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UniversalBasicIncomeintheUSandAdvancedCountries
HilaryHoynes,UniversityofCaliforniaBerkeley
JesseRothstein,UniversityofCalifornia,Berkeley
August15,2018
ABSTRACT:
WediscussthepotentialroleofUniversalBasicIncomes(UBIs)inadvancedcountries.Afeature
ofadvancedeconomiesthatdistinguishesthemfromdevelopingcountriesistheexistenceof
welldeveloped,ifoftenincomplete,safetynets.Wedevelopaframeworkfordescribing
transferprograms,flexibleenoughtoencompassmostexistingprogramsaswellasUBIs,and
usethisframeworktocomparevariousUBIstotheexistingconstellationofprograms.AUBI
woulddirectmuchlargersharesoftransferstochildless,non-elderly,non-disabledhouseholds
thanexistingprograms,andmuchmoretomiddle-incomeratherthanpoorhouseholds.AUBI
largeenoughtoincreasetransferstolow-incomefamilieswouldbeenormouslyexpensive.We
reviewthelaborsupplyliteratureforevidenceonthelikelyimpactsofaUBI.Wearguethatthe
ongoingUBIpilotstudieswilldolittletoresolvethemajoroutstandingquestions.
Keywords:safetynet,incometransfer,universalbasicincome,laborsupply.
ThispaperwasinvitedforaSymposiumonUniversalBasicIncomeinAnnualReviewof
Economics.WethankJamesHawkins,KristaRuffini,andRachelYoungforexcellentresearch
assistance.
1
I. Introduction
UniversalBasicIncome(UBI)proposalsaregettingalotofattentioninthehigh-income
countries.Awiderangeofproponents,fromCharlesMurray,apoliticalscientistandscholarat
theAmericanEnterpriseInstitute,toAndyStern,formerpresidentoftheServiceEmployees
InternationalUnion,havebackedtheidea.Wecountsixrecent,high-profiletradebooks–
includingthosebyMurrayandStern–arguingforUBIsassolutionstoproblemsfacingfirst-
worldeconomies(Murray2016;Stern2016,Lowrey2018,Yang2018,Hughes2018,VanParijs
andVanderborght2017).UsingametricofmentionsinNewYorkTimesarticles,“universal
basicincome”appears30timesin2017,andnearlyasmanyinthefirstsixmonthsof2018.The
termneverappearedbefore2014;eventhemoreexpansivesearchtermof“basicincome”
averagedonlytwousesperyearfrom1945to2014(Figure1).
Attentionmayberunningaheadofactualpolicydevelopment:thereislittleagreementor
definitionwhatexactlyaUBIis.Andbasicquestionsremainunresolved:aboutwhatspecific
problemstheprogramismeanttosolve;abouthowtheprogramrelatesandcomparestoother
existingtransferprograms;andaboutthekeyresearchquestionsthatneedtobeanswered.
Ourpaperattemptstofillthisgap.WecomprehensivelyexaminethepotentialroleofUBIsin
advancedcountries.1
WetakethreefeaturestodefineaUBI:
a) itprovidesasufficientlygenerouscashbenefittoliveon,withoutotherearnings;b) itdoesnotphaseoutorphasesoutonlyslowlyasearningsrise;andc) itisavailabletoalargeproportionofthepopulation,ratherthanbeingtargetedtoa
particularsubset(e.g.,tosinglemothers).Aswediscussbelow,manyproposalsandprogramsthatusethenameUBIdepartfromthis
canonicalstructureinimportantways.Indeed,someauthorswoulddisagreewithourdefinition
–forexample,VanParijsandVanderborght(2017)wouldincludesmalltransfersthatmeet
criteria(b)and(c)butnot(a)asUBIs.
Webegin,inSectionII,bydiscussingarangeofproblemsforwhichaUBImightbeseenasa
solution.OnecommonlycitedreasontoadoptaUBIisthecombinationoflabor-displacing
technologicalchange–journalistAnnieLowreycallsthis“therobotapocalypse”(Lowrey2018)
–andrisinginequalityandwagestagnation.Alternatively,aUBImightbeseenasaresponseto
perceivedinadequacies--ineffectiveness,inefficiencies,unfairness,orinsufficiency--ofthe
currentsocialsafetynet.Thesearequitedifferentmotivations,withimportantimplicationsfor
theprospectsofaprogramthatcouldrepresentasubstantialincreaseinthegenerosity(and
cost)oftransferpaymentsrelativetoexistingprograms.
InSectionIIIwedevelopaframeworkforcomparingawiderangeoftransferprograms,anduse
thistoplacetheUBIwithinthecontextofthecanonicalincomesupportprogramsroutinely
1
ThereisalsoanactivediscussionaboutUBIsinpoorcountries,wheretheissuesandexistinginfrastructureare
quitedifferent.SeeBanerjeeetal.(thisvolume)foradiscussionofUBIsinthatcontext.
2
providedbyadvancedcountries.Ourframeworkissimplebutgeneral,usingsixparametersto
nestawiderangeoftransferprogramsincludingcashwelfare,in-worktaxbasedassistance,
childallowances,socialsecurityretirement,negativeincometaxes,andUBIs.Weusethis
frameworktodiscussseveralpossibleinterpretationsofthewords“universal”and“basic
income.”WealsodiscussthevariousUBIsinproposalorpilotformandhowtheycomparetoa
canonicalUBI.
InSectionIV,wediscussthedistributionalimplicationsofaUBI.FocusingontheU.S.,we
explorethedistributionoftransfersreceivedundercurrentlaw.Alargeshareofcurrent
transferspendinggoestospecificpopulations,particularlyfamilieswithchildren,theelderly,
andthedisabled,andeligibilityisoftenheavilymeanstested.AUBIwouldsubstantiallysmooth
outthecurrentlyunevendistribution,withdramaticdistributionaleffects.IfaUBIofthescale
oftencontemplatedwereintroducedontopoftheexistingtransfersystem,itwouldrepresent
averylargedownwardredistributionofincome.Incontrast,aUBIthatreplaced,ratherthan
supplemented,currentprogramswouldbelesstargeted,providingmuchlessassistancetothe
lowestincomefamilies.Comparedtotheexistingcombinationoftransferprograms,a
canonicalUBIwouldalsodirectamuchlargershareoffundstoyounger,non-disabledworkers
andtofamilieswithoutchildren(andsmallersharesgoingtotheelderly,disabled,andfamilies
withchildren).
