Debunking UBI Objections - Part 2

Last week we looked at two major criticisms of UBI—that it is unaffordable and highly inflationary. As we saw, both objections largely fall apart under closer examination. A UBI is not “new spending” in the usual sense; it is primarily a transfer of income from those with the most to those with less.

This week we turn to two additional concerns: workforce participation and the possible dilution of targeted welfare programs. One concern comes more from the political right, the other more from the left. In my view, both are misguided.

But before we dive into them, I mentioned last week that the AI barons support UBI. Here’s a recent post from Musk. I’m pretty sure he’s thinking of a UBI well over $1,000/month.

Musk may have his faults, but he has certainly shown an ability to see the future coming.

Now on to the objections.

Objections to UBI: Disincentive to work

As is often the case, this objection is more theorical than based on observation. But even in theory, this objection falls short.

One of the major shortcomings of traditional means-tested welfare is that as recipients earn more, their benefits are reduced or disappear entirely. That creates a real disincentive to work. With Shares, people keep every dollar they earn plus the Share. Work always pays.

What does the evidence show?

There have been dozens of recent tests of UBI in the US alone, and many in other countries as well. One of the largest, $1,000 per month per family for a period of 3 years, was financed by Sam Altman of ChatGPT. While these tests have varied in the length of time and amount they pay, the results are quite consistent. Employment either stays the same or declines slightly, and working hours also tend to decline modestly. In the Altman study, these two effects amounted to about 8 fewer workdays per year between the group receiving UBI and the control group. Hardly the collapse in work effort critics predict.

That kind of reduction in hours will not to create a labor shortage, while it might drive up wages slightly. Not a bad thing. What did people do with the extra time? They spent more time with their children. They pursued more education. They started businesses. All these things tend to drive up productivity over time. People were also happier and less stressed and had greater control over their lives. An unexpected car repair was no longer a disaster.

It is entirely reasonable for people to trade income for time, and a modest UBI allows people to do so. But the financial incentive to work is still strong. Furthermore, people work not just to make money but because it provides purpose and order in their lives. According to a paper published in the Review of Economic Studies “market hours worked are approximately flat across the wealth distribution.” As automation and AI reduce demand for repetitive labor, a UBI could also help people transition into more creative, meaningful, or flexible work rather than forcing them into economic desperation.

Finally, UBI has been shown to drive job increases. Simply put, more income drives demand which in turn increases employment¹.

Conclusion: UBI does not lead to a significant drop in paid employment

Objections to UBI: Dilution of targeted social welfare

This concern which comes mostly from the political left, helped derailed Nixon’s attempt at UBI in the early 1970’s. The concern is that UBI might replace current welfare benefits such as housing vouchers, SNAP, and even Medicaid leaving the poor worse off in some cases. This is not an unreasonable fear. These programs are means-tested: if you make more, they pay less. The idea of UBI is to raise all boats so to speak, not to punch holes in them, so Shares In America, my vision of UBI, explicitly says that everyone’s Share will not count as income for either benefit or tax calculation.

In the chart above, all current incomes are raised by Shares in America. For example, the bottom 10 percent of households in 2019 received roughly $26,000 in disposable income and benefits. Under Shares, they would keep every dollar of that income and receive an additional basic income supplement of roughly $19,000 per household. Taxes increase almost entirely on the top 10%.

Over time, a successful UBI might reduce dependence on some targeted programs—but only if wages plus the Share make those programs less necessary. That would be success, not retrenchment.

And some targeted support will always remain necessary. People with serious disabilities, severe illness, or intensive care needs will still require specialized assistance.

Some critics also worry that UBI could weaken the will for public programs like healthcare, childcare, education, or housing. I suspect the opposite may be true. Social Security did not weaken the political support for Medicare. Getting to UBI will take massive grass roots involvement. It will set us back on a course where government is seen as providing essential services rather than grudging and demeaning handouts. Labor can more confidently demand a reasonable share of earnings when strikers can count on their UBI. That may be why Andy Stern, former head of the Service Employees International Union wrote Raising the Floor, a book calling for UBI.

In short, UBI can help reverse the damaging and divisive Reagan Revolution in how people feel about government. The idea of UBI will help will set the stage for a new assertiveness on the part of working Americans. It is part of a popular program that includes greater unionization, higher taxes on the wealthy, and limiting the role of money in politics. The gluttonous corruption and legislative overreach of the current regime give us a unique opportunity to make the case that government is there to serve the people writ large as our founders intended and not solely the interests of the rich and powerful. This message has widespread appeal.

Conclusion: Shares UBI compliments social welfare programs rather than replacing them

America is rich enough to ensure that everyone shares in the prosperity our economy creates.

The objections to UBI sound serious at first—but under closer examination, they don’t hold up very well.

And despite the concerns of the tech leaders about automation and AI, UBI will not come easily.

We will need a grassroots movement to make it happen.

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