In the months leading up to the 2020 presidential election, Democratic candidate Andrew Yang based his platform around one central idea: if elected, he would entitle every American adult to a “Freedom Dividend” [1]. His plan was to deposit 1,000 dollars into the bank account of US citizens every month, tax free, no strings attached. This is an example of a Universal Basic Income (UBI) program. Evidently this program was not enough to get Yang elected, but it did raise some questions about UBI and how it works. With the increased attention comes controversy and ethical debates: most importantly, are these programs worth the cost?
Stanford University’s Basic Income lab defines UBI as “a regular cash payment to all members of a community, without a work requirement or other conditions” [2]. The basic belief behind the idea is that wealth generated by a community should be redistributed equally to its members in order to maximize all members’ standard of living. Having a basic income would also provide a safety net in case a person is suddenly unable to work due to illness, workplace injury, or childcare responsibilities. UBI programs can trace their ancestry back to colonial times, where in 1797 Founding Father Thomas Paine proposed a lump sum of cash bestowed to every person upon reaching adulthood [2]. The idea resurfaced during the early 1900s, when feminists of the Wages for Housework movement brought about the idea of “a wage separate from labor” to provide housewives independence from the male breadwinner. It arose again during the Civil Rights Movement of the 1960s when Martin Luther King proposed guaranteed income as part of the solution for the problem of systemic discrimination [2]. Many countries have tried implementing UBI experiments across a multitude of different communities, minority groups, and social classes, with varying levels of success. This article will examine two cases, one considered a success and the other hotly debated: Alaska’s Permanent Fund and Finland’s UBI Pilot.
Living in poverty can have extreme effects on health. Adults living in poverty are at higher risk for negative health effects like obesity, smoking, substance use, and chronic stress. They also generally have a shorter life span than those with means, with a 15 year difference in the life expectancy of the top 1% and the bottom 1% [3]. According to the Spotlight on Poverty project, Alaska has the lowest extreme poverty rate of any state: 4% compared to the national average of 8% [4]. This can be partly attributed to the state’s Permanent Fund. Funded by oil revenues from the vast natural resources enjoyed by the state, the Permanent Fund was founded in 1976 and pays each Alaska resident 1,600 dollars annually, regardless of employment, economic status, or other conditions. A study by the University of Alaska found that the program has significantly reduced poverty among Alaskans, resulting in improved health outcomes like higher birthweight and reduced childhood obesity [5]. Some critics of UBI programs worry that the extra cash will have a negative effect on employment. However, the same study found that the Fund had no effect on full time employment, and even correlated with an increase in part time work [5]. The Alaska Permanent Fund is viewed by many economists, politicians, and other leaders as a model of what a UBI program can be; an improvement in the lives of everyone in a community resulting in less poverty and better health outcomes. However, some other programs have not found the same success, as is evident with Finland’s UBI Pilot program.
From 2017 to 2019, 2,000 unemployed, randomly selected Finnish people were chosen to receive a monthly payment of 560 Euros (~$600). The goal of the program was to see if the extra cash would help unemployed people secure jobs faster. Ultimately, the pilot program did not shore up to this goal. A Business Insider report found that participants in the study were not more likely to be employed by the end of the trial period than a control group [6]. However, the participants were overall happier and healthier than the control group. Finns who received UBI rated themselves 7.3 out of 10 in life satisfaction compared to 6.8 from the control group, and were 13% more likely to report themselves as “in good physical health” [7]. The report also mentioned flaws in the study design, such as how the participants were forced to give up other government subsidies like housing and food assistance in order to receive the money. The “major flop” of the program, as described by the report, is cited by opponents of UBI as an example of why it is not feasible to implement. On the other hand, proponents of the program would argue that the potential benefits of improved happiness and life satisfaction are worth the cost. A different study design may have had better outcomes, but it is not possible to know the true potential of a UBI program without more data and experimentation.
The cases mentioned above are just two examples of how a potential UBI program could turn out. Alaskans benefit from low extreme poverty rates and improved health outcomes due to their Permanent Fund. While the Finnish pilot program did not improve unemployment, and thus missed the goal of its inception, it did improve the well being of the participants. Both programs have this in common: those who participate have a generally, if marginally, improvement of lifestyle quality. Local leaders are taking notice. 29 US states are currently testing UBI programs, and more are under development [8]. The successes or failures of these programs could change the way government aid is administered in the US. If the improvements of the health and wellbeing of the participants outweigh the economic costs, leaders and citizens may choose to redistribute the collective wealth of a community in order to increase the standard of living for all.
Work Cited:
Andrew Yang, “The Freedom Dividend”, Yang, 2020.
2. The Stanford Basic Income Lab, “What Is Ubi: Stanford Basic Income Lab”, 2019.
https://basicincome.stanford.edu/about/what-is-ubi/
3. Raj Chetty, “The Association Between Income and Life Expectancy in the United States”, JAMA Network, April 26, 2016.
https://jamanetwork.com/journals/jama/article-abstract/2513561
4. Spotlight on Poverty, “Spotlight on the States”, 2023.
https://spotlightonpoverty.org/states
5. Michelle Saport, “New ISER Report: What Is the PFD's Effect on Socio-Economic Well-Being?”, University of Alaska Anchorage, June 28, 2019.
6. Aria Bendix, “One of the World's Largest Basic-Income Trials, a 2-Year Program in Finland, Was a Major Flop. but Experts Say the Test Was Flawed”, Business Insider, December 8, 2019.
https://www.businessinsider.com/finland-basic-income-experiment-reasons-for-failure-2019-12
7. Tera Allas, “An experiment to inform universal basic income”, McKinsey and Co, September 15, 2020.
8. Sergio Padilla, “Cities, States Experiment with Guaranteed Income Programs”, Pensions and Investments, October 28, 2022.
https://www.pionline.com/investing/cities-states-experiment-guaranteed-income-programs