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Julio Razza

Professor Watson

English 1001

March 27, 2019

Economies of the Future: Universal Basic Income

You could ask most people in 2019 if they’ve heard about universal basic income before,

and they would most likely say yes. It’s a hot topic early in the year and it appears to be gaining

in popularity. But do these people really know how it all works; and who can we trust to best

explain this crazy economic idea that affects all of us? We do indeed need to gain a level

understanding first of what universal basic income (UBI) is, and what our current economic

system looks like for comparison. The Andrew Yang 2020 campaign website page explains

“Universal Basic Income (UBI) is a form of social security that guarantees a certain amount of

money to every citizen within a given governed population, without having to pass a test or

fulfill a work requirement. Every Universal Basic Income plan can be different in terms of

amount or design” (Yang). The number most proposed for the United States is $1000 per month,

or $12,000 per year for every person age 18 or above. UBI’s definition is simple but its process

gets complicated very quickly just like our current systems; however, it is centralized with no

strings attached. Our current system is made up of many different payers such as Social Security,

Medicare and Welfare. According to a CRS Report in 2011 from then Senator Jeff Sessions “in

2011, the annual budget expenditure for Social Security was $725 billion, Medicare was $480

billion, and non-war defense was $540 billion” (Sessions). We also have programs such as food

stamps and disability payments that are made monthly to citizens. There are many programs that

have cut off limits; which means if you make $1 over the limit you have all your benefits taken
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away. This has been an obstacle for people trying to get off such programs and move up in

society since their inception. Other than these programs, you need to participate in the labor

force to get paid which means to most people; getting a job. You must sacrifice a large amount

of your time to commit to a job to cover your basic living expenses as well as any other expenses

you may have. Tragically, for many this is not enough, and they end up working 2 or 3 jobs just

to cover for the family. Those who go to school may need to work, occurring an opportunity cost

all while still needing to take out expensive and unforgivable loans. Some don’t work at all and

file for disability; and some get it. In areas with less jobs and opportunity some people sell drugs

or solicit other services just to provide for themselves and others. Maybe they didn’t have a good

childhood and they just turned 18 with very few opportunity tools for improvement based on

their location or circumstances growing up. The potential good that would be brought for these

people and those struggling in similar situations; or even those in decent financial situations by

adding $1000 per month with no strings attached is something that is within our power to make

happen as a society. As more jobs are lost due to automation and technology than ever seen

before, we need to take measure to protect each other by utilizing the amazing economic

machine that we have created for our own benefit as citizens. This is the largest economy in the

world, we can help those in need, and we can help ourselves!

Economists understand the major disruption technology can have on industries and the

jobs affected because of it, but do you? The phenomenon of technological unemployment has

been taking jobs since at least the invention of the wheel. The invention of the water mill, sewing

machines, printing press and other technologies almost eliminated entire professions. If your

business was selling carburetors, you ran out of luck a few years ago because almost all engines

have been built with fuel injection for many years now, because it’s more reliable, cheaper and
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better; just like the other innovative technologies. These are just simple examples that take jobs,

but how about we look at total economic disruption due to technology? There have been several

major shifts in the world that affected jobs on a massive scale, both creating and disrupting jobs.

These include the agricultural revolution where people didn’t need to grow their own food

anymore which allowed them to work. The industrial revolution was a job explosion that brought

all kinds of goods and services to the market. In the second industrial revolution there was a

large supply of ready and able labor, and production pioneers like Henry Ford were able to create

jobs while making things cheaper, and more efficient. Did you know we are already in the midst

of the automation revolution that is sweeping the United States and the rest of the world which

will only continue to gain momentum in the 2020’s? This very second, we have companies such

as Tesla, Uber and Ford investing large amounts of R&D money into the automation of cars and

electric vehicles. We are merely a few years away from driverless taxi’s being the majority in

major cities and populated areas, driverless busses will come later. Driverless trucks that require

no sleep or stop times are being introduced right now; and that’s just transportation! Amazon is

slicing the major retail businesses down and forcing malls to close across 2019. Online sales are

up, retail jobs are getting replaced. A McKinsey report states ““Jobs Lost, Jobs Gained” found

that 30 percent of “work activities” could be automated by 2030 and up to 375 million workers

worldwide could be affected by emerging technologies” (Manyika). This job loss is really no

joke; without universal basic income people are going to be jobless, their skills may be

irrelevant, and many will be unable to provide for themselves or their families anymore.

Universal basic income may be a saving grace, but how on Earth are we going to pay for it?

Universal basic income would be expensive. If you do the math for every adult 18-64 in

the United States receiving $12,000 per year, you end up at a head cost of around $2 trillion.
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However, we need to understand what our current budget looks like. For some perspective,

according to The Balance.com, “the United State’s annual budget for Current U.S. government

spending is $4.746 trillion. That's the federal budget for fiscal year 2020 covering October 1,

2019, to September 30, 2020” (Amadeo). This differs from our GDP, however. Historical data

shows “The Gross Domestic Product (GDP) in the United States was worth 19390.60 billion US

dollars in 2017” (TradingEconomics). So UBI would cost $2 trillion, and our current budget is

$4.7 trillion. Andrew Yang explains how to pay for UBI in 4 steps. “We currently spend between

$500 and $600 billion a year on welfare programs, food stamps, disability and the like” (Yang).

