014 015 working at its full capacity and isn’t achieving its market goals; to achieve the best allocation of scarce resources. In theory, providing UBI would create a disincentive to work. But is this a bad thing? This could instead encourage people to pursue education, training, entrepreneurship, and unpaid care workers, positively benefiting society as a whole. The main concern is increasing unemployment; however, the evidence does not support this. A number of pilot studies have been conducted, including the Canadian and Alaskan Mincome experiment, that found minimal reductions in work effort associated with cash transfers. Thirdly, we must assess the macroeconomic effect of UBI on the economy. According to the U.S. bureau of economic analysis, in 2021, consumer spending made up 68% of GDP in the United States. Simulation models tell us of the positive multiplier effect UBI has on GDP, giving people more disposable income to spend, thereby increasing aggregate demand, which is the cause behind economic growth, one of the main macroeconomic objectives. This shows us that implementing a universal basic income may be able to stimulate economic growth in our society, benefitting everyone. By contrast, we must also look at the fiscal implications of financing a universal basic income policy, the greatest issue behind creating a UBI policy. How could UBI be funded you might ask? Taxation is the only way we can finance UBI and provides one of the biggest disadvantages of providing UBI. Whether that be through progressive income taxation, wealth taxes, carbon taxes, this is the only way of providing UBI. Governments already struggle with funding basic essentials, take, for example, the UK government and its problems funding the NHS. The lack of funding for the NHS has had huge impacts on the UK, failing to provide adequate healthcare for everyone, something the NHS promises. Perhaps the government needs to figure out its problems with healthcare first, before thinking about providing universal basic income to everybody. However, if UBI is used to replace inefficient social welfare programs and tax expenditures, it has been shown during UBI simulations that financing UBI through progressive taxation could possibly be money saving, but only if provided at the most efficient level. Designing a sustainable and equitable funding mechanism for UBI requires careful consideration of distributional impacts, taxes, political acceptability, and constant administration. But providing an incremental approach to UBI implementation, such as beginning with targeted cash transfers towards the disabled, specific poverty issues such as child poverty, or the elderly, and then working towards expanding the coverage may mitigate these risks. To conclude, UBI is a regular amount of money given to every adult citizen, with the goal of reducing poverty, and stimulating economic growth. Overall, I believe the benefits outweigh the negatives, as the possibility to significantly reduce poverty is immense, and the macroeconomic benefits are generally positive with the possibility to stimulate growth. However, there would still be many problems with implementing this, primarily the funding, but also the effect on labour market participation. The economics of Universal Basic Income Braden Greenwood Universal basic income. Many of us have heard the term, but what actually is it? What effect would it have on the economy, how do we finance it, and what the issues with it? Should it be implemented, and if so, why would it be implemented? Universal basic income, or UBI, is a government policy in which every adult citizen is given a regular amount of money as a basic income. This means that every week, month, or year (depending on the policy), you would essentially receive a cheque from the government to do with as you please. Sounds great! But why would the government do this? The government’s primary reasoning behind providing UBI is to reduce poverty, but additionally it can have other benefits such as stimulating economic growth. But, in order to determine whether we should or shouldn’t input a universal basic income, we must first determine the impacts of introducing one. Primarily, the potential to provide a fairer distribution of income. In the United States alone, according to the U.S. Census Bureau in 2021, the official poverty rate in 2020 was 11.4%, with 34 million people living below the poverty line. This is a huge number and is clear evidence that there is need for something to counteract this. A study by the Roosevelt Institute estimated that providing $1,000 per month for all U.S. adults could reduce the poverty rate by over 40%, and significantly increase the quality of life of the other 60%. This means that many of these people can have regular, healthy eating habits, pay off bills and begin to pay back debts, afford electricity and heating, and gain many essential benefits that the rest of us take for granted. Applying this to a grander scale, the world bank states that approximately 700 million people today live in absolute poverty, where they are living on less than $2.15 per day. We have been working hard to reduce this number, with taxes, education, minimum wages, and benefits, but often it just isn’t enough. But perhaps introducing a universal basic income is a way to reduce this inequality, providing a regular income floor for vulnerable populations, thereby reducing the risk of absolute/partial poverty. If we could apply the same poverty reduction rate of 40% to this, we could save up to 280 million people from living in absolute poverty. On the other hand, we must also look at the effect on labour market participation, wages, and productivity. There is a worry that providing a UBI would produce disincentives to work, negatively effecting the economy by increasing unemployment rates, leading to market failure, as the economy is not producing at its best rate. In the UK, labour participation rate in May 2023 for people above the age of 16 was at 62.8%, meaning much of the population is unemployed, tied up in education, or retired. This tends to be bad for the economy, as it means that the population is not
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