A universal income may seem like a true social welfare paradise. In general, UBI (universal basic income) is a regular cash payment made to people to increase income. It would have minimal or no requirements for receiving money. In a world where there’s UBI in place, lower-income individuals would get the support they need from the government in a direct and seemingly efficient way. The wealth gap is minimized, and the world solves its poverty issue, once and for all. However, this doesn’t appear in practice, because UBI has its inevitable flaws.
One major setback for universal basic income and a UBI policy is the reduction of the funds for existing social welfare programs. An example of this is the Freedom Dividend proposed by the 2016 US presidential candidate Andrew Yang. He campaigned for a universal income plan in which $1000 dollars is given to an American adult per month with no strings attached. This sounds appealing until the source of funding for social welfare programs is put into question. The truth is, the government only has so much money it can spend until it inevitably cuts down on preexisting programs and benefits for families and people in need. Take Andrew Yang’s Freedom Dividend as an example, which would cut funding for SNAP (food stamps) and housing vouchers. The trend is a replacement of existing social welfare programs with a one size fits all UBI policy when one size fits all policies would never work. Many times, people support a UBI policy in hopes that it will solve all our problems when it is unable to do so. Social welfare is what is going to accomplish what UBI hopes to achieve.
It is also important to question government responsibilities. UBI is primarily hopes to minimize the wealth gap, but is unable to do so. In practice, UBI provides a monthly paycheck to citizens regardless of their financial standing; therefore, all adults would be receiving the money, including those of the upper and upper middle class who do not need that money to meet basic needs. This money would be used by the poorer families to pay for basic things like utilities, food, and rent, while the people who don’t need this money can use it for investment and gain more wealth. To which, we must question, is it the government’s responsibility to help the rich get even richer? It is diverting assistance from the people most in need and simultaneously widening the wealth gap. A UBI is both counterintuitive and counterproductive.
Aside from the fact that UBI wouldn’t be able to achieve its basic goal, it also causes major economic repercussions. Inflation is one such repercussion. In order to provide a UBI, the government would likely resort to printing more money, leading to inflation. However, another reason or explanation for this is when money is given to lower-income individuals, they can purchase goods that they need but could not afford before. Because UBI is universal, every lower-income individual is given the opportunity to do so. When everyone is buying essential goods or even non-essential goods, demand rises. The response from companies is to hike up prices, eventually making purchasing goods even harder for lower-income people. Debt is also a significant economic repercussion of UBI. As we know, a government funds a program like UBI not only by printing money, but also by borrowing from other countries. It may not seem very consequential for large countries like the US, but for smaller countries, it would severely strain their economy. Underdeveloped countries trying to implement UBI will ultimately be in debt because it would create a fiscal deficit they would not be able to recover from. It is not difficult to understand how expensive a UBI would be, and its ability to devastate an underdeveloped country’s economy and finances.
All in all, it’s safe to say that a universal income policy would come with many strings attached for everyone. Instead of investing in a one size fits all policy, governments should reform and improve existing social welfare programs.