InsectionIV,andthroughoutthepaper,weembedourdiscussionintheU.S.program
ecosystem.Whileitisnecessarytoadoptaparticularsettingtoprovidetheneeded
quantitativeanalysis,themainconclusionsofthepaperarequalitativeandwillapplyinall
advancedcountries.Itisworthpointingout,however,thattheU.S.providesmuchless
generousincometransfers,withmuchmoreofafocusonwork,thandomostotherdeveloped
countries.AUBIwouldthusbealargerchange,bothphilosophicallyandintermsofthe
distributionoffunds,intheU.S.thanelsewhere.
SectionIValsodiscussesthecostofaUBI,againintheU.S.context.AtrulyuniversalUBIwould
beenormouslyexpensive.ThekindsofUBIsoftendiscussedwouldcostnearlydoublecurrent
totalspendingonthe“bigthree”programs(SocialSecurity,Medicare,andMedicaid).
Moreover,eachoftheseprogramswouldlikelystillbenecessaryevenifaUBIwereinplace,as
eachservesneedsthatwouldnotbewellservedunderauniformcashtransfer.Expenditures
onotherexistingprogramstotalonlyasmallfractionofthecostofameaningfulUBI.This
suggeststhatafull-scaleUBIwouldrequiresubstantialincreasesingovernmentrevenue.The
impactsofwhatevertaxesareimposedtogeneratethisrevenuearelikelyoffirst-order
importanceinevaluatingtheimpactofaUBI.
InSectionV,wereturntoourtransferprogramframeworkanduseittodiscusstheincentive
effectsoftheUBI.Wediscusstheincentivesaroundlaborsupply,humancapitalaccumulation,
andentrepreneurshipaswellaspotentialimpactsonfamilyandchildwellbeing,healthandlife
satisfaction.UBIswouldrepresentasubstantialreversalofthepro-workgoalsofrecentU.S.
incomesupportpolicy.WealsodiscusshowUBIsmightaffect“stigma,”aprominent(and
3
arguablyintended;seeMoffitt1983)featureofmanyexistingtransferprograms,aswellasthe
potentialgeneralequilibriumeffectsoftheprogram.
Finally,inSectionVI,weconsidertheUBIresearchagenda.Wediscusswhatweknowfrom
researchontheEarnedIncomeTaxCredit,the1970sIncomeMaintenanceExperiments,and
cashwelfareprograms,aswellasfromstudiesofUBI-likepoliciessuchastheAlaskaPermanent
FundandIndiantribepayments.Finally,weconsiderelasticitiesfromthebroaderliteratureon
laborsupply.WearguethatalloftheseareusefulforevaluatingthepotentialimpactofaUBI,
andthatestimatesofthekeyparametersfromtheliteraturemaybemoreusefulthanimpact
estimatesfromUBIexperimentsforpredictingtheeffectsofanimplementedUBIprogram.
Nevertheless,thereareclearlimitsoftheexistingevidenceandweconcludebyoutliningthis
UBIresearchagenda.
II. Definetheproblem:WhatproblemistheUBItryingtosolve?
OnemotivationcommonlyofferedforadoptingaUBIisthatthelabormarketisnotdelivering,
orisnotexpectedtodeliver,adequategrowthofwagesandearningsforthelowerportionof
theincomedistribution.Thisissometimespresentedasthe“TheRobotsAreComing!”
argument–wecanexpect,thestorygoes,forrobotstograduallytakeoveralargeshareofthe
jobscurrentlydonebypeople,leavingseverejobshortagesanddecliningwagesinthejobsthat
remain.Inprinciple,therobotsshouldincreaseproductivityandthusdramaticallyincrease
globalrealincomes(AcemogluandRestrepo2018).Buttheconcernisthatanincreasingshare
ofincomewillgotoasmallelite(e.g.,theownersoftherobotpatents),leavingeveryoneelse
impoverished.Thus,intheautomatedworld,theprimaryeconomicproblemwillbefiguringout
income(re-)distributionschemesthatenablethevastgroupofno-longer-neededworkersto
survive,andactivitiestokeepthembusy.
Poorlabormarketoutcomesforworkersatthemedianandbelowarenotafuturistic
phenomenon.Wagesandearningsoflowerskilledworkers,particularlymen,havestagnated
overseveraldecades(Autor2014).Wageinequalitywithineducationgroupshasalsogrown.
Women’srealwagesdidnotdeclineasdramatically,butalsoshowevidentdisparitiesin
earningsgrowthacrosseducationlevel.2
Thelackofrealgrowthinwageshastranslatedtoearningsandincomestagnationthrough
muchofthedistribution.RealmedianmoneyincomeintheU.S.increasedlessthan1percent
between2000and2016(Semegaetal2017).Basedonamuchbroadermeasureofnational
income,pretaxincomeofthebottomhalfofthedistributiongrewbyonly1percentbetween
1980and2014comparedto42percentinthenextfourdeciles(P50-P90)and121percentin
thetopdecile(Piketty,SaezandZucmanforthcoming).Theshareofpost-taxnationalincome
goingtothebottomhalfofthepopulationfellfromalittleover25percentin1980tolessthan
20percentin2014.
2
Inthefiveyearsfollowing2012,inflation-adjustedwageshavestartedtoincrease,showingrealgainsforthe
lowestquintileofworkers(Shambaughetal.,2017).
4
Jobopportunitieshavealsodeclined,particularlysince2000whenemploymentgrowthbegan
toslow.Between2000and2016,thefractionofindividualsages25to54workingorlookingfor
workfellmorethan5percentagepointsformenand3percentagepointsforwomen.This
declinerepresentsacontinuationoftrendsinmalelaborforceparticipationsincethe1960s,
thoughthedeclineforwomenismorerecent(BlackandSchanzenbach2018),andstandsin
starkcontrasttotheincreasesinfemaleparticipationacrossmostotherdevelopedcountries
(EconomicReportofthePresident2015).
Alargeliteratureexploresthecausesofthesetrendsininequalityandwagestagnation.
Technologicalchangeisonecommonexplanation(e.g.,AcemogluandAutor2011),butothers
includetradeandglobalization(e.g.,Autor2014;Autor,Dorn,andHanson2016),changesin
labormarketinstitutions(e.g.,afallintherealvalueoftheminimumwage,Lee1999),declines
inworkermobility–bothgeographicandjob-to-jobmobility(Molloyetal.2016)–andrising
monopsonypower(Azaretal.2017).
