UBI is regressive – rolls back in-kind benefits

Interest in universal basic income is on the rise in the U.S. and other advanced countries. Decades of wage stagnation and concerns about automation, robots, and job destruction, as well as discontent with the current social safety net, provide the foundation for interest in this area. Support for UBIs has led to several pilot programs and policy proposals in the U.S., Canada, Finland and Switzerland. Despite all of this, there is a lack of clarity on what makes a UBI, what problem it is meant to solve, whether the social safety net can or is providing these benefits, and what (if anything) can be learned from the pilot programs that we don’t already know from the decades of existing research on individual and household responses to the social safety net, and wages and income opportunities more broadly. Our paper seeks to fill this gap. A “pure” UBI (providing a set benefit to all regardless of income, age, etc.) funded to meet basic needs for a household without earnings would be extremely expensive, about twice the cost of all existing transfers in the U.S. Funding this would require substantial new revenue. The source of the new funds is a first order issue, and will have substantial impacts on the distributional effects of the policy and its ability to target those most in need of assistance. In particular, replacing existing anti-poverty programs with a UBI would be highly regressive, unless substantial additional funds were put in. Much about the effects of a UBI, on labor supply, income and family wellbeing, can be gleaned from the existing research, which we briefly review here. We identify a few outstanding questions, such as the impact of a truly universal program (presumably without stigma) as well as the effects on human capital and, hence, labor supply in the longer run.