Universal Basic Income: Money for Nothing or the Key to Entrepreneurialism?
I’ve never been one for keeping up with the latest crazes and trends.
I bought my first pair of skinny jeans three years after everybody else and still wear them now (even though I think we’re all meant to have moved on to the far more comfortable sounding boyfriend jeans). I’ve had the same hair colour nearly all my life; I prefer my food on plates rather than presented artistically on a slab of pine; and I cannot name a single song that was released in 2016.
However, today I’m going to share with you the hot new trend for 2017 – yes, really. Admittedly it’s a trend in world economics rather than music or fashion, but a trend nonetheless. It’s an idea that’s taken hold across the globe, from the Netherlands and Finland to Canada and even India: Universal Basic Income (UBI).
The concept is very simple: every individual, regardless of their employment status, is given a monthly non-conditional, tax-free, flat-rate payment. So whether you’re Bill Gates or a penniless student, the government will give you the same amount of money each month. The exact sum of money is a matter still up for discussion, but the general agreement is it would be enough to ensure you could cover your basic needs and “live with dignity”. In other words, enough to keep a roof over your head and food on the table. So far, so good.
Those in favour of UBI say it would remove the stigma of benefits as the current system would be replaced by one in which everyone receives something. By ensuring everyone has enough for the basics (food, shelter, amenities) there is less pressure on people to accept “any job” just to earn money, putting the power back in the hands of the employee. Companies that rely on workers willing to accept zero hour contracts or less than the living wage would have to change their offer as nobody would be desperate for a job. Onus would be on the employer to offer improved working conditions and perks that aren’t currently available.
The concept of UBI faces several criticisms, however. One is that it’s simply unaffordable: to introduce such a scheme on a national scale would most likely require an increase in income tax, particularly for higher earners. Another criticism is that it would disincentivise people not presently in employment. Fewer people working means fewer people paying tax, which would leave the state unable to run public services. Finally, some argue that people simply cannot be trusted to spend a basic income sensibly and it could end up funding alcohol, gambling, and drug addictions. Last year the idea was put to referendum in Switzerland and was overwhelmingly rejected, with a whopping 76.9% voting against it. Voters believed that to remove the link between work done and money earned would be bad for society.
I’ll be honest: the arguments for and against UBI are economical and sociological, and I am an expert in neither. For me, the most interesting argument in favour of UBI is that it would encourage entrepreneurialism and innovation. Research shows that when governments provide citizens with economic security, they embolden them to take risks. Economist Gareth Olds of Harvard University has done a lot of research into the links between social security and risk taking in America. He found that entrepreneurs are actually more likely to receive benefits than other Americans because the financial safety net inspires a “nothing to lose attitude”. Olds claims that “If you can guarantee some kind of a floor that if the venture fails, their kids will still have health insurance, that they’ll still be able to eat — then they’re more willing to take on a risk. And… that’s very important to firm-creating and economic growth.”
Entrepreneurs are good for the economy for a number of reasons, most obviously because they create jobs. Like him or loathe him, Donald Trump employs over 22,000 people through his various business ventures. What might the rest of us be able achieve if we started out with the financial security he did? Entrepreneurs innovate – any invention you can think of from the hoover to Twitter involved somebody taking a risk. We require innovation to improve and develop as a country. I’m reminded at this point of a cartoon of a stone age man offering up a round wheel to two men dragging a cart along on square bricks. “No thanks!”, they say in response. “We’re too busy to try that!”
It’s an idea I can relate to having recently changed career. Once I’d decided I wanted to pursue a career as a freelance writer, I spent the next 18 months saving almost half of my salary to act as a safety net. I was fortunate to be in a position where I could save, but many aren’t. If I’d known that, whatever happened, I’d have enough to pay my bills and buy cheese then there’s no doubt I’d have attempted a career change earlier. Is the world better off now I’m a freelance writer? Possibly not. However, I am the happiest and healthiest I’ve been for a decade as a result of flexible working hours that have given me a work-life balance.
Which leads me to my final point. There is a direct correlation between income and mental health problems. 42% of women and 27% percent of men living in poverty suffer depression, compared to 15% of men and 25% of women in the highest income quintile. Whilst Universal Basic Income wouldn’t solve everyone’s problems overnight, it would remove at least some of the financial worries and stress – which so often drive people to drink and drugs in the first place.
So on the one hand UBI could make us a happier, healthier country emboldened to take risks. On the other, it could turn us into a bankrupt country of couch potatoes. The reality probably isn’t quite so simple and we won’t know until we try. As always, Finland are ahead of us on this one and start their trials this month, and Holland, India, Kenya, and Canada all have plans to trial it by the end of the year. Councillors in Scotland are now putting together a proposal for the UK’s first trial of UBI in Glasgow. The idea is gaining momentum – you heard it here first.