Regardlessoftherootcause,itisclearthatless-skilledworkersareexperiencingstagnationin
wagesandjobopportunities.Inthatsense,therobotapocalypsescenarioisalreadyhere.AUBI
canbeseenasaresponse.Itwouldtransferaportionofnationalincomefromcapitalowners
toworkers(andnon-workers),allowingthemtolivebetterlivesthanlowmarketwagescan
support,andcouldevensupportmarketequilibriawithhigherwages.
AdistinctargumentforaUBIisthatitcouldreplacethecurrentpatchworkoftransfer
programsintheUnitedStates,therebyavoidingthehighcumulativemarginaltaxratesimplicit
inmanyexistingpovertyprograms,suchascashwelfare(Murray2016).Thesehighratesare
claimedtocreate“welfaretraps,”keepingpeopleonwelfarewhowouldbebetteroffinpaid
jobs.3
AUBI,tosome,wouldradicallysimplifythetransfersystem,reducingperverseincentives
whilestillensuringaminimumlevelofincomeforthosewhoaretrulyunabletowork.
Thisargumentstandsincontrasttothe“robotapocalypse”argument:IfaUBIisintendedto
addressthedisappearanceofjobsduetotechnologicalchange,thelaborsupplyeffectsarenot
firstorder,andindeedonemighthopefordeclinesinlaborsupplyasworkersarefreedto
choosenon-employmentoverpoorlycompensatedwork.ButaUBIintendedtoavoidwelfare
trapshasanexplicitgoalofincreasinglaborsupply.Wereturntothisbelow.
AthirdsetofargumentsforaUBIis,likethesecond,groundedininadequaciesofourcurrent
safetynet,butcomesmorefromconcernwithinsufficientbenefits.Therearemanyholesin
ourcurrentwelfaresystem,particularlysincethe1990swelfarereform,withmanylow-income
families(particularlybutnotexclusivelythosewithoutchildren)receivingnobenefitsatallor
onlyveryminimalbenefits.Forsomeadvocates,aUBIrepresentsamorecomprehensiveand
3
Inpractice,withlargenegativetaxratesthroughtheEITC,andwiththedeclineincashwelfareandtherationing
ofhousingbenefits,cumulativemarginaltaxratesareactuallynegativeatlowincomesandpositivebutmodestin
magnitudeinprogramphase-outranges(KosarandMoffitt2017).
5
politicallydefensiblesafetynet,onethatreachesalloftheneedyandnotjusta
demographicallytargetedsubset.Theyarguethatamoreuniversalistapproachwouldalso
reducethestigmaofprogramparticipationandpossiblymovetheconversationawayfrom
assessmentsofthedeservingnessofthepoor.
III. WhatisaUniversalBasicIncome?
Anumberofdifferenttransfers,withquitedifferentcharacteristics,havebeendescribedas
UBIs.Therearetwoimportanttermstodefine:“universal”and“basicincome.”
Webeginwiththesecond.Generally,a“basicincome”islargeenoughtomeetafamily’sbasic
needsallonitsown,withoutearningsorothersourcesofincome.4
Thisisoftenoperationalized
asprovidingassistancetoensurefamilyincomeisatorabovethepovertylevel.Somealso
interpret“basic”toindicateabasethatmightbesupplementedbyotherincome,implyingthat
thetransferisnotreducedasearningsrise,atleastoversomerange.
Thefirstterm,“universal,”ismoreambiguous.Inourreading,universalreferstothreedistinct
designfeatures:
- Availabletoeveryone,withouttargetingbasedonfamilystructure,presenceof
children,age,ordisabilitystatus.
- Paidtothosewithoutearnedincome,andevenwithoutanyefforttofindwork.
- Paidtothosewithrelativelyhighearnedincome,sonotsimplyaprogramforthosein
deeppoverty.
AnidealizedUBImighthaveallthreeoftheseuniversalityfeatures,butmanyproposalsdonot.
Afullyimplementedprogramwiththeseuniversalandbasicincomeelementswouldbe
extremelyexpensive.Auniversalpaymentof$12,000peryeartoeachadultU.S.residentover
age18wouldcostroughly$3trillionperyear.5
Thisisabout75percentofcurrenttotalfederal
expenditures,includingallon-andoff-budgetitems,in2017.(Ifthoseover65wereexcluded,
thecostwouldfallbyaboutone-fifth.)Thus,implementingthisUBIwithoutcutstoother
programswouldrequirenearlydoublingfederaltaxes;eveneliminatingallexistingtransfer
programs–abouthalfoffederalexpenditures–wouldmakeonlyadentinthecost.Tobring
thiscostdown,mostUBIproposalsandpilotsinthedevelopedworldfailtomeetthe
conditionsofthecanonicalprograminsomeway,eitherbyreducingthepaymentbelowa
subsistencelevelorbylimitingeligibilitybasedonincomeorotherfamilycharacteristics.
A. AFrameworkforComparingTransfers
4
VanParijsandVanderborght(2017)wouldcallevenasmallamountabasicincome.Sometimesanamounthigh
enoughtoliveoniscalleda“fullbasicincome,”withsmalleramountscalled“partialbasicincomes”
(https://basicincome.org/basic-income/).
5
Thiswouldbringanon-elderlyadultlivingalonenearlytothepovertyline($12,752in2017).Thecombined
paymentstomarriedcoupleswouldputthemsomewhatabovethepovertyline,whilesingleparentfamilies
wouldremainbelowit.
6
TounderstandthepotentialimpactofaUBI,itishelpfultoexplorehowitwouldcompareto
existingtransferprograms.SomeoftheseprogramshaveUBI-likecharacteristics,whileothers
quiteclearlycontrastwithaUBIintheirgoalsanddesign.
Weproposeasimpleframeworktocapturemanyofthedesigndifferencesamongexistingand
proposedtransferprograms.Mosttransferprogramsinadvancedcountriescanbe
approximatedas:
! ", $ = & " ∗ min(, + .$,/,max(/ − 3 $ − 4 , 0))whereBisthetransfer(orbenefit)forafamilywithcharacteristicsXandearningsorincomeY,
andtheparametersare:
- G(for“guarantee”):thetransfertoafamilywithzeroearnings.
- S(for“subsidyrate”):Therateatwhichthetransfergrowsasearningsriseabovezero.
- M(for“maximumtransfer”):Themaximumtransfer,reachedatearningsof(M-G)/S.
