Universal Basic Income Explained in 5 Minutes

By 2030, robots and automation will force you to think about work in a very different way.

Photo by NeONBRAND on Unsplash

Universal Basic Income (UBI) is a cumbersome topic, widely misunderstood and still unheard of by many; it’s subject to surface-level criticisms such as “How does that work? Can we afford to pay every American $1,000/month with no strings attached? Is it really even a good idea to give people free money?”

Admittedly, I knew very little about UBI just a few weeks ago. But, then I came across Andrew Yang — serial entrepreneur and 2020 Democratic presidential candidate — who explicitly laid out all the facts, data, and research behind the idea in a recent podcast. Afterwards, I spoke with several of my colleagues about it and the following setiment became very clear to me: most people know nothing about UBI.

What is Universal Basic Income?

As the name suggests, UBI, or Citizen’s Income, is a type of social security dividend paid to all members of a nation without any test or work requirements. In other words, it’s “free money” for every citizen in America. The leading proposal entails $1,000/month for every US adult.

Why Universal Basic Income?

The overt benefits of UBI include:

  • Financial stress relief
  • Decreased crime rates
  • Improved health and well-being
  • Entrepreneurial incentive
  • Support for job displacement due to automation

The cardinal justification for UBI is that last point: to combat the loss of millions of jobs due to automation and artificial intelligence (AI).

Understandably so, the average person grossly underestimates the impact of new technology coming in the next five to ten years — some reports say it’s reminiscent of a fourth Industrial Revolution. While the idea that “upright robots will take over” still feels improbable and rather absurd, we have to keep an eye on the less anthropomorphic advancements knocking at the door, threatening our work force.

Andrew Yang is running for president; his entire push rests on the notion that Universal Basic Income is inevitable and essential, given the new technologies coming to market by 2030 (something Elon Musk suggest, as well). A large part of Yang’s campaign involves simply informing the American people about the pitfalls looming if we don’t take preemptive action. These insights are worth sharing.

Automation Washing Away Jobs

The transportation industry will experience the most dramatic, and obvious, change in the next decade. With the emergence of self-driving cars coupled with Amazon’s own master plan for autonomous delivery trucks, the most common job in 29 states is about to vanish; not good news for the 3.5 million truck drivers across the country.

Despite this enormous job loss, automation of roadways makes perfect sense at scale: it’s safer, more cost efficient, and frees people up for more productive use of time. For these reasons, the highest-paying job for uneducated, 50 year-old veterans will soon be displaced. How will they react/revolt? Well, we have Labor Day for a reason ... Anyway, drivers aren’t alone. Thousands of businesses (e.g. truck stops, motels, mom and pop restaurants) in “off-exit” communities will dry up and suffer when there’s no need for breaks.

All together, roughly 5 million people will be impacted by trucking alone and it doesn’t stop there. The same scenario threatens other common jobs too: call center workers, clerical/back office specialists, Uber drivers, radiologists, insurance brokers, and so on . A comprehensive UBI plan will (hopefully) offset the intense job displacement set to unfold at a rate never before seen in history.

By The Numbers

The sum of the money needed to fund $12,000/year for every American adult is roughly $3 trillion. This total is quickly cut down to $1.8 trillion due to exclusion of those who already receive $1,000 from the government via welfare and other benefit programs. The dividend brings everyone up to a thousand (e.g. if you receive $700 from government, UBI will cover the other $300), but it won’t stack on top of this amount.

So $1.8 trillion is the number. Where does this come from?

It’s important to point out whatever money we use to fund UBI does not simply disappear; the money goes right back into the economy, especially since majority of Americans live paycheck to paycheck and spend more as they make more. That said, there are a few corollaries that will help us reach the $1.8 trillion needed.

First, we save money by improving overall welfare. If every citizen had a base-level income, crime would decrease at the margins by an estimated 10 to 20%. Of course, crime wouldn’t end completely, but there would be a sizable drop in crimes pertaining to financial gain. In addition to civil improvements, public health would benefit as well. As parents earn more income, research shows kids grow up healthier, better educated, their mental health improves, there are less hospital visits and less instances of domestic violence.

So, we cut costs at large institutions when fewer people find themselves in jails, prisons, and hospitals. When you eradicate the need for homelessness services due to UBI, the total savings equates to roughly $100–200 billion. Add on $160 billion in savings via automation of trucking (e.g. increased fuel efficiency, fewer accidents) and the total needed drops to about $1.4 trillion.

Next, according to the Roosevelt Institute , we’ll generate almost $600 billion in new tax revenue when Americans spend more money and businesses sell more product— worker productivity will rise, too. Contrary to popular belief, added financial security motivates people to be more invested in their work, involved in their communities, and enabled to start new ventures that interest them.

In business, we accept “invest in our people” as a strategy for developing talent, cultivating goals, and pursuing prosperity — why then, don’t we adopt this same approach in the public sector?

We’re left with $800 billion for UBI.

In regards to automation and AI, large tech companies are going to be the “real winners.” We need to balance the rewards businesses and consumers will see resulting from robotic advancements coming down the pipeline. A value-added tax (VAT) on large corporations is the easiest way to make sure big companies pay their fair share. Otherwise, organizations will move production offshore, they’ll work around taxes, and hide profits. A VAT ensures the parties who benefit the most in our society shoulder a proportionate, and fair, burden.

Most countries already employ a VAT — in fact, 160 out of 193 developed countries use this as a means of generating income safe from loopholes. Surprisingly enough, if America employs a VAT at half the European level, we will generate $800 billion in new revenue.

The amount of funding left? $0.

The feasibility behind Universal Basic Income is surprising. $12,000 a year is not a lot of money and it’s not meant to replace jobs, rather serve as a soft landing for those who will lose out to automation. The positive side-effects of financial security and economic vitality are worth mentioning, too.

UBI is a revisionist approach to how we think about labor and currency in the landscape of unprecedented technological change — given the integrations underway, proliferating in the coming years, it makes a lot of sense to implement something so reformative.

While the actual plan for UBI could still use a bit of fine-tuning and testing, the overarching idea provides, at the very least, something to consider in the future.

Bored, uneducated, homeless — em dashes are my specialty. I write what I see, think, and feel. That’s it.

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