1. Such a system removes the incentive to work
One of the most popular arguments against basic income is that providing everyone with enough money to live off could reduce the incentive to work, leading to a drop in productivity, higher unemployment and a subsequent slowdown in growth. Current benefit systems often fail to ‘make work pay’, with sharp cut-offs leading to additional earnings being cancelled out by the withdrawal of benefit payments. If a system like the NIT was carried out correctly, there would be no such disincentives - the more income earned, the more income kept. We see in the US pilots of basic income in the 1970s that overall hours worked fell slightly, with the most significant reduction in work coming from single mothers. Most often the drop in hours worked was due to people allowing themselves more time to find new, more suitable jobs, rather than them simply working less.
Despite the ability to get by on no work at all, the individuals who would be most likely to ‘slack off’ are those whose productivity is low in the first place, perhaps due to lack of motivation or aptness to the role they are in. The absence of these workers from the labour market could actually boost productivity as they could be replaced by new capital - their roles could be automated. These individuals could then have the opportunity to learn new skills and become productive in other industries where they are better suited (see point 2). More people could find a role that motivates them, and as the US pilots suggest, few appear to drop out of the labour force solely due to the UBI received. Additionally, many of those who could benefit the most from basic income would be those who often face difficulties in full-time work (i.e people involved in childcare, domestic duties, those who are disabled). In this case it makes it easier for these people to manage as they are now receiving their own income and aren’t reliant on another’s, assuming that the basic income is paid out on an individual rather than household level.
2. People are more likely to find work meaningless when it is no longer their main source of income
Won’t those who choose to stay in employment find little value in their work if they don’t need the money they earn? This argument holds little reason itself; many people relish work itself and hold a sense of pride and identity in what they do. With the current welfare system millions are stuck in ‘unfulfilling’ jobs, often because they cannot afford to take time off and obtain the skills needed to switch industries. Basic income could allow those who feel this way to be free to pursue the positions they are really interested in, rather than having to take anything to keep afloat. People could have the liberty to learn skills that would allow for an expansion into more creative, or simply more enjoyable and fulfilling roles. Greater bargaining power for workers could mean businesses having to replace mundane, but essential, jobs requiring little skill with automated capital or AI – otherwise market distortion would occur due to labour being more expensive than capital.
3. Such a scheme would be too costly to be feasible
Perhaps the most popular criticism of basic income is its apparent cost. The money needed to give an entire population enough to live off of has to come from somewhere. What could make such a system affordable – potentially even revenue neutral – is a withdrawal rate in the case of Negative Income Tax (or clawing back money through taxation in the case of a UBI). As people earn more, the amount they receive through the NIT decreases on a tapered rate until they reach a certain income where they are no longer eligible for the NIT. It is entirely possible to set the withdrawal rate and the baseline at a level where sustenance is possible and the cost of introducing the scheme is not prohibitive to implement - a revenue neutral UBI could provide those over 25 with over £70 a week.
Additional savings from basic income could be made through the reduction in the number of DWP employees as much of the bureaucracy that is attached to the current welfare system might no longer be required.
4. Giving everyone money would lead to excessive inflation
A common misconception is that as an entire population now has enough money to live off, more money will be injected into the economy leading to higher levels of inflation. This is not the case. Firstly, the money supply isn’t changing due to the nature of the funding behind the NIT (see point 3). Demand-pull inflation would not occur because we’d have to be close to full capacity to experience high inflation in this scenario; more likely is that we’d experience a healthy level of inflation and growth. In fact AD itself might not shift out as you’d expect. And if inflation were to occur, we would expect to have seen it already with the current welfare system providing substantial payments through Universal Credit.
When the UK employed QE after the 2008 recession it didn’t cause excessive inflation, though we’d injected huge amounts of money into the economy. This is because the banks who received this extra cash didn’t actually push it straight into the economy - they held onto it. Similarly, those who receive extra income may choose to hold onto it rather than spend it immediately.
5. A basic income would worsen poverty and inequality
Some say, like Ian Goldin of the Financial Times, that by replacing specific benefits with a single grant, those who are dependent on multiple benefits won’t have enough income to cover basic needs, and those who don’t need the additional income will get it anyway. But those receiving the income would have the freedom to spend it on whatever they want, covering previous benefits they received and more. And basic income trials suggest that people tend to spend such money on necessities like food and shelter, rather using it to fuel addiction or ‘wasting’ it in some other manner. A GiveDirectly trial, in which entire villages in Kenya were sent direct cash transfers, resulted in individuals being able to literally build a roof over their heads, as well as start businesses and invest in livestock.
Though inequality is not something to be concerned about, the actual level of inequality might actually decrease with UBI as there would be a baseline standard of living, narrowing the gap between the rich and poor. Billionaires don’t ‘get a little more’ out of the system because with both a NIT and a UBI, and those with greater income pay it back via withdrawals or taxation. A basic income would be even better for many in poverty than the National Minimum Wage; those whose skills demand less in wages than the NMW may usually go unemployed, but with basic income in place these less-skilled workers could still receive a small wage (and supplemented by their basic income).
6. There are political implications - excessively high levels of UBI/NIT would be promised by politicians to garner support
There could be the issue of opposing political parties promising higher and higher levels of basic income in order to accumulate greater levels of political support. For basic income to work it should optimally be at a revenue neutral level – otherwise it could become unaffordable or force the government to borrow to fund it. A solution to this might be to have a third party administer the level of basic income (we see something like this in the Low Pay Commision advising the government on the National Minimum Wage). Removing politics from the payments means evidence based increases or decreases in the level, rather than rhetoric driving the debate.
7. Increased costs from higher levels of welfare tourism
There are concerns that countries providing a basic income for all open themselves to being ‘swamped’ by an inflow of immigrants into the country looking for a stable income. The argument goes that the country would then end up increasing the amount spent on such a programme, and so decreasing its affordability.
What this argument doesn’t take into account is the additional revenue provided by immigrants in terms of productivity and growth. Studies have shown that UK immigrants should not be generalised as sucking the cash out of the welfare system, and most immigrant groups are actually less likely to claim benefits than natives. Many forms of basic income such as CBI are only paid out to citizens of the country, so migrants would have to wait several years after moving before they could claim basic income, weakening any incentive to emigrate solely because of the programme.
8. Basic income makes people more reliant on the state
This argument suggests that by spending more on welfare, individuals become more reliant on said welfare and this dependency could be detrimental when trying to cut down on spending in this sector. However, by introducing a UBI scheme you are letting people spend money on what is their personal priority rather than tying them to a state-funded welfare programme or busybody groups that decides what people need for them.
By taking a less interventionist approach, governments are allowing individuals to become consumers: they are now contributing to market forces. With benefits and more specific programmes, the government could actually be creating surpluses and shortages in various industries by distorting demand and supply.
9. Introducing basic income could create a ‘slippery slope’
Some argue that the laissez-faire approach basic income provides to welfare could open the gate to more reforms of a similar nature, for example increases privatisation, or cuts to other schemes. programmes. While more free-market policies may not necessarily be a problem, worries about this are unfounded: basic income is an idea that has garnered support from the left, right and everywhere in between. As the Citizen’s Basic Income Trust puts it: ‘[CBI] is not the possession of any political ideology.’ The introduction of basic income would not make ‘right-wing’ policies more viable anymore than it would do for the left.
Emma Weber is a research intern at the Adam Smith Institute.