Universal basic income

Universal basic income (UBI) is a suggested strategy to improve individuals’ financial stability and health outcomes^{1, 8, 9}. Available evidence suggests that programs with similarities to UBI, such as cash transfer programs or supplemental assistance programs, can have positive, multi-generational effects, based on long-term studies of individuals whose families received these types of supports when they were children^{3, 10, 11}. These programs do not appear to significantly reduce labor supply^{1, 8}. However, additional evidence is needed to confirm effects, especially of a large-scale UBI program⁸.

In theory, universal basic income programs provide a direct cash transfer to individuals unconditionally, universally, and regularly^{2, 4}. Some experts interpret basic as covering basic needs without earned income; others argue it refers to a base amount intended to be combined with income from paid work⁴. Many UBI supporters propose $1000 per month as a cash transfer amount that is high enough to cover basic needs. Other supporters suggest starting with $500 or less per month and increasing over time, since even small amounts could be significant for those living in extreme poverty⁴. UBI is different from a tax credit or in-kind benefit, such as for food or housing, and distinct from programs which provide benefits at the household level or which provide a single lump sum, for example in early adulthood⁴. The scale and length of UBI programs also influence outcomes. Whether individuals anticipate a program will be short- or long-term may affect their behavior, especially for employment decisions^{6, 8}.

A systematic review of historical and contemporary programs with similarities to UBI finds multiple health benefits, including improved mental health^{8, 12} and infant birth weight, and modest effects on employment, with the largest effects for women with young children⁸. Another review of UBI-like programs in multiple countries finds no evidence that overall labor supply is significantly reduced: Reductions among some groups, such as women with young children, are offset by increases among other groups¹. Generally, safety net programs that increase families’ resources improve children’s outcomes over their lifetimes^{3, 13}. Available evidence shows children in families with lower incomes who receive a cash transfer have greater educational attainment, healthier weight, and higher incomes in adulthood^{10, 14}.

Negative income tax (NIT) experiments in the U.S. and Canada from 1968-1982 are often compared to UBI. These NIT experiments were government authorized and funded, though the programs were not universal and provided benefits at the household rather than individual level. NIT experiments provided cash transfers to families with lower incomes in an amount intended to cover basic needs^{6, 8}. These transfers lasted a few years and included families in rural areas. Individuals paid higher taxes on the cash transfer if they earned more through paid employment. Health benefits associated with NIT experiments include improved nutrition quality; fewer hospitalizations, especially for mental health, accidents, and injuries; and increased autonomy and self-respect. Education outcomes also improved, including school attendance, grades, and test scores, especially among younger children and those from households with the lowest incomes^{6, 8}. Available evidence shows minimal or no effects on employment outcomes^{6, 8}. In some instances, participants worked fewer hours in paid employment, with the largest decrease in hours among married women and single parents; however, the decrease in paid employment appears to benefit families and support improvements in education outcomes for children⁸.

Dividend programs can also be compared to UBI. For example, the Eastern Band of Cherokee Indians’ casino dividend program in North Carolina provides guaranteed income or smaller cash transfer amounts intended to supplement, but not replace, earned wages. One study suggests the program improved children and adolescents’ school attendance, educational attainment, and reduced participation in minor criminal activity. Program participation is also associated with improved mental health¹⁵. Related studies suggest Tribal members’ increased income from casinos is associated with reduced smoking, obesity, and anxiety¹⁶. The dividend program did not have a significant effect on labor supply^{6, 15}. The Alaska Permanent Fund is another dividend program that provides an annual cash transfer to all residents, including non-citizens who are permanent residents or refugees. The fund is maintained through the state’s oil revenue, so the transfer amount can vary, but the transfers are universal, permanent, and nearly unconditional. The dividend appears to have modest positive effects on birth weight¹⁷ and may reduce rates of obesity in young children¹⁸. Effects on criminal activity are mixed, with an increase in substance abuse incidents following the transfer, while property crime decreases slightly; the effect on annual crime rates is small¹⁹. Other studies suggest the dividend increases consumption, stimulates labor demand in some sectors, and increases the number of individuals working part-time—some individuals may leave full-time work, while others may transition from unemployment. Overall employment rates in Alaska remain comparable to other states⁶.

Early research on a small-scale, two-year basic income pilot program in Finland suggests that individuals who receive basic income report fewer health problems, reduced stress, and have similar employment outcomes, compared with those who do not receive basic income⁵. A two-year guaranteed income pilot in Stockton, California, which provided individuals with a $500/month unconditional cash transfer, appears to improve financial stability and participants reported improved physical and mental health²⁰. Experts note that politicization can influence and challenge understanding of such programs’ effects: For example, the early cancellation of a Canadian basic income pilot, which was ended due to shifting political support, left participants reporting increased financial precarity and negative feelings toward the government, but unable to report on how the program impacted them when it was active⁷.

