Five reasons why universal basic income is a bad idea – but only one is right

The FT has today, 11 February, an ‘opinion’ article by Ian Goldin, Professor of Globalisation and Development at the University of Oxford, giving five reasons why UBI is such a bad idea, which is a useful addition to the discussions we have had here on Progressive Pulse a while ago and on TaxResearch UK in the last few days. The FT’s objections were freely available but now seem to be closed off so I offer a summary of their objections together with the response.

The first is fairly easy to rebut

UBI is financially irresponsible,…would be unaffordable and lead to ballooning deficits.

Not of course when you realise that the UK has a sovereign currency, printed £435billion in Quantitative Easing without raising a penny in tax and doesn’t actually need to borrow.

The second objection is that

UBI will lead to higher inequality and poverty. It typically aims to replace existing unemployment and other benefits with a simple universal grant. [With] a generalised transfer to everyone, the amount that goes to the most deserving is lower. Billionaires get a little more.

There is no reason to presume that less than the desired amount goes to the less well off because the billionaires get their share too. It presumes that nobody pays any tax. As part of a UBI system the billionaire classes would need to pay tax on either wealth or income at a rate at least high enough to pay back any UBI income (and preferably more).

The third is

UBI will undermine social cohesion. Individuals gain not only income, but meaning, status, skills, networks and friendships through work. Delinking income and work, while rewarding people for staying at home, causes social decay. Crime, drugs, dysfunctional families and other socially destructive outcomes are more likely in places with high unemployment.

The idea that only paid work gives people meaning suggests a stay at home husband or wife has no meaning – and the increased possibility of this, which UBI would assist, is highly unlikely to increase the number of “dysfunctional families” or “undermine social cohesion”. Rather the reverse.

“Rewarding people for staying at home” is what the old age pension does. Yet personal experience suggests large numbers of OAP’s do voluntary work, interest themselves in both society and societies and sometimes have a part-time job as well. What this objection really seems to amount to is that the poor are too feckless to stay at home. A few may be of course – but then so too are some of the rich. Most people, given responsibilty, embrace it. When they are disparaged and downcast, depressed and demotivated they are doubtless reluctant. As Rutger Bregman, author of ‘Utopia for Realists’, says, if you assume people cannot be trusted then it will be self fulfilling. But there is unsurprisingly no scientific evidence that people are lazy.

“Fourth,

UBI undermines incentives to participate. Stronger safety nets are vital. No decent society should tolerate dire poverty or starvation. But for those who are able, help should be designed to get individuals and families to participate; to help people overcome unemployment and find work, retrain, move cities. Wherever possible, safety nets should be a lifeline towards meaningful work and participation in society, not a guarantee of a lifetime of dependence.

This really is much the same territory as point three. The poor lack cash, not character. All the state-issued, tightly conditional payments just infantilise and humiliate the recipients – and often for no better reason than an accident of geography or that they have been no inheritance – or both.

Fifth,

UBI offers a panacea to corporate and political leaders, postponing an urgent discussion about the future of jobs.

I’m delighted the author seems to think UBI is on the current political agenda. He continues

There must be more part-time work, shorter weeks, and rewards for home work, creative industries and social and individual care. Forget about UBI; to reverse rising inequality and social dislocation we need to radically change the way we think about income and work.

I agree.

And I think paying a UBI would do just that.

Comments

  1. Charles Adams -

    I try to remain open minded but I am really not sure that UBI would work as intended as the outcome is highly dependent on other factors.

    Consider an analogy with housing benefit. If you pay higher housing benefit then landlords raise their rents and pockets the extra, no help to the person who initially received the ‘benefit’.

    Universal basic services (which would include basic housing, energy, and public transport, as well as education and health) may be a better way to optimise median disposable income, see
    https://braveneweurope.com/charles-adams-the-measurement-problem-in-political-economy-a-solution and hence a better way to optimise individual freedom and hence individual power. ‘Freedom to choose’ means ensuring that no-one is life constrained to such an extent that they can be exploited. So the question is, would UBI prevent exploitation? As I said, it depends.

    1. Peter May -

      I, too, have doubts that UBI might not quite work as intended, but not along the lines outlined in the FT article above!
      You pointed out some links a while ago and I tried to review the report at the time: UBS also has some difficulties. If I remember I concluded that the internet and transport would probably work as ideas but housing, energy and food were not actually going to be universal so would be much more problematic.
      I certainly think it would be a beneficial change to society to have all the services you mention (to which I’d like to see added a National Legal Service – justice should be a basic right in any state).
      In effect this would be reducing private sector capitalism and increasing the state – the opposite of what we have now!
      The advantage of UBI is that in theory at least, it should give a measure of choice, which is what we are told is important for fulfilment!

    2. Andrew (Andy) Crow -

      Charles, you put your finger on the benefit lie here:

      “Consider an analogy with housing benefit. If you pay higher housing benefit then landlords raise their rents and pockets the extra, no help to the person who initially received the ‘benefit’.

      The benefit lie is that benefits are paid to the poor (and by common inference indolent,feckless and undeserving) whereas the real benefit is a transfer of government spending to the wealthy. In this case, of housing benefit racking up property rents, the increased rent does not in any way relate to added value.

      So who is actually the freeloader here?

      Much the same applies to the other ‘basic services’. There is only one sort of money and it is that which is issued by government. The necessities of (civilised) life are overhead costs and privatisation of these provisions increases the cost of them because they are required to service (expensive) private capital. This is not necessary nor is it sensible.

      It is logically impossible to provide these services more cheaply (to the same standard) whilst they are required to generate profit.

      1. Andrew (Andy) Crow -

        As a postscript I would say that I see no reason why these necessary services must be provided free of charge.

        Energy, for example, is something which we would sensibly wish to avoid wasting and the pricing mechanism is one fairly effective means of regulating waste. Effectively the price is a tax paid for access to energy and if level pricing was applied (a consistent unit price for all levels of consumption) it would be a fairly progressive tax.
        Privatised provision does this very badly because the market model tends to reward increased use by discounting. This is utter folly.

        Pricing for industrial purposes would probably be (as It is now) at quite different rates to those applied to domestic users, but the principle remains the same that privatised profit-making energy is a burden on the productive economy. It is a form of privatised tax collection (of government money) at the expense of the national economy.

        It really isn’t clever.

  2. Andrew (Andy) Crow -

    Goldin asserts: “Wherever possible, safety nets should be a lifeline towards meaningful work and participation in society, not a guarantee of a lifetime of dependence.”

    Yes I agree, but the implication here is that the only meaningful work is what is market-viable in current terms and furthermore that needing to work in the currently accepted relationships does not lead to a different sort of dependency culture.

    I don’t think this rebuttal of UBI is very thoughtful and doesn’t address the radical change in the understanding of the relationship of work to money despite saying as his final point that that is the very thing we need to do.

    I agree, Peter that If consideration of UBI does nothing else, it certainly does that.

  3. Peter May -

    I’m still broadly fovourable towards UBI but I’ve come to the conclusion that the Universal Basic Services argument revolves around ‘freedom from’ as in “proper freedom isn’t..the ability to ‘access the market’, but rather the ability to reduce the area in which it operates.”
    So we need less market – precisely the opposite of today’s direction of travel.
    http://www.progressivepulse.org/economics/the-real-argument-for-universal-basic-services

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