Unveiling The Largest Ever Study On Universal Basic Income

Andrew Yang and Universal Basic Income

In the 2020 Democratic Party’s presidential nomination, Andrew Yang emerged as a unique candidate. He gained attention for his promise to provide everyone with $1,000. Yang's campaign strategy was similar to Trump’s 2016 campaign, as it focused on a single issue - universal basic income (UBI). Yang's UBI proposal was straightforward. Every individual in the country, regardless of their financial status or age, would receive a fixed amount of $1,000 per month. Despite criticism from his party about the idea of giving rich people $1,000 per month, Yang insisted on the universality of the payment. He believed that by ensuring everyone gets $1,000, it would avoid incentive issues and the bureaucracy that comes with typical welfare programs.

The Reasoning Behind UBI

Yang suggested several reasons for implementing UBI. His primary concern was the potential displacement of many low-skilled jobs due to technological advancements. UBI, he believed, would prepare the country to support these displaced workers. However, Yang suggested other benefits of UBI beyond a safety net. He claimed it would allow people to be more creative and entrepreneurial. A guaranteed income would provide the security people need to pursue their passions, start businesses, or return to school. He argued that contrary to critics' claims, UBI would not increase laziness but would boost productivity. Some UBI supporters even argued that it could make the government smaller by replacing the current complex welfare system. However, no advocate has yet provided a realistic path towards abolishing current welfare programs.

Evaluating the Impact of UBI

A recent study titled "The Employment Effects of a Guaranteed Income: Experimental Evidence from Two U.S. States" conducted by researchers Eva Vivalt, Elizabeth Rhodes, Alexander W. Bartik, David E. Broockman, and Sarah Miller, aimed to evaluate the impact of UBI. The study involved an experiment where 1,000 low-income individuals received $1,000 per month unconditionally for three years. The results were surprising. The transfers led to a reduction in annual total individual income of about $1,500 compared to the control group. This was because people worked less and stayed unemployed for longer. Other adult members of the household also worked less, and the unemployment duration increased by 1.1 months for recipients. The study found no significant differences in the types of jobs participants applied for, and there were no notable changes in the quality of employment. While there was an increase in entrepreneurial intention, it did not translate into actual entrepreneurial activity. The study also found no significant improvements in education outcomes.

What Did People Do With Extra Time?

The study found that people used the extra time they gained from working less to relax. The authors concluded that participants reduced their labor supply because they placed a high value on additional leisure. A detailed breakdown of time usage showed that the most significant increases in time were spent on non-commuting transportation, social leisure, and solitary leisure. Some time was also spent on home production and self-care. Conversely, people spent less time working, sleeping, caring for children, generating income, and engaging with their communities. There was also a decrease in time spent on self-improvement, job searching, and exercise.

Implications for UBI Advocates

The evidence suggests that UBI would cause people to work less and relax more. Therefore, if the case for UBI is built on unleashing human creativity, it seems UBI may not be the solution.

Bottom Line

The largest ever study on Universal Basic Income provides some interesting insights into how people might behave if they receive a guaranteed income. It appears that rather than unleashing a wave of creativity and entrepreneurship, people might choose to work less and enjoy more leisure time. The implications of these findings are significant and could shape future debates on the viability of UBI. What are your thoughts on this matter? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, available every day at 6pm.