Targeting is key to effectiveness

We view a UBI to be a sub-optimal, and possibly harmful, policy response to all three of these challenges. A UBI in its most basic form would be massively expensive yet do little to reduce inequality or advance opportunity. Devoting that level of spending to targeted benefits, focusing on the poorest and those hardest hit by ongoing economic forces, and polices dedicated to human capital development instead of mere redistribution would produce a much greater social return than a UBI.

First, on inequality and redistribution, a UBI is by design not ideal for redistributive purposes. For example, a UBI that paid $10,000 to every U.S. adult would cost about $2.5 trillion per year, well more than half the current federal annual budget. Furthermore, by giving money to everyone, there would be far fewer resources available to redistribute money and/or invest in the human capital of those with the most need. In calculations presented below, we show the practical trade-off between giving more money to a more targeted group of low-income individuals and less money to a more diffuse group including less needy individuals. We cite work by Hoynes and Rothstein (2019) documenting the loss of progressivity that would come from replacing our current system of transfer programs with a UBI. We further argue that programs that are universal do not accomplish as much in terms of generating social benefits as those that are targeted, citing evidence from examples such as child care and early childhood education programs.

Second, on labor market trends and limited skills, the best long-term policy response is for the government to pursue a pro-work, pro-skills agenda, and devote resources to investing in the human capital development of children and economically disadvantaged groups of individuals. Such a policy emphasis would advance both individual economic security and aggregate productivity. However, it is critical that this long-term investment strategy be coupled with income support programs that provide wage subsidies for low-wage workers and limited cash and near-cash benefits for individuals who can’t work or who are temporarily out of work. This implies a pro-work agenda and targeted redistribution. UBI is neither.

Third, the safety net should not just be about redistribution, but also about investment in human capital and in the next generation. Programs should advance opportunity and economic mobility. Targeted in-kind programs and benefits have been shown to do that, especially when targeted to children. We are sympathetic to the argument that the existing safety net consists of a complicated array of different programs. To some extent, however, this complexity is a consequence of having different programs deliberately designed to serve different purposes and/or different needs. Even so, we are in favor of taking a holistic view of the panoply of safety net programs and reforming the entire system to work better in terms of both efficiency (namely, incentives) and equity (specifically, redistribution). Simplifying and improving the system does not, however, imply a UBI. It would be wholly counterproductive to address the complexity of the current system by replacing targeted programs that function as investments in human capital – thereby advancing the productivity of future workers – with an income guarantee that would fail to advance opportunity and upward mobility. Instead, we should reform current programs to better serve their desired goals.

In summary, for fiscal, efficiency, and equity reasons, the U.S. government should provide targeted benefits instead of universal benefits. And, it should not just provide cash, but rather invest in human capital and pursue redistribution through targeted spending on education, child care, health insurance, food vouchers, and housing assistance programs.