15 Things Universal Basic Income Won’t Solve

10 October 2020

Great, You Have Your UBI Settled So Your Future’s Secure. Uhn-Uhn… Find Out Why It’s Not That Simple.

The idea of a Universal Basic Income or UBI has been a hot topic in recent years as former US Democratic presidential hopeful, Andrew Yang, placed at the forefront of his campaign. This ignited discussion around what a Universal Basic Income really means for a superpower country like the USA.

The concept isn’t new. Martin Luther King Jr. argued in 1967 that a guaranteed income would abolish poverty. Before him in the 16th century – More, in the 18th century – Spence and Paine, then Russel, Cole, Friedman, gosh even Nixon threw his hat in the right for a safety net of income for the poor.

So, what is a UBI?

Well, it’s basically a no-strings attached, monthly payment that every working adult in society receives to cover basic living costs.

That sounds nice right?

Not so fast… there are plenty of upsides, but there is also a lot that makes it a difficult territory to navigate as a miracle solution to all our inequality problems.

So, we at Alux took the role of devil’s advocate and came up with 15 things that universal basic won’t solve.

Is reading a long finance article a lot of number-crunching for you? Check out the same stuff explained in our fun YouTube upload:

With that pinned on the bulletin board, let’s find out the first reason why you shouldn’t lean on UBI alone.


It Won’t Solve Unemployment

Many of those who are against UBI say that it will cause too many people to sit home and just claim UBI, in the way people think unemployment benefits motivate people to remain unemployed. This claim is not backed up by studies. But what is true is that providing everyone with a basic living wage won’t change people’s unemployed status necessarily.

A study of 5,000 people in Finland that ended in 2018 showed that people who received a guaranteed payment of €560 a month compared with 5,000 that continued to receive the normal government benefits had no difference between the numbers of days each group worked. And those receiving the benefit only earned €21 less on average than the controlled group during 2017.

The truth is, is that jobs are not disappearing because of technology, but rather they are changing, and usually the unemployed population is failing to keep up with the new employment demands.

While a monthly stipend might offer more opportunity to sharpen your look for an interview, it isn’t the kind of figure that will allow unemployed people to completely reinvent themselves. So, they won’t necessarily be eligible for different or more employment opportunities than they already had before the basic income.


It Won’t Provide Better Medical Care

In some countries you can rely on the state to provide you a good standard of medical care. But in more countries than not, the free medical care is substandard, or non-existent. In these countries people are forced to take monthly private medical insurance, or simple go into debt to cover unforeseen medical bills.

When the UBI is discussed, it often means that other government services will be cut or done away with. This means that what little free or subsidised medical care is available, might disappear. This leaves a small Universal Basic Income amount to cover private medical expenses. Because this won’t be possible, many people will be forced to forego medical treatment.


It Won’t Close the Wage Gap

As with the need for public services like Medical care, lower income families also need services like housing vouchers, or public schooling. If the funding for these services are cut, it won’t affect the wealthy who will be receiving the benefit of the UBI too. But it will have a detrimental effect on lower income households who will be fully responsible for food, housing, medical and education all out of their monthly UBI stipend.

By way of example, if you take a typical single parent low-income family in Queens, New York. They would be eligible for around $31,000 worth of benefits a year. But if you introduced a Universal Basic Income at the expense of government benefits of $1,000 a month, then the total income for the family would decrease to only $12,000. In this case the family would have lost $19,000 worth of much needed help.

In the end a universal basic might leave some families worse off than before.


It Won’t Solve Hunger

When you consider the monthly suggestions for a Universal Basic Income in the USA it isn’t a massive amount. A guaranteed income that’s enough to eliminate poverty would be too expensive. The suggestion is $1,000 a month. How universal basics are determined in most countries are by working out the basics of survival or the lowest consumption level required and providing people the cost of that. So, it’s basically a budget to live on the survival line. Which to some could be novel.

However, there is an adverse effect.

With everyone in the country having an extra $1,000 a month to spend, there will be an increase in services and goods. This could lead to an increase in prices due to the high demand. So, what was the original survival line will increase, and many will only be left with the UBI to spend and not be able to make ends meet.


It Won’t Solve Lower-Income Related Health Problems

There are many illnesses associated with poverty. Illnesses often associated with poor diet and healthcare like Type 2 diabetes, hypertension, heart disease, and strokes to other chronic disorders, are common.

The socio-economic status of lower-income households won’t necessarily improve due to the loss of other benefits and the increase in food and service pricing driven up by inflation.


It Won’t Resolve Taxing of the Poor More Heavily

To make up the budget required to offer a Universal basic, in most countries there would need to be a substantial government income increase. The only place this is viable is to tax the working population.

As we know, when it comes to tax, the poor and middle class carry the burden of tax increases. Not only will income be taxed but sales tax, travel tax and so on, will all increase. These are all taxes that the poor can’t avoid, and that the rich are expert at avoiding.


It Won’t Necessarily Create New Skills for the Changing Job Market

One of the main calls for UBI is coming from Tech Moguls. Richard Branson and Elon Musk all feel that a UBI is inevitable as automation through robotics increases.