Advocates for UBI suggest it could reduce poverty and increase economic stability; improve population health, especially through reduced stress and stress-related behaviors; increase involvement in activities like caregiving, education, and entrepreneurship; protect workers who may be displaced by automation; and be simpler to administer than existing safety net programs^{8, 9}. Some experts suggest UBI benefits could reduce the negative economic and social impact of the COVID-19 pandemic²¹. Research focused on the long-term, psychological, and political effects of a universal component is needed³. Available evidence on targeted cash transfer programs suggests that eligible individuals fail to enroll due to lack of awareness, administrative barriers, or stigma and that such programs can have unintended effects for non-beneficiaries; experts suggest that universal programs would alleviate these challenges¹.

Criticism of UBI includes concerns that individuals will leave paid employment⁸ though available evidence suggests that negative labor effects are overstated and the health benefits of UBI seem to be understudied and undervalued²². Fewer individuals in paid employment may actually be a desirable outcome of UBI, but employment concerns may be a barrier to political will³.

UBI alone may not be adequate assistance for some groups, including individuals with the lowest incomes, individuals who are differently abled, and older adults⁸. Experts recommend maintaining or expanding supports for these groups alongside UBI, to reduce poverty and provide economic security⁴. Experts also suggest implementing UBI with initiatives to address the cumulative disadvantages of structural racism. For example, UBI and reparations have been proposed together as a multi-component initiative to reduce the racial wealth divide⁴.

Proposals understood to be universal are often near-universal; for example, some proposals exclude children but assume UBI would exist alongside an unconditional child benefit program². Some proposals and programs limit eligibility for individuals who are or were recently incarcerated². For example, Alaskan residents who were incarcerated in the previous year for felony convictions are not eligible to receive the annual cash transfer from the Alaska Permanent Fund⁶.

UBI program financing may influence effects, whether funds are generated through increased taxes, decreased spending, a wealth dividend program, or something else. Further research is needed to clarify what types of financing are most feasible and desirable^{6, 8}. Proposals for universal basic income often recommend funding programs through a combination of taxes, such as progressive income, wealth, or carbon taxes; although other mechanisms have been used, such as state wealth from natural resources or industry⁴.

A generous UBI program would reduce the need for some existing programs³ and streamline administration of benefits⁴, which would account for some of the cost of the program. Some research suggests that implementation of UBI in the U.S. could cost as much as $3 trillion per year, or 75% of total federal expenditures as of 2017, to provide U.S. residents 18 and older with a transfer of $12,000 per year. Some UBI proposals aim to control cost by lowering the dollar amount below what would cover basic needs or by limiting eligibility, i.e. eliminating the universal component³. However, the economic value of UBI’s benefits has not been studied, including reduced health service use, increased educational attainment, and reduced criminal justice system involvement⁸. More research is also needed to estimate the value of the multi-generational benefits of safety net programs¹³.

There is continued interest in UBI and cash transfer programs worldwide, in countries with varying income levels^{23, 24}. UBI programs have been considered at regional or national levels, and by countries in a union, such as the European Union². In the U.S., the state of Alaska continues its dividend program, with around 660,000 individuals receiving the dividend annually⁶.

Guaranteed income and basic income programs exist which meet some of the criteria for UBI. These are often implemented at the city or county level and funded through nonprofits, community foundations, and community trusts. The Stockton Economic Empowerment Demonstration (SEED) in California was led by the city’s mayor and provided 125 residents with incomes below the area median with an additional $500/month for two years²⁵. Many new basic income pilots have begun in the U.S., often with a focus on racial and wealth inequities, with federal funding made available to cities through the American Rescue Plan Act²⁶.

The City of Los Angeles began a guaranteed income pilot program in 2021, which provides selected households with a monthly $1,000 unconditional cash transfer for a year. The program is targeted to households with low incomes who have been adversely impacted by COVID-19²⁷. Participants are offered counseling to understand the potential impact of participating on any existing benefits²⁸. Other cities with similar programs include the People’s Prosperity Guaranteed Income Pilot Program in St. Paul, MN,²⁹ and Hudson UP, in Hudson, NY, which is scheduled to last five years³⁰. Alachua County, FL offers Just Income GNV, a guaranteed income program for individuals who have been incarcerated³¹.