The Case Against UBI
Written in April, 2020.
UBI stands for “Universal Basic Income”. In its simplest form, UBI is a direct payment to every citizen every month. It would (at least in theory) replace other government programs that alleviate poverty, such as means-tested welfare. It is growing in popularity as a political proposal.
In this essay, I will make the case against UBI.
The basic argument for UBI is that we already agree on the existence of a social safety net, and UBI would be simpler and fairer than existing welfare schemes. As it is typically conceived, UBI would simply be a regular direct payment from the government to all members of a society, without the complex bureaucracy that administers means-tested welfare schemes. Because it would be universal rather than means-tested, it would also eliminate or reduce certain perverse incentives of existing welfare schemes.
Let’s consider some of the problems with means-tested welfare schemes. They require means-testing on an individual basis, so they need a large bureaucracy to administer and enforce. They can be abused in various ways, such as by working on the black market, using false identities to claim extra benefits, or lying about family relationships. They create a perverse incentive not to work. If a welfare recipient gets a job, she loses her welfare benefits. As a consequence, the net benefit from getting a job might be very small, especially considering the extra costs of employment, such as transportation, daycare, etc. Means-tested welfare schemes also create perverse sexual incentives. They disincentivize marriage and pair-bonding (because a husband’s income might disqualify a woman from receiving benefits). They create a financial incentive to have more children, because welfare typically increases with each child. The overall effect is a welfare-dependent culture of single mothers, short term sexual relationships, and black-market employment (such as dealing illegal drugs). Means-tested welfare has many negative consequences.
UBI would partly remedy some of those problems. However, it can be very misleading to compare an existing scheme to a hypothetical scheme. It is very easy to be fooled by such a comparison (or use it to fool others). It is much easier to imagine something than to make it real. People are often seduced by utopian dreams that turn into dystopian nightmares (e.g. communism).
UBI would still require a bureaucracy. It would be less complex to administer and enforce per recipient, but it would be on a larger scale. Overall, it appears to be much simpler, but that’s partly because ideas are simpler than realities. To make it real, you’d have to add some details.
For example, who decides how much the UBI should be? What is a “basic income”? Is a basic income in New York City the same as a basic income in Kalamazoo? Is a basic income for a paraplegic the same as a basic income for a healthy young person? What about medical and retirement benefits? Are those schemes subsumed by UBI, or do they exist in parallel?
UBI might be simple in theory, but reality is complex. You can imagine replacing all welfare schemes with a single one, but doing it in practice is another matter.
UBI would reduce the disincentive for welfare recipients to work, but it would create a much broader disincentive to work. There are many people who would choose not to work, or choose to work less, if they received a free basic income.
Welfare might be a trap that is hard to get out of, but it also has barriers to entry. To get welfare, you need to qualify for it. Often, you must look for a job, or demonstrate that you are unemployable. Welfare is low-status compared to employment. Many people will not go on welfare because of the bureaucratic barriers to entry and/or because it is low-status.
UBI would eliminate those barriers to entry. It would make living off the government much easier and more socially acceptable. UBI would create a dependency trap that is not as deep as welfare’s, but much broader.
UBI would have a similar effect on the perverse sexual incentives of the welfare state. It would eliminate the financial incentive for welfare-dependent women to stay single, but it would further increase the financial independence of women from men, by giving women another source of support.
In the past, most women needed husbands to protect them and provide for them. Women valued men for their protective and productive services. Today, women are protected by the state (men in uniforms) and they can provide for themselves by selling their labor. This has weakened the pair-bond.
See Apollo and Daphne.
However, men still contribute more to household income for married couples. UBI would further reduce the economic incentive to marry. The value of men to women is directly reduced by any state subsidy to women, even if men receive the same subsidy.
The more that wealth is transferred from men to women through the state, rather than through the pair-bond, the weaker the pair-bond will become.
The same is true for social relationships.
Society is based on exchange relationships. Employment is an exchange between the employer and the employee. Buying a cup of coffee is an exchange between a customer and a business. Even friendship is an exchange of information, time and favors. These relationships provide most of the benefits of society to its members.
Transfers of wealth from the state to individuals strengthen individual dependency on the state, while weakening other relationships. As a redistribution scheme, UBI would make people more dependent on the government, and less dependent on employment, friends and family.
Some individuals would receive net benefits from UBI. They would have a child-parent relationship to the state. Others would pay more in taxes than they receive in UBI. They would not have a child-parent relationship to the state. They would view the state as oppressive, and its dependent population as parasitic. Redistribution schemes create hostility between the net contributors and the net beneficiaries.
The biggest problem with the welfare state is that it provides a reproductive free ride. It allows people to reproduce at the expense of others. In the long run, the welfare state is unsustainable, because it breeds an unproductive population.
Some proponents of UBI claim that this problem would be reduced by UBI, because the benefit would only be given to adults, and there would be no increase based on the number of children. But in that case, UBI would not replace existing welfare schemes, unless we allow children to live in abject poverty. So, there would still be a need for other welfare programs, or additional UBI based on the number of children.
