Do we need universal basic income?
Some economists say we do. They claim that UBI—a taxpayer-funded minimum monthly payment with no strings attached—would reduce poverty and inequality; improve physical and mental health; and provide financial security so that recipients can earn a degree, launch a business, or care for family members.
But we don’t have to take their word for it. A recent UBI experiment has given us some real-world results.
Nineteen counties in Texas and Illinois tested a UBI program that provided an unconditional $1,000 check every month for three years to a group of lottery-selected individuals. All were between the ages of 21 and 40 and had incomes below 300 percent of the poverty level.
The results aren’t exactly good news for the pro-UBI crowd. In fact, they underscore what skeptics have been saying about unconditional UBI—that it would discourage work and lead to a long-run decline in incomes and economic output.
Plus the cost would be enormous. Providing $1,000 per month to everyone between the ages of 20 and 64 with income below 300% of the poverty level would cost about $1.1 trillion per year, or roughly half of the federal government’s current individual income-tax revenues.
The findings from three new studies of the Texas and Illinois UBI programs clearly demonstrate the pitfalls of UBI. Here are eight key takeaways:
1. UBI caused people to work less and earn less
Recipients of UBI and other adults in their households reduced work by 4% to 5%. Those reductions translated into 2.2 fewer hours per week (114 fewer hours annually) for the average household.
And, the authors reported, “Participants work increasingly less over the course of the study.” Less work meant lower income. UBI recipients experienced an average reduction of $2,500 in their annual household income (excluding the UBI transfers).
2. Less work was used for more leisure instead of productive activities
Recipients mostly spent more time on leisure activities, not pursuing education, higher-quality jobs, or spending time caring for family members. The authors noted, “Interestingly, we do not observe those with children spending more or less time on childcare as a result of the transfers.” Moreover, households without children reduced their work by more than households with children.
3. UBI increased periods of non-employment and did not improve quality of employment
On average, UBI recipients averaged an additional 1.1 months of non-employment compared to the control group. While recipients were more selective in the jobs they applied for, the findings “do not support any changes in quality of employment.”
4. Initial improvements in food security disappeared over time
Initial first-year improvements in food security “were short-lived and, by the end of the program, participants in the treatment group reported no better ability to meet their food needs than those in the control group.”
5. UBI recipients reported significantly more disabilities
Upon receiving UBI benefits, recipients were four percentage points more likely to report a disability or health problem that limits the work they can do.
6. Recipients reported no increase in access to or utilization of health care
The study found “no improvement in measures of participants’ self-reported access to health care or their concerns about their ability to pay for needed medical care.” The study “also (didn’t) find that participants in the treatment group used more preventive care, such as vaccines or cancer screenings, or that they made more health investments by exercising or sleeping more.”
7. Benefits did not lead to lasting physical or mental health improvements
First-year improvements in mental health and psychological distress disappeared by the second year. The authors concluded that, “We find essentially no evidence of improvements in physical health due to the transfers and again can rule out even small improvements.”
8. Additional cash didn’t improve personal finances
While participants increased expenditures and savings, they also increased their debt. While net worth increased in the second year, it declined by almost $3,000 by the third year of the study.
These overwhelmingly negative UBI impacts should be reason enough for policymakers to forgo unconditional cash handouts. But these studies consider only the potential benefits and not the costs of higher taxes that would reduce other individuals’ and families’ incomes and require them to work more and save and invest less.
Instead of taking money from some people and redistributing it to others in ways that reduce total incomes and lead to a smaller economy, lawmakers should pursue policies that make people better off without hurting others.
That should include streamlining welfare and workforce services similar to Utah’s One Door policy. And policymakers should also remove barriers to employment such as new government restrictions on apprenticeships, on small businesses, and on flexible and independent work.
With federal spending already astronomically high and employment inordinately low, America cannot afford a costly UBI proposal that would just make matters worse.
by Rachel Greszler/Courtesy Heritage Foundation
