Unconditional Basic Income: how the concept works and what experiments have shown

Unconditional basic income is a concept of economic support for the population which, according to its supporters, can take society to a new level.

In recent decades, numerous experiments have been conducted in various countries, but their results cannot be unequivocal. Proposals to introduce unconditional basic income periodically arise in many countries, but so far they remain just proposals.

We will explore how the concept of unconditional basic income was born and how it was experimented with in different countries.

What is unconditional basic income?

According to the Global Basic Income Network, unconditional basic income (UBI) is a periodic cash payment provided to everyone personally, without any conditions based on income or social status.

There are five main characteristics of a UBI:

1. Regularity. Payments should be regular, for example, monthly, and not one-time.
2. Payment in cash. The recipient should decide how to spend the money, and therefore it should be in the form of universal payment – money – and not less universal cards for receiving some goods.
3. Individuality. Payments are received by a specific person, not a group like a household.
4. Universality. Everyone receives the payment.
5. Unconditional. There should be no conditions for receiving payments, such as reaching a certain age or being in a difficult life situation.

The history of the emergence of the idea

The first mentions of the idea of payments from the state to citizens can be found in Thomas More’s “Utopia” written in the 16th century. The same period also includes Juan Luis Vives’ “On the Assistance to the Poor”. But there were other supporters of the idea.

French marquis de Condorcet and Anglo-American writer Thomas Paine developed the idea of financial support for citizens by the government in the late 18th century. In his “Agrarian Justice,” Paine proposed a one-time payment of 15 pounds sterling to every English person upon reaching the age of 21, and an annual payment of 10 pounds upon reaching the age of 50. The source of payments was meant to be land rent.

Thomas Spence, Charles Fourier, and Joseph Charlier. They were much closer to the idea of unconditional basic income. Charlier proposed in his book “Solution to the Social or Human Constitution Problem” the payment of a regular “territorial dividend” to every citizen. The size should be set by the national council based on the rental value of all real estate.

Bertrand Russell and Clifford Douglas. In the beginning of the 20th century, the idea of unconditional basic income began to actively develop in Great Britain. Among its supporters was Nobel Prize laureate in literature, philosopher Bertrand Russell. And his fellow countryman Clifford Douglas developed the idea of social credit, according to which the state should issue interest-free credit to its citizens as a share of national wealth. In some countries – Canada, Australia, New Zealand – parties advocating this idea have even been created.

Juliet Rhys-Williams. In the 1940s, British writer and politician Juliet Rhys-Williams proposed the concept of a negative income tax, which is already quite similar to the idea of a universal basic income.

The essence of the concept was that the state sets a single income tax rate and also pays a certain amount to each taxpayer. At the same time, workers with low incomes should pay taxes in an amount less than what they received from the state. A similar concept became popular in America in the 1960s thanks to the book “Capitalism and Freedom” by Nobel laureate in economics Milton Friedman.

In the 1970s-1980s, the idea of unconditional basic income began to be actively discussed in several Western European countries, resulting in the establishment of the Basic Income Earth Network. The organization is positioned as charitable and educational, holding international congresses where scientists and supporters of basic income ideas gather for discussions and debates. The 21st such congress already took place in Australia in September 2022.

Examples and experiments with unconditional income

History knows several examples when the state made payments that resembled unconditional basic income in some aspects.

Here are some of them.

Manitoba. This experiment took place in the small town of Dauphin in this Canadian province in the 1970s and was called Mincome. The town’s residents received payments for five years from the federal budget.

The experiment showed positive results: overall employment did not decrease, there were more volunteers. Only young men started to work slightly less, but were focused on education. In addition, people were able to devote more time to their health and spent less on healthcare.

Alaska. Since 1982, law-abiding residents of the state who have lived there for at least a year receive oil rent in the form of payments from the Alaska Permanent Fund. A quarter of the state’s profits from oil sales go into this fund. Then, half of the fund’s profits are distributed as annual payments to citizens. The amount of payments varies greatly due to the volatility of oil prices: in 2020, the payment was slightly less than $1,000, in 2017 and 2021 – about $1,100, and in 2018 and 2019 – about $1,600.

Brazil. In 2003, the country introduced payments to poor families, in exchange for requiring them to fulfill social obligations: send their children to school, undergo preventive medical examinations. By 2013, the experiment showed good results: the level of extreme poverty decreased by more than two times, and income inequality among the population decreased by 15%.

Namibia. In the late 2000s and early 2010s, approximately 1,000 residents of this African country under the age of 60 received $100 per month, which was later reduced to $80. According to the results of the experiment, the organizers noted a decrease in poverty and crime rates, as well as a stimulation of people towards social development.

Mongolia. In 2010-2012, all citizens of the country received payments as shareholders of the Mongolian coal mining company. Essentially, this was resource rent. However, the amount turned out to be too large: the obligations of the fund that carried out the payments significantly exceeded its income, which led to the program being canceled.