The reproductive free-rider problem has only two possible solutions in the long run: (1) allow children to die from poverty, or (2) coercively limit reproduction. (I have argued for the latter.)
Now, let’s consider some of the fallacious arguments for UBI.
Most arguments for UBI depend on the fallacy of composition, which is the false assumption that what is true of one part is true of the whole.
An ordinary person cannot think about the economy as a whole. He can only try to imagine how a proposed economic policy would affect him personally. This makes him susceptible to fallacious arguments.
For example, if we propose a $1000/month UBI, most people will imagine themselves having $1000 more than before, while everything else stays the same. So, they will imagine themselves having $1000 more spending power at current prices. That makes UBI seem very appealing.
The truth is very different. If everyone were given $1000/month by the government, the entire economy and financial system would change in ways that are hard to predict. We can’t know exactly what would happen without doing the experiment, but we can say with absolute certainty that it would not give everyone $1000 more spending power at today’s prices. It would probably increase prices, unless the money came entirely from increased taxation. It would almost certainly reduce average spending power, because UBI would reduce the incentive to work, and thus it would reduce total production. There would be fewer goods and services. Lower production implies lower consumption. And of course, the $1000 would have to come from somewhere, either from taxation or money printing. The person who imagined that he would be $1000 richer might find himself $2000 poorer in actual spending power.
The UBI proponent will typically commit the fallacy of composition in his arguments, often implicitly. He will appeal to intuition rather than reasoning holistically. He will argue from imaginary examples to conclusions that do not follow.
For example, he might say “UBI will make it easier for women to stay home and look after children”. This claim is based on an implicit fallacy of composition. He imagines that families would have more spending power, making it possible for women to work less. This fantasy is based on ignoring the holistic effects of handing out free money. The opposite is more likely: that UBI would increase economic hardship for families, forcing more mothers into the workforce, while single people stay home. It might seem intuitively obvious that single-income families would be better off, but that intuition it is based on an implicit fallacy of composition.
If the government gave one family $2000/month extra, without changing anything else, then of course that family would be better able to afford the mother staying home. But UBI would give every family $2000/month extra, while also taxing them more, or printing money. It is easy to imagine giving $2000 to one family. It is much harder to imagine the holistic effects of giving $2000 to every family. We know that it would not make people better off on average, because no wealth is created by handing out money. It would change the distribution of spending power, thereby changing incentives, prices, and the entire economic system.
Would UBI make the average single-income family better off in material terms than the average single-income family today? There is no easy way to answer that question without running the experiment. Any such claim is highly speculative. It could make the average single income family wealthier by transferring wealth from double-income families and singles. On the other hand, it could make the average single-income family poorer by reducing the overall production level of the economy, so $2000 plus a single income has less real purchasing power than a single income has today.
The proponent of UBI will typically just claim hypothetical positive effects and ignore hypothetical negative effects. This will seem intuitively plausible, because the negative effects involve complex holistic reasoning about the economy, while the positive effects are easily imagined at an individual level. It is easy to imagine getting a bag of money, and how it would make your life better. That’s why free-lunch schemes are so popular, although they produce bad economic outcomes in practice. Intuition is a very poor guide to social policies. That is one of the many problems with democracy.
There are some non-fallacious arguments for UBI, but they depend on assumptions about the future. The most interesting, in my opinion, is the idea that we need to transition to a society that is less organized around work, and more organized around leisure. Some people predict a post-work future, in which machines do almost all of the labor, and we must find something else to do with our lives. That is interesting as a long-term possibility. What would a post-work future be like? How would we organize the distribution of goods and services? What would people do with their time? How would we measure the value of an individual to society?
While it’s worth thinking about this hypothetical scenario, there isn’t a shortage of work today.
Some proponents of UBI believe that there is an imminent problem of automation replacing human labor. This “imminent threat” has been around since the days of the Luddites, but it hasn’t materialized yet. Automation has eliminated many jobs, but it isn’t the main reason for structural unemployment in modern societies. In the West, unemployment is due to a combination of personal choice, mismatch between educational qualifications and labor force demand, women working instead of staying home, outsourcing labor to lower-wage societies, and mass immigration. There are still plenty of jobs for human beings. In fact, we are often told that we need more immigrants to prevent a labor shortage, and to support an aging population. If we cut immigration and reduced out-sourcing (which we should do for other reasons anyway), there would be plenty of jobs in Western societies.
It is worth re-evaluating the role of work in modern societies, and thinking about how it might change in the future. I agree with the view that our culture attaches too much importance to wage-labor, and too little importance to other types of labor, such as caring for one’s own children, tending one’s garden, writing in one’s blog (one’s little garden of ideas), and so on. However, that issue is more philosophical than economic.
We can imagine a distant future in which humanity is completely liberated from wage-labor, or even from the need to work entirely. Would it be a utopia or a dystopia?
Liberation of any kind creates a problem of what to do with the new freedom. We are not divine beings held back from heavenly pursuits by the chains of wage-slavery or anything else. We are earthly creatures that evolved to struggle and fight to survive and reproduce. Even if we could liberate ourselves from wage-labor, we’d have to find other work to do.