Universal basic income has a few different names depending on what country you were speaking about. But the concept behind it remains the same. In short, it is a guaranteed income for every citizen regardless of their job income or their gender. 

The only factor that would influence the rate of change for their universal basic income would be their age. Everyone would be entitled to it and receive it automatically at established intervals. 

The goal would be to abolish poverty and this would be a significant part of that movement. With that in mind, let’s take a closer look at how a universal basic income could look in America. And also, how it does look in places that have already implemented it.

Reality of poverty

Sounds like a dream doesn’t it? Presently, forty-six million Americans are living in poverty. 75% of American workers are living paycheck to paycheck. What happens if an unexpected expense occurs? All in all, half of all Americans live in poverty or are low income.

The American government defines poverty as a family earning less than $24,000. While low income is defined as earning less than $48,000. When you consider these facts, universal basic income seems like an obvious solution. For not just America but multiple countries who are facing a similar problem. 

While this issue seems like the obvious answer it’s a rather complex proposal. The intention is to stabilize economies and elevate people out of poverty. Studies have proven time and time again that economies that have lower rates of poverty have higher rates of growth. 

Property is not just about being poor. There are several rippling affects of poverty. When you’re poor it impacts your mental health. You’re more likely to experience depression, anxiety, stress and suicide. 

The ripples of poverty

Poverty leaves people less likely to be able to afford to get the support to overcome these health issues. Physical health is another area that strongly impacts poor people. The reason for this is because poverty impacts every facet of your life

If you’re poor you can’t afford good quality food just as you cannot afford medicine. If you’re unable to afford either one of these things your health will consequently be negatively impact. While this may not happen immediately it is inevitable. 

Arguably, just considering these two factors alone -focussing around health- it seems reasonable to assess the situation as being expensive. Poverty is expensive. Not just for the individual but for society as a whole. 

If someone is struggling with their mental or physical health, they will also struggle in their job and personal life. The former impacts the business directly but also the economy. The latter impacts families and successive generations, thus continuing the cycle of poverty. 

Economic impact

On the face of it a universal basic income would seem like it could hinder the economy. At least that’s how it would seem to anyone who does not understand economics. However, regions and countries that provide a living wage for citizens, have seen successful results in their economies.

People opposed to universal basic income claim that it would result in harmful inflation. There is no data to support that being true. In all of the places a universal basic income has been implemented, inflation has remained unaffected or declined. Including Alaska.

If an increase in demand leads to an increase in production, prices go up. Prices can also go up due to a rise in the cost of goods, or wages. This is inflation how inflation works. Since we’ve dispelled the argument about wages, let’s look at the rest.

If people are earning more, will they consume more? Will they drive up the cost of goods due to an influx in demand?

A shift in spending

Poor people typically spend more money in almost every category of necessary spending. When we think back to what causes inflation, it’s reasonable to speculate that spending would not increase, but shift.

Based on income allocation, low income homes currently outspend middle and upper income earners in a few key areas. They include housing, utilities and healthcare (by a LOT). Middle income earners only outspend low and upper income people are in one area. Transportation and gas.

So, where upper income earners are outspending the other two groups? They spend a larger part of their income in more categories than the other two groups combined.

This includes include clothes and shoes, entertainment, education (by a LOT) and retirement savings (by a LOT). They match middle income earners on dining out.

Half of all Americans don’t meet the above survey’s benchmark for middle income households. In another survey, half of all Americans spend half of their income on basic essentials.

Likely outcomes

We can use this information to make a reasonable guess about what the economy would look like with a universal basic income. In American specifically at least. We know how a universal basic income pans out elsewhere.

It stands to reason that if people were spending less money on basic necessities, they would simply spend their money on other things. As illustrated by the spending habits of the upper income households.

This would not result in an increased demand overall. Simply a shift in what is in demand. However, even if it did result in an increased demand, would this not mean more job opportunities? More economic development? Inflation is not always a bad thing, but it does sound scary to people who don’t understand it.

People will spend the money on drugs and alcohol

There is some concern around the universal basic income proposal. The two biggest concerns are the fear that the money would be spent on drugs and alcohol by individuals. However studies have disproven this more than once.

In fact, there’s a link between drug use and poverty. Same can be said about mental health issues such as depression. This is all due to the lifestyle created from poverty. 

As an aside, lifting people out of poverty could create countless job in the mental health field. One of the greatest barriers to accessing mental health services is finances.

Anyway, there is no proven correlation between a universal basic income and elevated drug and alcohol use. But I felt it was necessary to bring some common sense into the equation so we could come to the same conclusion.

People will be lazy

Another criticism is that universal basic income will make people lazy. Lazy in this claim is defined as demotivating people to seek employment. Some studies on this are a bit inherently flawed.

But the ones that have not permitted a bias, have produced two results. Citizens either prove this claim to be untrue. Or the universal basic income has zero effect on their motivation. The theory that it makes people lazy has yet to be supported with any sort of credible evidence. 

In fact a recent study of the Alaska Permanent Fund Dividend (APFD) indicates this belief was completely unsubstantiated. There was a study conducted in 2008 and again in 2009 that uncovered similar findings. The APFD is still providing residents with a universal basic income to this day.

Capitalism’s part

At the same time, it would be amiss to not call out the capitalistic nature of America. What would stop employers from petitioning for a lower minimum wage? What’s to stop politicians from removing the universal basic income just as citizens come to depend on it? 

The only way around these issue is through unions to protect workers and a living wage in every state. In my opinion, THESE are the real issues to the universal basic income; capitalistic greed and political corruption. 

So while it would seem universal basic income is a viable solution for America’s poverty epidemic, there needs to be a series of steps preceding it’s implementation to ensure it’s integrity and longevity are protected. 

The Next Step

It would seem the only legitimate obstacle to implementing this plan is the overall cost. Politicians have spoken on this issue before. And no one can put a tangible number to what it would look like from a monetary perspective to implement this in Canada or the United States. 

Poverty costs America five hundred fifty billion dollars a year. It also results in citizens being unable to contribute to the economy in any meaningful or long-lasting way. The cost of lifting everyone up to the poverty line would be less than one hundred seventy-six billion.

Yes, ending poverty would cost America less than 1/3 of what it costs the country to maintain it. So don’t let anyone convince you there isn’t money to fund poverty abolishment initiatives like universal basic income. There’s money. And that’s before we get into things like progressive taxes.

Implementing this program is guaranteed to improve the overall well-being of citizens and potentially reduce the strain on healthcare services. Not to mention, the near three hundred seventy-five billion dollar annual savings from eliminating poverty.

When you consider all these elements, the real question is; can America afford NOT to implement a universal basic income? Who is currently profiting from poverty? Also, why is a progressive tax not something more citizens are in support of? It would not only help fund a universal basic income, but it would also help abolish poverty and homelessness.