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The idea of a universal basic income has long achieved the rare feat of seducing both the political left and the libertarian right. The redistribution involved in paying everyone an income without any conditions appeals to socialists, while the free-market right likes the absence of bureaucracy inherent in the policy. More recently, it has gained another support base among tech bros, who see it as the future in an idealised robotised world where there is no place for work.
To date, however, boring mainstream economists have persuaded governments not to introduce a universal basic income at any scale by appealing to maths over ideals. When you run the numbers, either the level of basic income is pathetically low or the tax rates needed to fund a reasonable income would be unacceptable. Neither of these outcomes, nor a blend, is desirable.
Before the pandemic, a comprehensive OECD study found that it would always “require very substantial tax rises if it were to be set at a meaningful level”. In the US, for example, the suggested $1,000 monthly payment for all 258mn adults would cost more than $3tn a year. That is roughly equivalent to the combined cost of US social security, Medicaid and Medicare, yet it would provide an income too low to prevent poverty.
Such stark figures should stop the debate over universal basic incomes dead in its tracks. But that would be to underestimate the “yes, but” brigade of its supporters.
Yes, we understand your static maths, but a universal basic income will raise productivity by allowing people to improve themselves, skill up, start a business and find better work, say many advocates. The dynamic effects outweigh your pesky sums.
Others focus on the ability of a guaranteed basic income to improve mental health and provide healthier, less stressed and therefore better workers. Yes, they say, but you have failed to take account of the much improved society it would generate.
Reliable evidence on these additional issues has been difficult because wide testing of a such an income is so damned expensive. The beauty of having the tech bros involved is that they have provided the money for the first very large-scale, high-quality and long-term randomised control trial. Funded by, among others, OpenAI’s chief executive, Sam Altman, the initial results of the $60mn available for the OpenResearch unconditional income study were published this week.
The trial recruited 3,000 people in Texas and Illinois on the basis that they would be in a study receiving $50 a month or more for three years. Then a third of them were unexpectedly told they would instead receive $1,000 a month with no effect on any of their other income.
The results definitively show that receiving more money provides a better life. Spending and saving rises. No surprise there — no one was asked to pay higher taxes to fund this free money. But the details of the findings are not good for the “yes, but” brigade.
Time at work went down for both the recipients of the $1,000 and their partners, replaced by more leisure. This was a standard economic income effect of moderate size and, though inconvenient, is not the devastating part of the study. The big question for the dynamic benefits of a universal income was what people would do with their additional time. Would they invest in their education, upskill, get better jobs or start businesses?
The short answer was no. The findings ruled out “even small improvements” in the quality of employment and upskilling. The most that could be said was that the recipients spent some of their extra leisure time thinking about starting a business without actually doing it. These results were much worse than a group of experts predicted before the study and, interestingly, than ChatGPT predicts when it reads the first half of the paper’s abstract.
Did universal support make recipients healthier than the control group? Again, the answer was no. Surveys and blood tests of recipients and the control group shows no improvement in physical health, and mental health improved only in the first year. There were more visits to medical facilities and more alcohol consumed, although also less problematic drinking.
These studies are incredibly useful and important because they add some facts to a debate that has in the past pitted maths against ideals. The feeble results should be enough for everyone to agree that unconditional financial support does not have magic effects. We live in a world of difficult trade-offs.
But it is important not to extrapolate too far from the weak results to thinking that the poor are lazy or that redistribution is pointless. Raising the incomes of poorer people definitively improves their lives, reduces poverty and allows those with low incomes to enjoy some time off.
We just don’t need to give such payments to everyone at exorbitant cost unless the robots take all our jobs. And even then, let’s not fool ourselves that it would be a utopia.
chris.giles@ft.com