The Effectiveness of Universal Basic Income

Throughout the history of mankind there were only a few social problems, the solution to which still remains an unresolved secret. One of these problems has always been and most likely will be the problem of poverty or high income inequality in certain countries and social strata, based on a hierarchy of income. Many famous politicians, economists and social scientists have taken this issue very seriously and developed a set of solutions, which might eliminate or at least decrease the possibility of devastating consequences of poverty. The most ,perhaps, ambitious, obvious and ,as it may seem from a first glance, simple solution to this complicated issue is just to give people the amount of money, which will be enough for them to cover costs for the basic physiological needs and provide financial security ,thus, reducing poverty level to its minimum. This solution is called the Universal Basic Income(UBI) and this idea was firstly introduced by famous social philosopher and statesman Sir Thomas More in his well-known book “Utopia” written in the early 16th century depicting an affluent society in which every member receives a guaranteed income. Nowadays, Universal Basic Income policy is considered to be one of the most controversial ways of achieving welfare in a society, it is highly debated and discussed on economic forums all over the world. UBI is a subject of extreme importance because it can significantly affect the life of everyone and therefore this essay will be completely devoted to the topic of the effectiveness of this socio-economic income policy, its benefits and drawbacks, conclusions drawn from the results of real-life experiments and pilot programs conducted in different countries such as Finland, Canada and many others. We will consider opinions of the most prominent intellectuals about the past performance of Universal Basic Income, their future forecasts based on the profound economic analysis and eventually we will decide whether it is indeed a solution to the problem of poverty trap, unemployment and income inequality in terms of its reduction, leading to the prosperity of the whole society and its members.

To start with, let us consider historical empirical evidence regarding economic performance and effectiveness of UBI. First of all, let us examine the basic income experiment implemented in Finland in 2017 by the government led by Prime Minister Juha Sipila. So, 2,000 unemployed people were given €560 a month for two years, instead of their unemployment benefit. The basic income was paid without any conditions, recipients received payment despite their employment status. As the purpose of such investigation, The Finnish government wanted to test the impact of this financial incentive on people's desire to start their own business or get a job. Results of the experiment were fairly unexpected because as it was correctly pointed by BBC News Article by Ashitha Nagesh: “Finland basic income trial left people ‘happier but jobless’ “. What that means is that recipients of the basic income during the experiment did neither less, nor more work than those, who were in the control group. However, by the survey it was observed that recipients experienced greater well-being than the control group, they were happier with their lives and less stressed. Moreover, it was investigated that the basic income recipients had more trust in other people and social institutions, they also had more faith in their own opportunities for employment and to make an impact. It is actually clear that the experiment provided unique research materials for the development of the social security model for the future but the controversial outcomes of an experiment show that those negative expectations of a labor market exodus did not come to pass but at the same time, unfortunately for basic income policy supporters, neither did the more optimistic expectations of scientists that unemployed people will attempt finding their jobs and starting a new business.

Secondly, let us consider Ontario Basic Income Project, where in 2017 4000 people living in Ontario, Canada each received from $5000 to $23000 per year in monthly payments depending on their social status and position in income hierarchy. On the contrary to the experiment conducted in Finland , in this case not only jobless people were given this amount of money but also employed ones(approximately,70% of statistical sample of people.). However, the results were still fairly disappointing, there were no big difference in work situation between participants of the experiment and a selected comparison group, members of which did not receive basic income at all. Furthermore, government authorities decided to cancel the project earlier due to their unsatisfaction of preliminary results of an experiment and its high costs. As a Former Premier of Ontario, Kathleen Wynne, said on economic forum in 2017, in Hamilton: “We want to find out whether a basic income makes a positive difference in people’s lives”. Again, the help was expected to last at least three years ,however, less than a year a new provincial government took power and announced that it would cancel the program and instead promise to reform social assistance province-wide. As a Lisa MacLeod, Minister of Children, Community and Social Services quoted: “We are hitting the pause button on a patchwork of programs that were not doing what they were intended to do, which is supporting Ontario’s most vulnerable”. Effects of basic income on people’s lives in Ontario were very similar compared to effects from the experiment conducted in Finland, meaning that people were feeling more psychologically inspired but didn’t actually work more in terms of working hours. Still, the data gives researchers something to analyze and work with.

To sum up arguments listed above, it could be concluded that based on this, unfortunately non-random statistical samples, the purpose of the experiment to address unemployment, encourage jobless people to take jobs instead of getting their unemployment benefits or encourage employed people to develop their financial position was not actually achieved. UBI is still a way of reforming the social security system but its potential is to be explored and improved in terms of not just the confidence or some another psychological improvement, but rather the better response to the changes in working life, utilization of UBI in the process of decision-making.

Now, let us focus on more theoretical and behavioral side of this social policy. Indeed, UBI is considered to be a great opportunity to step up, a jump point but what if people’s mentality does not change, they do not use money that wisely as it was shown by experiments in different countries? As it was correctly concluded, after an experiment most participants were left on the same place with the same problems ,even though they became less stressed, this fact didn’t help them become more able to actually go and do things that they really needed to do in order to exit the ranks of the working poor like ,for instance, gain education and apply for a job. So, were Nobel Prize Winner Milton Friedman quoting that we should replace the ragtag of specific welfare programs with a single comprehensive program of income supplements basically wrong? Most scientists believe that this point of view on basic income still has a right to exist even after the failure of a real-life experiments. The argument is that some conditions needed for UBI’s utility and effectiveness maximization are not yet met in the contemporary societies. The modern countries are simply not rich enough to conduct such policy, but it definitely will be needed due to extremely rapid development of artificial intelligence programs , which in future can create massive structural unemployment. Famous CEO and product architect of Tesla Inc. ,Elon Musk once quoted referring to the connection between employment, UBI and AI: “We have to have some kind of universal basic income, I don’t think that we are going to have a choice”. Another side of UBI is simply its fairness, meaning it is indeed reasonable to create a society, where everybody, who works or at least attempting to find a job, is guaranteed not to live in poverty. UBI concept can help people find good jobs through redistribution policy, not necessarily as a simple unconditioned payment to everybody, but payment in the form of a wage subsidy. Government should seek for the affordable and at the same time pushing people towards self-sufficiency way of conducting such policy, instead of creating this cushion that a complacent person can just sit on without any motivation. Eventually, this higher level income-stabilization policy must reduce economic anxiety and lead to the economic growth due to the development of human capital and welfare. UBI forms the sense of security being translated into measurable outcomes, it helps to reduce desperation in case of hopeless people.

In conclusion, Universal Basic Income is an extremely complicated concept which might be A Holy Grail or the poison for the society. As it was pointed by a Facebook founder Mark Zuckerberg: “We should explore ideas like Universal Basic Income to make sure that everyone has a cushion to try new ideas”. This concept should definitely not be rejected out-of-hand based on the couple historical failures. Many more empirical evidence of its performance must be collected in order to make a final decision whether to adopt this social policy or not. Researchers need to try various forms of UBI in order to find the most optimal solution from the cost-benefit analysis perspective. Many more experiments must be conducted, people should realize that UBI is not simply almsgiving but the real way to step forward the development of personality, increase the quality of life, diversity of chances not in terms of wealth but in terms of Human Capital and job opportunities.