Board finds that the percentage of workers satisfied with their
jobs was only 48 percent, a reduction from 61 percent in 1987. [ 11]
3. Freedom to upgrade skills and education to find preferred
4. Budget impact would be offset by eliminating benefit payments
being made under support programs in place (and their administration cost).
5. Lower level of work-generated stress; reduced stigma for not
The cons could include:
1. Potential for widespread loss of work ethic; could increase the
size of the “underground economy.”
2. Money may be wasted on alcohol, gambling, drugs, etc., which
could increase crime and health care costs.
3. Even as there will be offsets from the current program, there may
still be a residual cost for an adequate program.
4. Could increase inflation by adding “nonproductive” spending
dollars in the economy.
5. May be perceived as “free money” and thus be politically
6. Costs can vary by city/state/region. Uniform payment to everyone
could overpay in some areas and underpay in others.
What do we know about outcomes from any previous UBI initiatives? Before looking at these, it is interesting to note that Alaska’s
Permanent Dividend Fund, which makes an annual per capita
payment to each resident of the state, is very popular and has
some similarities to the UBI idea. Annual payments have varied,
ranging from $1,000 to $4,000 annually over its long history.
Other than social dividend programs, there is little to look to
from the past for direct comparability with UBI. However, two
previous large-scale experiments are worth mentioning—the randomized 1968 evidence-gathering in the United States around the
“war on poverty” initiative and the 1973 “mincome” experiment
in Dauphin, Manitoba, Canada.
In the first, four negative-tax experiments in different parts of
the country, reflecting different demographics—low-income, rural,
urban, and African-American households (with emphasis on those
headed by females)—were started in 1968. The primary intent was
to study the impact of guaranteed income on the labor market; secondary aims were on associated variables such as health, education,
family breakdown, and others. These experiments ran from two to
nine years, although the original plan was for 20 years.
Meanwhile, President Nixon’s Family Assistance Plan (FAP),
which would guarantee a level of income for all Americans with
children, was introduced in Congress twice, starting in April
1970; both times the House passed it by strong margins but the
legislation stalled in the Senate. In time, the momentum of the idea
dissipated and was dropped when Nixon left office. Interestingly,
Milton Friedman, Friedrich Hayek, and over 1,000 other economists
from 125 universities signed a statement in support of a national
system of “income guarantees and supplements.”
Back to the negative tax experiments, the design recognized
both the importance of the guaranteed income level and also
the disincentive from the “take-back tax” (or marginal rate) on
incomes subsequently exceeding the guaranteed threshold. For
the former, six income levels from 0.5 to 1. 46 times the federal
poverty level were tested. The multiples 0.75 and 1.0 were applied
in all experiments. Similarly nine take-back rates were tested. With
so many subgroups, the volume of data in some groupings lacked
statistical credibility for complete analysis.
The experiments would show better school performance but
small change in labor market outcomes for the primary earners
(under 10 percent reduction of hours worked); for the spouse and
children, the data showed a fairly significantly reduction in hours
worked. The concern that one or more segments in the experiment would completely withdraw from the labor market was not
confirmed in any of the experiments. It is important to keep in
mind that both the income guarantee level and the take-back tax
design can impact the incentive to work. A generous income level
with low take-back tax, for example, brings in work disincentives.
In the March 1973 Canadian “mincome” experiment, all residents
of Dauphin, Manitoba—a small town of 12,000—were guaranteed
a basic income at the poverty level with the support gradually
withdrawn as income increased above this level. The “poverty
line” threshold resulted in some 30 percent of the town’s inhabitants ( 1,000 families) receiving monthly checks. This continued
for about five years before coming to an abrupt end, with all data
packed up and stored. In early 2000, Evelyn Forget, an economist
at the University of Manitoba, gathered and studied the outcome
data. From the health side, the study group had 8. 5 percent fewer
hospitalizations, as well as lower level of contacts with physicians,
especially for mental health; the analysis also showed a higher
high school graduation rate and no increase in fertility or family
dissolution—and no reduction in hours worked, except for mothers
with newborn children who wanted more time off after birth.[ 12]
Otherwise, labor market outcomes were largely unchanged.
Another source of insight is the more recent 2015 paper on
research into the earned income tax credit (EITC) and child tax
credit (CTC) from the Center on Budget and Policy Priorities, a
progressive think tank. Its findings supported those in the previously discussed experiments. The report also states that “children
who benefit from tax credit expansions have been found to do
better throughout childhood and have higher odds of finishing
high school and thus going on to college. The education and skill
gains associated with the CTC and EITC likely keep paying off
for many years through higher earnings and employment.”[ 13]
In an extreme scenario of high long-term
unemployment, it is questionable whether
universal basic income could help. Indeed, in such
a scenario, the whole idea of money as a reward
for “labor” may need to be reconsidered.