If we were to allow people to keep their current plans or choose universal basic income; a large

majority of that amount would be able to be used on UBI instead. Next, we could add a value

added tax, or sales tax of 10% to everything. This is half of the current level of the European

Union. “A VAT will become more and more important as technology improves because you

cannot collect income tax from robots or software” (Yang). To add to this, this means everyone

is paying for UBI, including the poor. The amount paid additionally in sales tax equates to how

much you spend. If you spend $120,000 or more per year, then you break even with UBI in this

concept due to the VAT. This means wealth is distributed down -with the tax affecting those

individuals and companies who spend more than that amount- since most people who will

benefit from UBI spend far less than that. And even if you spend $30,000 per year, you are only

paying $3000 more in sales tax while receiving $12,000 from UBI for a gain of $9000 per year.

Then, we would grow the entire economy. If you put money in the hands of people who need it,

they will spend it. “78 percent of U.S. workers live paycheck to paycheck to make ends meet”

(Hayes). This will grow the economy because most Americans will spend it; so, it will likely go

right back into the economy. Finally, we save by advancing as a society. “We currently spend
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over one trillion dollars on health care, incarceration, homelessness services and the

like. We would save $100 – 200 billion as people would take better care of themselves and

avoid the emergency room, jail, and the street and would generally be more functional (Yang).

So economically it makes sense, however due to the theoretical nature many people disagree

with UBI entirely, and many people can’t see past the $2 trillion head cost. Let’s find out why.

Arguments against UBI tend to rely on several common issues: “The first problem with

the basic income is philosophical. It ignores how people choose to live in a free society” (Booth),

“UBI will reduce incentive to work” (Annunziata), and its often talked about that taxes will be

very high to compensate. Arguments against UBI state that it would essentially be useless for

richer households. The family aspect of parents saving up and giving their children money for

college would be ruined. Many believe that the parents should be the ones facilitating the money

that their children receive at that age, not them. In people’s opinions, it is a waste of time. For

example: “We would be taxing families more so that more money can go out of the pockets of

one of the members of a household, through a bureaucracy and be put back into the pocket of

another individual in the household who probably holds a joint bank account with the first

individual!” (Booth). Perhaps this can apply to some people but imagine the 18 through 25-year-

old parents out there, unable to go to school because their parents cannot support themselves,

their child and a grandchild. The “well off” families would be indirectly contributing to them,

and others in need; and yes, their children. It’s believed that UBI will reduce the incentive to

work as well. “Our concept of a dignified life is relative. Getting by on my guaranteed basic

income, I will look at my richer, working peers and feel that my lifestyle is not quite dignified”

(Annuziata). Shifting perspectives, this seems ridiculous. Many students and mothers may be

able to work less, or not at all with UBI, but you will not be quitting your $25,000+ a year job
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for it anytime soon. His claim is based on the idea that we would just quit our jobs and then get

jealous that we’re only receiving $12,000 a year while our other working friends are making

much more than that. To me this is an attempt to sway people in agreeance while only giving

them a very sided perspective. If someone quits their job for UBI then they quit their job and it is

their responsibility. No one’s going to get jealous that their working friend is making more

money, they are receiving UBI and work pay because they are participating the job market!

Many people prosecuting UBI seem to believe taxes will raise by as much as 25%. Their claims

are also based on specific, targeted tax increases. If they did use this system, they would indeed

see massive tax raises. This is precisely the reason Andrew Yang proposes a 10% value added

tax. This way everything is taxed, its rate is not very high and it affects those only who spend

more than $120,000 per year, which is quite a lot over essential spending for a family of any

size.

Universal basic income is heating up in 2019. India’s opposition leader is adopting a

variety of it for his platform of presidency. Andrew Yang has also adopted UBI as a key

component to his 2020 U.S. presidential run. As the months go by many more people will be

hearing about UBI and it’s important for everyone to understand the potential it could have for

the impending job loss from automation and artificial intelligence. We have the largest economy

in the world, and we have the chance and opportunity to evolve it into an economy that will take

care of everyone and propel us forward past the 2020’s and beyond. Many people disagree with

UBI; however, the research has been done and the information is there. We cannot retrain

millions of truckers and fast food employees to be coders or hardware engineers, we must leap

ahead of the job loss and prepare our citizens by transforming our economy, improving the life

quality and empowering Americans with universal basic income.

Works Cited

CRS Report: Welfare Spending The Largest Item In The Federal Budget

https://www.budget.senate.gov/imo/media/doc/CRS%20Report%20-%20Welfare%20Spe

nding%20The%20Largest%20Item%20In%20The%20Federal%20Budget.pdf

Andrew Yang for President Website. What is Universal Basic Income?

https://www.yang2020.com/what-is-ubi/

James Manyika, Susan Lund, Michael Chui, Macques Bughin, Jonathan Woetzel, Parul Batra,

Ryan Ko, and Saurabh Sanghui, “Jobs Lost, Jobs Gained: Workforce Transitions in a Time of

Automation,” McKinsey Global Institute, December, 2017.

https://www.mckinsey.com/featured-insights/future-of-work/jobs-lost-jobs-gained-what-

the-future-of-work-will-mean-for-jobs-skills-and-wages

United States GDP

https://tradingeconomics.com/united-states/gdp

Ladan Nikravan Hayes. “Living Paycheck to Paycheck is a Way of Life for Majority of U.S.

Workers” CHICAGO and ATLANTA, /PRNewswire/ Aug. 24, 2017

http://press.careerbuilder.com/2017-08-24-Living-Paycheck-to-Paycheck-is-a-Way-of-

Life-for-Majority-of-U-S-Workers-According-to-New-CareerBuilder-Survey

Marco Annunziata. “Universal Basic Income: A Universally Bad Idea” Jul 27, 2018.

https://www.forbes.com/sites/marcoannunziata/2018/07/27/universal-basic-income-a-

universally-bad-idea/#493401733269

Phillip Booth. “The Case Against a Universal Basic Income (UBI)” 22 May 2018.

https://iea.org.uk/the-case-against-a-universal-basic-income-ubi/