Why Universal Basic Income will not work

Universal Basic Income (UBI) is a periodic cash payment delivered to everyone unconditionally and as a right. It’s an interesting proposition. It’s become more popular as of late because of not only the quick development of artificial intelligence and robots but also the persisting wealth gap present in most of society. Those advocating for it call UBI the solution to all of these issues: income inequality, low wage growth, and the mechanisation of labor. These are legitimate concerns, and on the surface level, UBI seems like a simple yet genius solution to all of them. Fighting poverty is a cause hard to oppose. But here’s the thing:

Similar systems have historically not worked.

The best example can be found in Cuba. After the 1959 Revolution, the Cuban government began to give a flat salary to all workers. In the beginning, thanks to communist fervor, these handouts worked; the Cubans stayed motivated and the economy began growing. But this fervor did not last. At a certain point there was no real or metaphorical revolution to be fought, and no reason to persevere. The Cubans grew demoralised. The economy entered a slow collapse. Why would they work hard? They would be paid the same anyhow.

When Cuban workers knew that money was guaranteed, they put in the least amount of effort possible.

Things began to change, however, in 2011. Raul Castro introduced the “New Cuban Economy” which, among many things, allowed a limited market economy. “Entrepreneurs” could sign up for private business ventures and purchase licenses to work privately, as opposed to preceding years in which all business was run by the government. The economy almost instantly picked up. Hundreds of thousands of private ventures began creating a stark dichotomy between private and state-run establishments.

Media coverage of restaurants in Cuba makes this difference clear. In “paladars” run by the aforementioned “entrepreneurs,” the kitchen staff are lively, and they’re running about. The host comes up to the customer smiling, ready to take their order. The customer is made to feel welcome. In state-run restaurants, where the government pays a tiny salary no matter how the worker performs, the workers barely pay the customer any attention. The workers make it apparent that they do not want to be there.

This failure of the flat wage system to support Cuba economically may be, of course, because of something else; a multitude of different factors contributed to the fall of the Cuban economy. Some people will work hard no matter what, as the UBI experiments and their success in Alaska, Iran, and India have proven. But that’s exactly the issue: UBIs are not a guaranteed method to avoid economic and social stagnation.

UBI aims to soften a blow instead of prevent it.

Instead of investing in a UBI program, money should be used to incentivize companies to keep human employees. There should be government-sponsored programs to train workers and start apprenticeship programs, encourage avoiding mechanisation of labor, and improve employee retention. These alternatives will be much more effective at addressing the slow middle class growth and worsening income inequality that plagues America.

Some advocates for UBI programs dismiss this alternative as “hard and expensive,” but the American government is designed to be taking on this kind of responsibility. Employment has become part of the American social contract. No matter how “hard” it is, the government should be taking action. Undertaking this task will not be as much of a challenge as it may seem to be. Experts have found that investments in public works, reductions in business payroll taxes, and reduction in interest rates will all be able to stimulate job growth, not to mention improve the economy. These are methods that are much less radical and divisive in our government than a UBI, not to mention cheaper.

As for UBI’s costs, giving just $1000/month to all Americans would cost almost 4 trillion dollars. Annually. The cost for government programs for employment, on the other hand, balance out in the long run. Running an apprenticeship program would yield economic gain thanks to the benefit of more skilled workers, which has been proven to work in the United Kingdom. Financial incentives for the private sector would cost money, sure, but certainly less than 4 trillion dollars annually. The American government would (and should) not be unwilling to pay a little money to fight unemployment.

Annie Lowrey, in her book “Give People Money,” argues that UBI might “revolutionize work” by giving people income to rely on in between jobs, encouraging employees to find jobs that pay better than “poverty wages” and thus increasing overall wages. While this may be true, is giving a safety net to all American people just in case better than finding and creating jobs for the unemployed?

Attention should be paid to prevent economic hardships rather than set up a Plan B for if they happen. It would be like if a boxer prepared for a tough fight by setting up a predictive hospital visit instead of going to the gym to practice. It’s misplaced attention.

– Logan Choi (‘20)

Featured Image: AFP/Fabrice Coffrini/Getty Images

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