Iran. In the first half of the 2010s, about 90% of the population received subsidies. The payments replaced numerous subsidies, and did not result in a significant increase in the number of unemployed. However, the program was eventually cancelled due to high inflation and macroeconomic problems in Iran.

Ontario. The experiment took place in this Canadian province in the mid-2010s. Citizens between the ages of 18 and 64 with low incomes received payments. The amount of payments depended on the composition of households and disability status. The experiment was terminated prematurely due to a change in provincial government in 2018.

Researchers from McMaster University later noted the positive consequences of the payments: people began to feel better physically and mentally, most of the working participants in the experiment continued to work and even managed to subsequently switch to higher-paying jobs.

Finland. In the second half of the 2010s, the state institution of social insurance, Kela, paid 560 euros per month to each of the 2,000 participants in the experiment. Their age ranged from 25 to 58 years old. The government planned to study the impact of unconditional basic income on practice and expand the practice to the entire population of the country. The results of the experiment also led to an improvement in the social status of citizens and increased trust in politicians.

Kenya. The experiment is being conducted by the American non-profit organization GiveDirectly since 2016. It is planned to continue for 12 years and will affect 20,000 people. Several control groups with different payment formats are participating in the experiment – from one-time to daily payments. However, preliminary results in 2020 did not show any significant positive effects, as the experiment coincided with the COVID-19 pandemic.

Unconditional Basic Income: Pros and Cons

The concept has many supporters and opponents who actively discuss the nuances and possible consequences of introducing unconditional basic income. Here are some controversial points.

Fight against poverty. Supporters of the UBI theory cite the fight against poverty as one of its main motivators for implementation. They point out that poverty not only negatively impacts people physically and psychologically, but also creates a vicious cycle.

A person who is in poverty is forced to take on any job, even the hardest and lowest-paid one, losing their strength and health in the process. This makes it difficult for the person to pursue education and limits their ability to find higher-paying work. Often, children from poor families cannot receive a good education because of this and end up in the same vicious cycle.

Opponents of the theory note that guaranteed payments may not help with the problem, as poverty is not the absence of some nominal amount of money, but rather the lack of a sufficient amount to meet needs. With the introduction of unconditional basic income, there is a risk that prices will significantly rise and the poor will remain poor despite the payments.

The answer to production automation. There are concerns that the ongoing automation may leave many people without work. In this case, the BD will help prevent the negative social consequences of this phenomenon.

But humanity has already faced significant changes in the structure of employment: if in feudal times, the majority of the population was engaged in agriculture, then many later became workers. And, for example, Karl Marx and his contemporaries could hardly have imagined that at the end of the 20th — beginning of the 21st century there would be not so many workers, but there would be a huge number of office workers.

It is quite possible that in the future, humanity will find something to occupy itself with. Perhaps, the field of content creation will become even more numerous than it is now.

Lack of money. Experiments with UBI were few and not very long-lasting. Many of them were funded by sponsors. However, if we are really to move towards paying the entire population, colossal financial resources will be required. This is the main reason why only 23% of the population voted in favor of the introduction of a basic unconditional income in Switzerland, and as a result, UBI was not introduced in the country.

Supporters of a basic income propose the following solution: in many countries there are a huge number of social support programs – from pension payments to various benefits and subsidies. It is assumed that with the introduction of a basic income, all these payments will be cancelled.

Thus, from a financial perspective, several goals will be reached with one solution: firstly, freed up funds that are currently being spent on these support measures, secondly, significant costs for administering these payments will be reduced, and thirdly, people will be able to better monitor their health, which will lead to a reduction in government spending on healthcare.

Opponents of the basic income point out that in addition to possible budget deficits that could lead to economic problems, as in the case of Iran and Mongolia, there may be a massive wave of emigration to countries with a significant level of basic income.

Another problem is that unconditional basic income must be guaranteed to everyone, which means that the state will have to spend significant sums on payments to well-off citizens who do not need assistance.

A step towards the decline of civilization. Opponents of the basic income guarantee argue that its implementation could lead to a significant portion of the population ceasing to work, losing motivation to develop and labor. In the long term, this could lead to degradation and decline of human civilization.

Proponents of the concept refer to experiments in which the majority of participants continued their work activities and received additional education.

Summary

Unconditional basic income is the concept whereby the population can receive regular payments from the state, becoming financially independent from other sources of income or earnings.

The ideas underlying the concept have been floating in the air for several centuries, manifesting themselves in one form or another. In the 20th and 21st centuries, several experiments were conducted: in some countries, similar payments were introduced at the state level. According to the results of the experiments, most participants not only did not quit their jobs, but on the contrary, engaged in education, were able to improve their physical and psychological condition, which even helped them to change to higher-paying jobs.

Supporters of UBI claim that implementing this concept will help successfully combat poverty. Opponents of UBI, on the other hand, do not understand where states will be able to get such huge sums for payments, fear mass migration of the population, and in the worst case scenario – the decline of human civilization.