- P(forbeginningof“phaseout”ofthetransfer):Thehighestearningsafamilycouldhave
andstillreceiveM.
- T(for“taxrate”):TherateatwhichthetransferisreducedforearningsaboveP,untilit
reacheszerowhenearningsequalP+M/T.
- E(for“eligibility”):Adefinitionofwhichindividualsorfamiliesareeligible(basedon
factorsotherthanearnings/income)fortheprogram.Thisisoftenreferredtoas
“categoricaleligibility.”WecanthinkofitasafunctionE(X)mapping(non-earnings)
characteristicsXtoanindicatorforeligibility.
Figure2showsagenerictransferprograminwhichallofthefirstfiveparametersarenon-
trivial(G,S,M,andTarenon-zero,andPisfinite).Here,afamilywithzeroearningsreceivesa
benefit(G).ThebenefitthenincreaseswithearningsatsubsidyrateSuntilreachingthe
maximumbenefitM.ThereisaflatportionwithconstantbenefitM,followedbyaphaseout
forincomeabovePatrateT.
NosingleprogramintheU.S.hasaschedulelikethis.However,thebasicfeaturesofmost
existingprograms,includingtraditionalcashwelfare,in-worktaxbenefits,retirement
programs,andchildallowances,canbecapturedbyvaryingthesixparameters.(Ofcourse,our
piecewiselinearframeworkcannotduplicateamorenonlinearschedule,butitcanbeseenas
anapproximationtoit.)Thisframework,whichcanalsocapturebothNegativeIncomeTaxes
andUBIs,clarifieswhatis“new”abouttheUBIthatisnotalreadypartofatypicaldeveloped
country’ssocialsafetynet.
B. ExistingTransferPrograms
Below,weuseourframeworktocharacterizesixtypesoftransferprograms.Parametersfor
severalillustrativeprogramsarepresentedinTable1.Wefollowthatwithadiscussionofhow
thecanonicalUBIcomparestootherincometransfersandhowproposedUBIscomparetothe
programinitspurestform.
7
1.In-workprograms:In-workprograms,thebestknownofwhichistheU.S.EarnedIncomeTax
Credit(EITC),aredesignedtotransferresourcestolowerincomeindividualswhileencouraging
work.Typicallytheseprogramsarephasedin,reachamaximum,andthenarephasedout.
Thus,theparametersM,S,PandTarenon-zero;G=0,asnon-workersarenoteligibleforthe
transfer.
UndertheEITC,eligibility(E)isclosetouniversalamongfamilieswithchildren(althoughthe
generosity[SandMinparticular]variesbymaritalstatusandnumberofchildren).Childless
workersareeligibleforaverysmallcredit,witheligibilitylimitedtothosebetween25and64
yearsold.In2017,forafamilywithtwochildren,thesubsidyrateissubstantial,S=40%;the
maximumbenefitMisover$5,500/year;thephase-outpointPisquitehigh,closeto$20,000in
annualearnings;andthetaxrateonearningsabovethatpointisaboutT=21%.Asaresult,two-
childfamilieswithearningsashighas$45,000(or$55,000formarriedcouplefamilies)canget
positiveEITCtransfers.Aswewillsee,thisisamuchhigherbreak-evenpointthanundereven
themostgenerouswelfareprograms.
TheChildTaxCredit(CTC)isanin-workcreditwithasimilaraggregatecosttotheEITCbutwith
muchlessincometargeting(seethediscussioninHoynesandRothstein2017):S=15%(andthis
onlyappliestoearningsabove$3,000),M=$1,000perchild,P=$75,000($110,000formarried
couples),andT=5%.AswiththeEITC,fortheCTC,G=0.The2017taxreformbillraisedMto
$2,000perchildandPto$200,000($400,000formarriedcouples).
2.Cashwelfare:Cashwelfareprogramsprovideanincomefloor(G>0,S=0,andM=G).Itis
commontohavezeroorlowearningsdisregards(P)andhightaxrates(T)thatensurethat
benefitsfullyphaseoutatrelativelylowearningslevels.IntheU.S.(thoughnotinallEuropean
countries),cashwelfareprogramshavetightlyrestrictedeligibility,andaremainlylimitedto
singlemothers,thedisabled,andtheelderly.
IntheU.S.,thecashwelfaresystemforsingleparentfamilieswasdramaticallyreformedin
1996.Priorto1996,AidtoFamilieswithDependentChildren(AFDC)programprovidedcash
welfare.TheguaranteedincomeGvariedbystate,andforafamilyofthreerangedfrom$190
permonthinMississippito$1,100inSuffolkCountyNY(in2017dollars);themedianstateset
G=$600,orabout36percentofthefederalpovertylineatthetime(U.S.Houseof
Representatives1996).Familiescouldonlyearnasmallamount(P=$190/monthwasatypical
figure)beforebenefitswerephasedout.6
Finally,thetaxrateTwasverylarge,atleast66%
withT=100%formostoftheprogramhistory.ThecombinationofthelowGandPandvery
highTimpliescompletephaseoutoftransfersatverylowearningslevels–around$8,600per
yearforafamilyofthreeinthemedianstate(2017dollars).
In1996AFDCwasreplacedbyTemporaryAssistancetoNeedyFamilies(TANF).Allstateswere
requiredtoimposestrictworkrequirementsandlifetimetimelimitsforprogramreceipt
6
Pvarieddependingonhowmanymonthstheindividualhadearnedincome.Thisfigureappliedapplyafter8
consecutivemonthsofearnings.
8
(Moffitt2003).Inourframework,thiscorrespondstofurthertighteningofE.Stateswerealso
givenflexibilityregardingtheotherparameters.TheyvariedinhowmuchtheytightenedE,and
somestatesattemptedtomakeitpossibletocombineworkwithTANF,atleasttemporarily,via
increasedPandreducedT.
OthersimilarlystructuredprogramsincludeGeneralAssistance(GA)programs,smallpayments
forindigent,non-disabledadultswithoutchildren,andtheSupplementalNutritionAssistance
Program(SNAPorfoodstamps).GAprogramshaveverylowM.SNAPphasesoutrelatively
slowly(T=30%)andeligibilityextendsto130%ofpoverty.
3.Cashwelfareforindividualsunabletowork:Mostcountrieshaveseparatecashwelfare
programsforthosedeemedmedicallyunabletowork,suchasthedisabledorlow-income
elderly.Theseprogramsprovideanincomefloorandtypicallydonotattempttoencourage
work,sosetG>0,S=0,andM=G.Manyexplicitlylimitbenefitstothosewhodon’twork(P=0,T
isinfinite),whileothersphaseoutrapidly.
