Heading into 2022, we’ve definitely heard about the government's schemes involving UBI or Universal Basic Income - the idea that the government would give everyone a minimum monthly payment, regardless of their circumstances or income. UBI has gained massive popularity over the past couple of years, especially amongst politicians, world “leaders” and celebrity billionaires. Although the general idea of UBI sounds amazing, it’s quite the opposite. It would steal resources from those who are in a more desperate position for broader distribution. It will also bench star players who are focused on doing their part in society and making something of themselves in this world.
Although UBI proposals come in many different amounts, they all have similar justifications. One of the most prominent claims by UBI enthusiasts is that it will reduce poverty. According to some proponents, a generous payment of $3,000 a month would cut the country’s poverty rate in half. If $250 a month were to be given to children, it would cut the child poverty rate down by 40%. Other claims suggest that UBI would allow people at a disadvantage to finally climb the economic ladder and save money and help bring on a cultural revolution as more people will have time to “contemplate life”.
In reality, there are many downsides to universal basic income that people are not considering. One of the more apparent downsides is economic instability. It would cost billions if not trillions of dollars to fund UBI. With such a large pull on the economy would burden taxpayers and increase debt. The huge draw on financial resources would also push back priorities such as infrastructure improvements, hospitals and building and affordable housing.
Furthermore, there was a UBI experiment done from 1968 to 1980 called the “negative income tax”. It was tested across several different states, and similar to UBI, it guarantees a minimum income, which decreases as earnings increase. Although people hoped for the best and an improvement in society, it did the opposite. The experiment resulted in a decrease by 9% of desired hours worked by men, 20% for wives and 25% for single mothers and a staggering 43% for single males that are not head of household. If recipients lost their jobs during the experiment, it would take them significantly longer to find a new job compared to someone not receiving UBI. In addition, for every $1,000 guarantee, there was an average of $600 in reduced income, meaning $300 in government benefits would equal a $1000 increase in net income.
You would think after an experiment with a clear negative outcome, UBI wouldn’t be seen again, but of course it had to make its way back into society! Our good pal Justin Trudeau is testing universal basic income in Ontario. They will be testing a group of 4,000 recipients and 2,000 in the comparison group. Recipients making under will be monitored for overall stress, food security, mental health, housing stability, education and employment participation. The monthly guarantee for those making under $34,000 a year is $16,989, less 50% of any earned income.
In addition, parliament introduced bill S-233 and C-223 on December 16, 2021, which is an act to develop a national framework for a guaranteed livable basic income. The key features are as followed:
Evidence from the failed income tax experiment strongly points out that a universal income may not be the best idea for our economy and future generations. A universal income program would significantly reduce work and increase dependency. Clearly advocates are hoping for a different result this time around. But if history is any indication, they will be disappointed.