the system. Many believe that first implementing a partial basic income would be a more reasonable measure, with the amount of money dished out to recipients increasing incrementally until an eventual full basic income is feasible.
Who would receive universal basic income?
Universal basic income would be distributed to more or less everyone, regardless of their earnings. The only exceptions would be prisoners, who would lose their access to basic income when they are detained (but would receive it once again when/if they are released), and perhaps individuals in other institutions such as the mentally ill or the elderly. Again, these details are the subject of debate among supporters of the system.
Tesla CEO Elon Musk has pledged his support to basic income. (Credit: Axelle/Bauer-Griffin / Getty Images)
How could universal basic income benefit society?
Poverty is still a major issue in first-world countries, with there being a huge disparity between the richest and the poorest in many countries. With struggling citizens not able to look far beyond earning enough money to pay for their next meal, keep a roof over their heads and desperately hoping that a new wave of government spending cuts won’t force them far below the bread line, the goal of universal basic income is to end this fear and lend a helping hand to those in need.
Critics of universal basic income bemoan the system as little more than “free money” given to those who haven’t earned it, but in reality its implementation would aim to eliminate the frequently imbalanced other forms of social security, along with helping those struggling in poverty to reinsert themselves into society. Supporters of the system believe that by removing the financial worries that unfortunately burden so many members of society, these individuals would then be better prepared to contribute to the economy in a more meaningful manner. For instance, enforcing a basic income would afford many the ability to use public transport, which would then give them a broader range of options in the job market.
But basic income isn’t just for the impoverished. In modern society an individual’s success is routinely tied to their parent’s finances, as being born into a wealthy family will grant them a comfort blanket of cash that will ensure they can take more financial risks. Introducing a basic income would help to ensure that these risks could be taken by more people, potentially leading to a great increase in entrepreneurship, along with many being able to pursue further education, training and projects that they previously wouldn’t have been able to afford.
The argument made by supporters of basic income is that the system wouldn’t encourage laziness, but rather the opposite: by giving people the opportunity to be more ambitious. As stated by Facebook CEO and founder Mark Zuckerberg: “We should have a society that measures progress not just by economic metrics like GDP, but by how many of us have a role we find meaningful. We should explore ideas like universal basic income to make sure everyone has a cushion to try new ideas.”
How could universal basic income benefit the country financially?
While universal basic income would certainly help benefit many individuals, it wouldn’t mean much if it left their country in financial ruin. However, there are multiple financial benefits of the system that would both help cut costs for a participating country, along with injecting more money into its country if implemented correctly.
With basic income intended to overrule many current existing social security systems, the lack of bureaucracy required in distributing an equal amount of money to all individuals would help cut a significant cost for the government, as minimal paperwork would be required for such a process. It would also completely eradicate benefit fraud, with it nullifying the need for many to purposely avoid work in order to illegally claim their government hand-outs, along with eliminating “welfare traps” that encourage people to earn less rather than earn more. It is also strongly believed that crime rates would reduce as a result of basic income ending extreme poverty.
Facebook CEO Mark Zuckerberg is another high-profile believer in the basic income system. (Credit David Ramos / Getty Images)
What are the risks of universal basic income?
While universal basic income sounds fantastic in theory, in reality there are a large number of hurdles such a system would face before it could be properly introduced. Trials are currently being conducted in Finland and the Netherlands, with the former seeing 2,000 unemployed citizens being granted a monthly sum of €560 ($625) while the latter will hand out €960 ($1072) per month, and Switzerland concluded its own trial that ultimately led to the Swiss government rejecting the system on the basis of it being too expensive.
As experienced in the Switzerland trial, the key issue with universal basic income is that it is reliant upon a bunch of varying factors in order to make it a success. Though poverty is still a crippling issue that traditional governmental methods have yet to solve, tackling it by way of introducing a monthly income system does not automatically ensure the prosperity of a country, and if not correctly implemented could well wind up leading to more financial issues in the future.
There is the obvious threat of people taking the money and choosing to not work, which would mean that they wouldn’t be contributing to the system, and would effectively be taking advantage of the “free money” as critics have suggested will happen. However, the biggest potential draw back is the impact such a system would have on taxes, with it requiring a major increase on the amount of tax obtained by a country in order to work. As noted by The Economist, in order to pay every adult and child in the US a basic income of $10,000 per year, the US would need to raise the amount of tax collected by nearly 10 per cent along with cannibalizing the majority of non-health social-spending programs. This would inevitably require a major clampdown on corporation tax and tax evasion, which would in turn require much more effort on behalf of the government.
How would we pay for universal basic income?
Though universal basic income certainly has stumbling blocks ahead of it, if it can be sufficiently paid for then it’s difficult to argue against a system that bring an end to extreme poverty. Evonomics suggests a system that would see individuals and companies being charged for using “key components of our legal and financial infrastructure.” The economic outlet continues: “For example, modest transaction fees on trades of stocks, bonds and derivatives could generate more than $300 billion per year. Such fees would not only generate income for everyone; they’d discourage speculation and help stabilize our financial system.
The UK’s Centre for Welfare Reform proposes another method that would help put money into the system, suggesting that banks could take off a small percentage of money from every bank balance in order to pay for the basic income. “Money in the bank is stagnant, doing nothing to facilitate productive activity,” the proposal reads. “If we shave off a small percentage from every bank balance every hour of every day, not only do we refill our UBI pot in a way that’s proportionally fair, we also discourage the longterm hoarding of money.”
While many, including Mark Zuckerberg, have stated that the rich should effectively pay for the system, it’s difficult to imagine that it would receive much traction if a country’s elite were told that they were going to be forced to be philanthropic in order to support a risky financial program that would, ultimately, give employers less power over their workers as a result of them now having a financial cushion. As such a system would likely need to be positioned as being at least moderately “fair” in order to ensure that everyone, even society’s richest, would ultimately benefit from it.
As a result of this, it’s difficult to imagine that this system will be implemented in the near future, despite the current methods of ending poverty clearly not working. Though the likes of Elon Musk have claimed that it will be an inevitability given the current job market, it would need to receive substantial backing in order to be introduced, something which doesn’t seem likely right now. However, with more high-profile people continuing to pledge their support to the system, who knows what could happen?