IntheU.S.,SupplementalSecurityIncome(SSI)andSocialSecurityDisabilityInsurance(SSDI)
providecashwelfaretothedisabled(and,forSSI,theelderly).SSIismoregenerousthan
AFDC/TANF:in2017thefederalguaranteewasG=$735/monthforsingleindividualsor
$1,103/monthformarriedcouples.Theprogramaccommodatessomeearnedincomewith
T=50%onearnedincomeaboveP=$85/month.SSDIisbasedonpastearningsandrestrictedto
thosedeemedmedicallyunabletowork,soG>0,S=0,M=G,P=0,andTisinfinite(thougha
“trialwork”periodallowsforshort-termworkwithP=$850/month).Averagebenefitsare
$1,063/month.
4.Publicretirementbenefits:Publicretirementprogramscanalsobepresentedinthis
framework.Eligibility(E)forSocialSecurityretirementbenefitsisachievedbysatisfyingrules
forrequiredyearsofworkandreachingage62.Benefitsareavailableregardlessofworkstatus
(G>0),andinthemostflexibleform,havenophasein(S=0,M=G)andnophaseout(Pinfinite,
T=0).AswithSSDI,benefitlevels(G)dependonearningshistory;theyaverageabout$1,368per
month.
5.ChildAllowance(CA):Achildallowanceprovidesanincomefloor(G>0,S=0,M=G)thatis
typicallyphasedoutathigherincomesandmoreslowlythantraditionalcashwelfare.By
design,eligibilityislimitedtofamilieswithchildren.
In2016,CanadaimplementedagenerousCAcalledthe“CanadaChildBenefit.”Theguarantee
isG=$4,800/year(allfiguresinPPP-adjusted2017USdollars)perchildaged0-6and
G=$4,050/yearperchildaged6-17.PhaseoutbeginsatP=$22,500withT=7%forone-child
familiesand13.5%fortwo-childfamilies;theratesincreaseatincomesaboveabout$50,000.
Thus,afamilywithonechildage3andanotherage7wouldhaveaG=$8,850/yearthatwould
bephasedoutbetweenannualincomesof$22,500and$75,000.Recently,Shaeferetal(2017)
proposeda$250permonthchildallowancefortheU.S.,withnophase-out.
9
6.NegativeIncomeTax(NIT):AnNITinitspureformisadvancedasasingleunifiedtransfer
andtaxsystem.Initssimplestform,anNITwithalineartaxscheduleprovidesforanincome
floor(G>0,S=0,M=G)thatistaxedawayatarateTwithanypositiveearnings(P=0).The
marginaltaxrateremainsTevenafterincomerisestothepointwherethebenefitisentirely
taxedaway(atY=P+M/T);individualswithincomesabovethatpointarenettaxpayers,andhelp
tofundtransferstolower-incomerecipients.
MiltonFriedmanfamouslysupportedanNITintheU.S.inthe1970s.However,therewasnot
politicalsupporttopaybenefitstonon-workers,andtheoutcomeofthedebateinsteadwas
theintroductionoftheEITC,withG=0(seethediscussioninNicholsandRothstein2016).
C. TheUniversalBasicIncomeasaTransferProgram
WedefinedaUBIaboveasatransferthatpaysasufficientbenefittomeetbasicneedswithout
earnedincome,hasbroadeligibility,andisavailablebothtonon-workersandtothosewith
relativelyhighearnedincome.Inourframework,thiscorrespondstoG>0,S=0andM=G,ahigh
(oreveninfinite)P,lowT,andminimalrestrictionsoneligibility(E).
Figure3comparestheschedulesforacanonicalUBI,theEITC,andcashwelfare.Itshowstwo
ofthedistinguishingfeaturesoftheUBI:ahighincomefloor(G),anduniversalincome
coverage(Pisinfinite,T=0).(Thethird,broadeligibility,isnotshownhere.)Amongthepolicies
listedabove,socialsecuritycomesclosesttothisideal,thoughonlyfortheelderly.Thechild
allowanceisalsoverysimilarinstructuretoaUBI,thoughinterestinglythesupportersofthese
twotypesofproposalsinpracticeexhibitlittleoverlap.
Onecanalsodrawcomparisonstootherprograms.TheUBIissimilartotheEITCandCTCin
theirrelativelyhighreachintheincomedistributionandnear-universality,butdiffersinpaying
benefitseventonon-workersand,initspureform,inreachingeventhehighest-income
families.Figure3alsoshowsamodifiedUBIthatphasesoutathighincomes,asdotheEITCand
CTC(atverydifferentpoints).Thephased-outUBIisqualitativelybutnotquantitativelysimilar
tocashwelfare.GivengeneralhostilitytowelfarerecipientsintheU.S.,itisdifficulttoimagine
awelfareprogrambeingscaledupinthisway.
Table2listsseveralUBIpilotsandproposals,withtheirassociatedparameters.Mostdonot
meetthecanonicalUBIstructure,forsakingsomecombinationofhighG,broadEand/orhigh
phaseouttoreducecosts.Forexample,Murray(2016)proposesaphaseoutatincomesabove
P=$25,000,usingataxrateofT=20%.(Murraywouldallowonlyhalfofthebenefittophase
out;theremainderwouldbepaidregardlessofincome.)YCombinator’sUBIexperimentlimits
eligibilitytothosebetweenages21and40,andtohouseholdswithincomesbelowtheir
county’smedianincome.
Ourframeworkconsidersonlypaymentsfromthegovernmenttoindividuals,notrevenues
neededtofinancethem.Giventhefirstorderissueofcost,afullunderstandingoftheUBI’s
distributionaleffectsmustincludethetaxesneededtopayforit.Asimpleassumptionisthat
10
theUBImightbepaidforbyalinearincometaxonincomeabovesomethreshold.The
combinedprogramofaUBIwiththelineartaxwouldinvolveabindingphase-outpointP,a
positivetaxrateTabovethat,andthecontinuationofthattaxrateevenafterthetransferhas
gonetozero(atpre-transferincomeP+M/T).Theneteffectwouldthereforebenegativefor
highincomefamilies.7
Amongthetransfersdescribedabove,onlytheNIThasthistaxfeature
builtin.
