Universal Basic Income Harms Recipients and Increases Dependence on Government

Report Welfare

Universal Basic Income Harms Recipients and Increases Dependence on Government

February 14, 2018 Download Report

Authors: Robert Rector and Mimi Teixeira

Summary

The idea behind universal basic income (UBI) policy has a record of failure. Policymakers seeking to reform the welfare state should focus on policies proven to work. Appropriate priorities for welfare reform are (1) insisting on budgeting transparency about the full costs of the 89 federal means-tested programs providing cash, food, housing, medical assistance, and other social services to poor and low-income Americans; (2) promoting work; and (3) removing penalties in the welfare state that discourage marriage. UBI policies expand the welfare state and undermine work.

Key Takeaways

Test experiments on the negative income tax policy (similar to UBI policy) were failures and led policymakers to shift focus to work-based welfare benefit programs.

In these tests, yearly hours worked by recipients were reduced significantly.

Under UBI, for the first time, able-bodied adults who refuse to work are entitled to the same benefits as everyone else.

Universal basic income (UBI), also referred to as guaranteed minimum income, is a social welfare policy that provides cash payments to all citizens. A variant provides cash aid to all individuals but phases out aid at some income level. Recent advocates include libertarian scholar Charles Murray,[REF] former union leader Andy Stern,[REF] and innovators Elon Musk[REF] and Mark Zuckerberg.[REF] The mayor of Stockton, California,[REF] recently announced his intent to launch such a program.[REF]

The premise of universal basic income has a known track record of failure that hurts recipients and increases dependence on government, based on test experiments on the closely related negative income tax policy.[REF] In four controlled random assignment experiments[REF] across six states between 1968 and 1980, the comparable policy was shown to reduce yearly hours worked among recipients significantly.[REF] For each $1,000 in added benefits, there was an average $660 reduction in earnings, meaning that $3,000 in government benefits was required for a net increase of $1,000 in family income.[REF] The results of these studies led policymakers to shift their focus to work-based welfare benefit programs.

Additional Flaws in Comprehensive UBI Policy

Additionally, a comprehensive UBI policy would:

  • Transfer funds away from the vulnerable to affluent persons capable of self-support. A comprehensive UBI policy directs money to those who do not need it, including relatively affluent families and young adults without dependents.
  • Eliminate Social Security and Medicare payments and transfer funds to able-bodied non-working adults. Virtually all policies advocating a guaranteed minimum income eliminate Social Security and Medicare payments. Such a policy shifts resources from the elderly to non-elderly, able-bodied adults without dependents. This poorly targeted welfare makes the policy an inefficient use of financial resources.
  • Increase government spending and the scope of government. Current government policy makes a distinction between the elderly and disabled who cannot work to support themselves and able-bodied non-elderly adults who can and should work to support themselves. Aid to the latter group is conditioned largely on work; assistance is given only when individuals are in need, and able-bodied recipients are expected to work or prepare for work as a condition of receiving aid. In principle, work-capable adults who refuse to work or prepare for work do not receive aid. The UBI eliminates all distinctions between the elderly, disabled, and work-capable adults. Able-bodied adults who refuse to work are entitled to the same benefits as everyone else. By establishing a new universal entitlement and by creating for the first time a moral expectation that able-bodied adults who refuse to support themselves should be entitled to aid from the taxpayer, a UBI would set the stage for a massive expansion of government.
  • Reduce work and increase recipient dependence. The overwhelming majority of Americans believe that able-bodied adults should be required to work or prepare for work as a condition of receiving aid.[REF] This was the core principle behind welfare reform in the 1990s. As noted, the UBI abandons that principle. By removing work requirements from welfare, UBI would decrease work among the poor and increase dependence on government.
  • Increase pressure for greater redistribution to eliminate income inequality. By reducing the complex variables of the current welfare state to a single variable of what level of support the guaranteed income will provide, this proposal would put greater pressure on politicians to increase redistribution.
  • Misdirect attention to the administration of the welfare state rather than the effect of programs on work and marriage. Administrative costs are the wrong target for reform because they are not the reason for the high cost of the welfare state. For the most part, administrative costs in welfare are only 10 percent of total costs.[REF] Therefore, simplifying administration cannot result in substantial savings. The real problem in welfare is not administrative costs but an incentive structure that reduces work[REF] and marriage.[REF]

Conclusion

Universal basic income policy is an idea with a record of failure; policymakers seeking to reform the welfare state should focus instead on policies proven to work.

Appropriate priorities for welfare reform are (1) insisting on budgeting transparency about the full costs of the 89 federal means-tested programs providing cash, food, housing, medical assistance, and other social services to poor and low-income Americans;[REF] (2) promoting work;[REF] and (3) removing penalties in the welfare state that discourage marriage.[REF] UBI policies would undermine work and expand the welfare state.

Robert Rector is Senior Research Fellow in Domestic Policy Studies, of the Institute for Family, Community, and Opportunity, at The Heritage Foundation. Mimi Teixeira is a Graduate Fellow in Domestic Policy Studies.

Authors

Robert Rector
Robert Rector

Senior Research Fellow

Mimi Teixeira

Graduate Fellow in Domestic Policy Studies, Institute for Family, Community, and Opportunity