Facebook co-founder Chris Hughes outlined his plan in his book “Fair Shot.” According to Hughes: “Cash is the best thing you can do to improve health outcomes, education outcomes and lift people out of poverty.”  Take a listen to the book for free by using our Alux code on sign up on Audible.

But how will giving people an extra $500 or $1,000 a month really offer them a new set of skills. Or even the access and knowhow on how to reinvent one’s self. It isn’t enough to give up work altogether and go back to school. So, the jury is out on this one, whether it is enough to reskill to working class. More on that coming up.


It Won’t Grow the Economy

A new study on the universal basic income contends that giving every American adult a $1,000 cash stipend per month would grow the economy by 2.5 trillion by 2025. This is based on the assumption that every adult receiving the UBI would be adding an additional $1,000 into the economy.

But this is forgetting where the funds for UBI come from. Taxes! So that means in other areas of the economy there will be less money to spend. So wah waaaah! Sorry folks. This isn’t a perfect analysis, and a bit of a circular argument.

There are many governments striving to improve their economy and much more. Check out 15 Best Performing Governments in the World.


It Won’t Improve the Education Gap

Like we mentioned before, for a single mom or struggling family, the UBI is a necessary stop gap to make ends meet, not a newfound wealth. It won’t be a miracle cure to allow people to send their children to private schools and extra lessons or enrol themselves in college to increase their employability.

This might be the case in the lower-middle class bracket, but it won’t immediately have any effect on the lower-income households who would have relied on bursary programs to help fund the shortfall. These types of programs would in all likelihood be stopped to help fund the Universal Basic Income budgets.


It Won’t Improve Quality of Life for the Poor

When you look at the average low-income household, they are more than short of $1,000 a month to truly improve their quality of life. While it will be a welcomed income increase, it won’t necessarily allow them to move to a larger house. It is more the difference between working a 60- or 70-hour week when you are earning a minimum wage. It will just help plug the gap of an already big monthly deficit.


It Might Inspire but It Won’t Necessarily Fund Invention

The old saying goes that necessity is the mother of invention. We’re not saying that you need to be destitute to be inspired to invent something, but human nature is certainly inspired by solving problems.

Facebook co-founder and CEO Mark Zuckerberg strongly promotes the concept of a UBI to counteract the job losses from robotic advancement. According to Zuckerberg: “We should explore ideas like a universal income to make sure that everyone has a cushion to try new ideas. When you don’t have the freedom to take your idea and turn it into a historic enterprise, we all lose.”

Good in theory, but the universal basic won’t exactly offer the same privileged time or resources that a Harvard or Stanford graduate gets. And even if it did, does this guarantee inventiveness? If that was the case, you could assume that every trust-fund kid should be frothing with all kinds of inventions and ideas that could change the world. But we know that’s not the case.

So sure, it might be a start to allow some people some resources and space to be inventive, but it’s not the finish line. There are lots of other resources needed to get an idea into fruition.


It Won’t Save the Government on Social Services Spend

One of the proposed advantages is that it will save the government by reducing the amount of grants and benefits. But this argument is redundant on the principal that a universal basic income goes to EVERYONE in the population above the age of 18. Not just those that were accessing government grants and benefits.

If you use the USA as an example, in 2017 they spent about $2.6trillion on its safety net services like Veteran’s Benefit, Income Security, Social Security and Medicaid and Medicare. Then a further $540 Billion on services and benefits like education, retirement, transportation and so on.

The Universal income will cost the government $2.4trillion a year. The US government has an income of around $3.3 trillion that year.

Those services will still be needed by the lower income households, as we already showed the benefits are worth more than the cash injection that a UBI would offer a family.


It Won’t Motivate the Unmotivated

Most countries have some kind of unemployment benefit. And depending how close the benefit is to the annual income of a minimum wage worker, depends on how likely it is that people re-enter the workforce after they begin receiving unemployment benefits. In some countries, this can be a large percentage of the unemployed.

In the case of countries where there is a finite time that you can receive unemployment benefits, the working population have more incentive to actively seek a new job. But in the case of a Universal Basic Income without an end, there would be no incentive for the type of job seeker who would not be motivated by personal ambition to seek employment.

Once they are gainfully employed they might lose other benefits like housing and health, and when you do the sums, this might mean that living on a UBI and government benefits and having your time to yourself is more attractive.

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It Won’t Solve Immigration

Donald Trump and other world leaders have been known for winning the popularity vote by overstating the problem of immigration. We at Alux are not here to comment on whether this claim is true or not, but many arguments against UBI state that an attractive benefit like a Universal Basic Income would certainly be an attractive incentive to take up residence in another country.


It Won’t Prevent Wars

Wars might be fought for financial gains, but that is from the political and big business level. Getting the troops and population to buy into a war is promoted through patriotism. And nothing makes someone more patriotic than your government literally securing you $1,000 a month just for being a citizen. Now that’s certainly a benefit of “the land of the free and home of the brave” worth fighting for.

Question: Do you believe that a basic universal income is a good idea or not? We’d love to hear your thoughts.