Alineartaxisofcourseasimplification.Givenrisinginequalityandthemotivationofoffsetting
increasingincomesharesofcapitalowners,onemightprefertofinanceaUBIthroughamore
progressivetax.Thiswouldlifttheeffectivebreak-evenpoint,withhighertaxesatthehighest
incomes.
Itisnotclear,however,whetheroneshouldthinkofthecombinedprogram,oroftheseparate
impactsofthetransferandthetaxcomponents.Separatingthetwomaycarrypolitical
benefits,byallowingevenhigh-incometaxpayerstobelievethattheyarebenefittingfromthe
UBI.
IV. DistributionalandCostComparisonsofUBItoCurrentPrograms
Here,wediscussthedistributionalimplicationsofaUBIrelativetotheexistingU.S.transfer
system.Toillustratethedemographicandincometargetinginthecurrenttransfersystem,we
presentcomparisonsacrossfamilytypesandacrossdecilesoftheincomeandearnings
distribution.
Ourdistributionalcalculationsusedatafromthe2017CurrentPopulationSurvey(CPS)Annual
SocialandEconomicSupplement,representingtheciviliannon-institutionalizedU.S.
population.TheCPSincludesmeasuresofindividual-level2016receiptandamountsofmost
majortransferprograms.8
Wegroupprogramsintofouraggregates:Meanstested(welfare)
programs,encompassingTANFandSNAP;disabilityprograms(SSIandSSDI);SocialSecurity
retirement;andin-worktaxcredits(EITCandCTC).Withinthewelfarecategory,thebulkof
spending(seeTable3,below)comesfromSNAP;withinthetaxcredits,theEITCandCTCare
roughlyequalinsize.Importantly,weexcludeallin-kindprogramsotherthanSNAP,most
notablypublichealthinsurance.Wereturntothislater.
Toaccountforeconomiesofscaleinhousingandothercosts,wesumincomefromeach
programacrossallmembersofthehousehold,thendividebytheOECDequivalencescale
(whichcountsadditionalhouseholdmembersolderandyoungerthan14ascosting50%and
7
See,forexample,Rhodes(2017),whonotesthat“Althoughauniversalbasicincomewouldbedistributedto
everyoneregardlessofincomelevel,thebenefitreceivedbyhigher-incomeindividualswouldbepaidbackintaxes
inordertofundtheprogram”(p.13).
8
WesimulatetheEITCandCTCusingNBERTAXSIM,butrelyonCPSresponsesforothertransfers.IntheCPS,the
aggregateamountoftransferincomethathouseholdsreportreceivingissignificantlylessthanadministrative
totals(Wheaton,2008;Meyer,Mok,andSullivan,2009).Wedonotadjustforunderreporting.
11
30%asmuch,respectively,asdoesthefirstadult).Werefertotheresultas“equivalized
transfersperperson.”
Wedividehouseholdsintofourmutuallyexclusivedemographicgroups.Thefirstishouseholds
withchildren,includinganyhouseholdwithatleastonepersonunder18.Next,ifthereis
anyone62orolder,butnooneunder18,weassignthehouseholdto“Householdswith
elderly.”9
Finally,householdswithoutchildrenorelderlyareseparatedintothosewithand
withoutdisabledindividuals.
Figure4showsaveragetransfersacrossthefourfamilytypegroupsalongwiththepopulation
countsrepresentedbyeachgroup.Thefigureshowstremendousvariationintheamountof
(non-health)governmenttransfersacrossgroupswiththeaverageelderlyhouseholdreceiving
$12,600perequivalizedperson,disabledhouseholdsreceiving$8,000,andnon-elderly,non-
disabledhouseholdswithandwithoutchildrenreceiving$2,200and$500,respectively.
Toillustratethedistributionofbenefitsacrosstheincomedistribution,weconsidertwoincome
classifications.First,weuseaftertaxandtransfer(ATT)income.10
Second,becauseATTincome
isinpartafunctionofthetransfersystem,wealternativelyusepre-taxearnedincome.Earned
incomeisamoreusefulproxyforfamilyresourcesfornon-elderly,non-disabledhouseholds,so
wefocusontheminouranalysisofthismeasure.Weusetheequivalencescalediscussed
abovetocompareATTincomeandearningsperequivalizedpersonacrosshouseholdsof
differentsizes.
Figure5hasfourpanels,oneforeachofourdemographicgroups.Ineachpanel,households
aredividedintodecilesbyequivalizedATTincomeperperson,andweshowmeantransfers
(perperson,equivalized)byprogramwithinincomedecile.11
Becausemeantransfersaremuch
higherforelderlyanddisabledhouseholdsthanforothers,weusedifferenty-axisscalesfor
thesegroups.Transferstotheelderlyanddisabledarenottightlyconcentratedinthelower
deciles,reflectingbroaderincomeeligibilityforsocialsecurityanddisability.12
Transfersto
familieswithchildrenarelowerandmoretargeted,thoughtaxcreditpayments(theCTC,in
particular)reachhighintothedistribution.Familieswithoutchildren,elderlyordisabledreceive
verylittleinbenefits,evenatlowincomes.
Figure6providessimilarcalculations,dividinghouseholdsintodecilesbyearningsratherthan
ATTincomeandincludingan11th
categoryforthosewithoutearnings.Amongfamilieswith
children,transferstothosewithoutearningsaresmallerthanthosetothosewithlowbut
9
Weuseage62becausemanyclaimSocialSecurityretirementbenefitsassoonaspermittedratherthanwaiting
untiltheso-callednormalretirementage.
10
ATTincomeequalstotalmoneyincomeplusnear-cashtransfers(SNAP,schoolmeals)lesstaxesowed(which
maybenegativeforfamiliesreceivingtheEITC).
11
AppendixFigure1showsthedistributionoffamiliesofeachtypeacrossdeciles.
12
Notethathouseholdscontainingdisabledindividualsbutnooneoverage62seemtoreceivenon-trivial
amountsofSocialSecurityretirementincome.Thismayreflectrespondentmis-reportingofdisabilitypaymentsas
retirementincome.
12
positiveearnings,reflectingthedeclineofcashwelfarecaseloads(Floydetal.2017)andthe
growthofin-worktaxcredits.EITCbenefitsarealargeshareofthetransferstopositive-
earningshouseholds.Inzero-earningshouseholds,thereisabitmorewelfareincome,butthe
biggerreplacementonaverageissocialsecuritybenefits(largelyforgrandparentsinthe
household).Forboth,theaverageisverylow,around$4,500perequivalizedpersonperyear,
indicatingthatmostfamilieswithzeroorlowearningsarelivingindeeppoverty.
Whenweexaminefamilieswithoutchildren,intherightpanel,theabsenceofwelfarebenefits
alongwiththeverysmallchildlessEITCdramaticallyreducestheincometransferatlowearning
deciles.Theaveragefamilywithoutearningsreceivesonlyabout$2,000inannualtransfersper
person,againlargelyfromSocialSecurity,whilelow-earningsfamiliesaveragelessthanhalfof
that.
Figures4-6collectivelyshowthedemographicandincometargetinginourcurrentsocialsafety
net,withhighertransferstotheelderlyanddisabled,highertransfersforthosewithchildren
comparedtothosewithoutchildren,andhighertransfersforthosewithlowearnings.This
impliesthatwerewetoeliminatecurrentincomesupportprogramsandapplythefunds
towardsapureUBI,therewouldbearelativeredistributionfromlow-earnerstozeroearners,
butthefirst-ordereffectswouldbeamassivedistributionuptheearningsdistribution,along
witharedistributionfromtheelderlyanddisabledtowardsthosewhoareneither,primarilybut
notexclusivelythosewithoutchildren.
OneaspectofcurrenttransfersthatisnotillustratedclearlyinFigures4-6isthesubstantial
variationwithindemographicandincomegroups.Figure7showsthedistributionoftransfers
withinearningsdecile(plusthezero-earningsgroup).Thisrevealswidedisparities,evenatthe
lowestincomes.Foreverygroupwithchildren,mediantransferstotallessthan$3,850per
equivalizedpersonperyear,andlessthan$250forthosewithoutchildren,elderly,ordisabled
members,thoughthereareaverysmallnumberoflow-andzero-earningshouseholdswith
childrenwhoreceivemorethan$10,000peryear.
Table3showsaggregatecostsandtotalcaseloadsforthemajorincometransferprograms.We
includeheresomeprogramsnotincludedinthefigures,mostnotablythetwopublichealth
insuranceprograms,Medicare(fortheelderly)andMedicaid(forthepoor).Totalexpenditures
acrossallofthelistedprogramsarearound$2.3trillionperyear,withjustunderone-thirdof
thisduetoSocialSecurityretirementbenefitsandabitlessthanhalfduetoMedicareand
Medicaid.
Table3alsoshowstheaggregatecostofacanonicalUBIthatpays$12,000toeachadult
resident,withouteligibilityrestrictionsorphase-out.13
Weestimatethatthiswouldcostabout
13
Onemightwanttoincorporatefamilysizeadjustments,asinthefamilysizeequivalizedcalculationsabove.
However,asintheU.S.federalincometaxsystem,thiswouldcreatemarriagepenalties.Wearenotawareof
seriousdesigneffortsforUBIsthatincorporatesuchcomplexities.
13
$3.0trillionperyear.Costisafirst-orderconcernforanyUBIprogramthatmightexpand
beyondapilot.
InthefinalrowsofTable3,wepresenttwopotentialnot-quite-universalbasicincomepolicies.
Onelimitstransferstoadultsunder65,whiletheotherislimitedtoadultswithbelowmedian
incomes.(Thiscanbeseenasanapproximationtoaprogramthatphasesoutgraduallyaround
themedian.)Thesereducethecostsomewhat,buteachwouldstillcostseveralmultiplesofthe
entireexistingnon-retirement,non-healthinsurancesafetynet.
Figures4-7indicatethatreplacingallexistingtransfersincludingthebigthree(socialsecurity
retirement,Medicare,andMedicaid)withaUBI14
wouldbeadramaticchange,especiallyfor
seniors.Theaveragehouseholdwithamemberover65receives$17,400inSocialSecurity
benefits,andhealthcarebenefitsthroughMedicaidandMedicarewithanactuarialvalueof
$12,900,muchhigherthanproposedUBIs.Evenassumingthatwecouldcreateahealth
insurancemarketplaceforseniors–alargeshareofwhomhavepreexistingconditions–that
pricedinsuranceatclosetoitsactuarialcost,theaverageseniorwouldseeamorethanone-
thirddeclineinhisorhertransferincome.
ButwhileSocialSecurity,Medicare,andMedicaidcouldnoteasilybereplacedbyaUBI,there
aresomeotherprogramsthatwouldbecomeredundant.Inparticular,asufficientlygenerous
UBIwouldreducetheneedfortheEITC,CTC,TANF,SNAP,andperhapsdisabilityand
unemploymentinsurance.Butthiswouldnotberemotelybudgetneutral.IfSocialSecurity,
Medicare,andMedicaidarepreserved,theremainingprogramsinTable3togetherwould
coveronlyaboutone-fifthofthecostofthecanonicalUBI.Theremainderwouldneedtobe
fundedthroughcutstonon-transfergovernmentexpendituresorthroughtaxincreases.
Alternatively,averysmall,possiblynon-universalUBIcouldbefunded,butthiswouldnotcome
closetomakingupforthelossoftheexistingtransferstothedisabledortolow-income
familieswithchildren.
Insum,aUBIwouldhavequitesubstantialdistributionalandcosteffects.Asmallerproportion
ofUBIdollarswouldgotothebottomoftheincomedistributionthanunderthecurrent
system,thoughagenerousUBI,withneededrevenuefundedbyaprogressivetax,would
increasetheabsolutesizeoftransferstothebottomandthuswouldrepresenta(potentially
verylarge)downwardredistributionofincome.Similarly,acanonicalUBIwouldgivealarger
shareoftransferstothenon-elderlyandnon-disabledthantheexistingprograms,soany
proposaltofinanceitthroughcutsinhealthandretirementprograms–thelargestsourcesof
fundsintheexistingU.S.transfersystem–wouldneedtoaddressthelargedeclinesinliving
standardsthattheelderlyanddisabledwouldexperience.
14
Murrayarguesthatthiscouldberoughlycost-neutral,thoughourestimatesdonotsupportthat.The
discrepancyreflects(a)hisinclusionofalargenumberofotherprogramstobeeliminated–includingasexamples
federalstudentloans,childcareandadoptionprograms,publichospitals,andagriculturalpricesupports;(b)
somewhatdifferentestimatesofprogramcosts;and(c)hisuseofasmallerUBIthatphasesoutandexcludesthose
under21.
14
V. EconomicissuesaroundaUniversalBasicIncome
AdoptingaUBIwouldhavearangeofconsequences.Wereviewheresomeofthelikelyeffects,
focusingonlaborsupply,humancapital,andchildren.Wefirstdiscussqualitativepredictions,
thenreviewtheempiricalevidenceinSectionVI.
A. StaticLaborSupply
Webeginwithlaborsupply,asthiseffectdominatesdiscussionsoftheeconomicsofmeans-
testedtransferprograms.Traditionalwelfareprograms,withlowphase-outpointsPandhigh
taxratesT,unambiguouslyleadtoreductionsinlaborsupplythroughnegativeincomeand
substitutioneffects.Bycontrast,theEITC,whichhaseffectivelyreplacedtraditionalcash
welfareasthemainincomeassistanceprogramforfamilieswithchildren,hasnotransferfor
non-workers(G=0)andahighphase-inrate(S),socreatesstrongincentivestoenterwork.(For
thosewithpositiveearnings,theEITCcreatesbothanegativeincomeeffectand,inthephase-
outrange,anegativesubstitutioneffect,soisexpectedtoreducehours.)
Existingprogramstructures,theshiftfromAFDCtoTANF,andtheEITCreflectageneraltrendin
recentdecadesintheU.S.towardprogramsthatattempttominimizelaborsupply
disincentives.Thesetaketwoforms.First,historicallyU.S.meanstestedprogramshaveused
“tagging,”(Akerlof,1978),limitingeligibilitytothoseinexogenouslydefinedgroupswhohave
lowpotentialtowork(orexpectationtowork).Second,currentpoliciesareincreasingly
designedtoavoidpunitivetaxrates(lowerT)andincreaseearningsdisregards(higherP).This
canalso,asinthecaseoftheEITC,includeprogramsthatuseapositiveSandnoincomefloor
(G=0)tocreateincentivestowardincreasedlaborsupply(NicholsandRothstein,2016).
UBIproposalsmovepolicyintheoppositedirection,andingeneralcanbeexpectedtoreduce
laborsupplyrelativeeithertoano-transferhypotheticalbaselineortothestatusquo.First,the
canonicalUBIgeneratesapureincomeeffectwhichwouldreduceworkontheextensiveand
intensivemargins.Second,manyUBIproposalsimposephase-outsandtheaddedP>0andT>0
leadtoafurtherworkdisincentivethroughnegativesubstitutioneffects.15
Third,thehighGina
UBIrelativetoexistingcashwelfareprogramslikelyleadstolargerlaborsupplyreductions
(thoughthehigherPandlowerTwouldarguablyworkintheoppositedirection).Fourth,the
absenceoftaggingmeansthatvastlymorepeopleareexposedtotheseworkdisincentivesthan
inourcurrentpatchworksystem.
Itisnotclearwhethernegativeeffectsonlaborsupplyareadrawback.AtleastsomeUBI
advocatessupportaUBIbecauseitwouldeliminatetheneedtoworkforsomelow-skill
workerswhoareexpectedtobedisplacedbytechnologicalchange.Inthatcase,reductionsin
workareadesiredimpact,notanunintendedconsequence.
15
Further,anypaid-forprogramwillnecessarilyrequirehightaxrates.These,too,willcreatenegativesubstitution
effects.(Theymayalsocreatepositiveincomeeffects,butthesewouldbeconcentratedamonghigh-income
workersandweexpecttheywouldbequitesmall.)
15
ArelatedpotentialimpactofaUBI,muchemphasizedbyitsbackers(e.g.,VanParijsand
Vanderborght2017),istoshiftlaborsupplyfromunpleasantjobstojobsthatcombinelowpay
withhighamenitiesand/orwithopportunitiesforhumancapitalaccumulation.Thiscanbe
seenasamanifestationoftheincomeeffect.Onemightalsogetshiftstowardjobsoffering
trainingifcreditconstraintscurrentlypreventworkersfromtakingthesejobs.Wediscussthis
below,undertheheadingofhumancapitaleffects.
Arelatedincentiveconcernsentrepreneurship.ItispossiblethataUBI,byprovidinga
predictableandpermanentincomefloor,willencouragerecipientstoexploreriskyventures.
Thisagainisbestseenasreflectinganincomeeffectand/orcreditconstraints.
Insum,anyUBIwouldbeexpectedtoleadtolowerlaborsupply,atleastintheshortrun.
Below,weexploreotherpotentiallyoffsettingchannelsthatcouldproduceapositiveeffectin
thelongerrun,oratleastoffsetthenegativedirecteffect.
B. Pre-TaxWages,HumanCapital,andLaborSupplyintheLongerRun
TherearethreepotentialchannelsforUBIimpactsonwages.First,allotherthingsequal,the
reductionsinlaborsupplyoutlinedabovewillincreasewagesforthosewhoremaininwork,
simplybymovingupthelabordemandcurve(Rothstein2010).
Second,aUBImayleadtoincreasedhumancapitalinvestments,bybothyoungpeopleand
adults.Thereisextensiveevidencethatcreditconstraintsarebindingonmanystudentsand
leadtoreducededucationalattainment(LochnerandMonge-Naranjo2012).AUBIwould
loosentheseconstraints,allowingmoreeducationalinvestment,includingon-the-jobtraining.
Effectsmightbeparticularlystrongformid-careerworkerswhoseevalueinretrainingbut
cannotforgoearningstodoso.Anyimpactonhumancapitalaccumulationwouldnaturally
translateintohigherwagesinthemediumtolongerrun.
Third,aUBIcouldhavepositiveeffectsonchilddevelopment.Transferprogramsthatincrease
families’resourceswhenchildrenareyounghavebeenfoundtohavelong-runeffectsonthe
children’sdevelopment,health,andhumancapitalattainment(discussedbelow).Impactson
earlychilddevelopmentmaytranslateintoimprovedhumancapitalaccumulationand
eventuallyhigherwages.Insofarasdynamiccomplementaritiesareanimportantpartofthe
childdevelopmentprocess(CunhaandHeckman,2007),these“twogeneration”effectsmaybe
animportantcomponentofthesocialwelfareimpactsofaUBI.
Humancapitaleffectshavefollow-onimplicationsforlaborsupplyinthelongerrun.Higher-
skilledindividualstendtoworkmore.Thus,UBIimpactsonskillimplypositiveimpactsonlong
runlaborsupply.Thesemayoffset,tosomeextent,thenegativeshort-runimpactsonlabor
supply.
16
Ofcourse,laborsupplyisnottheonlymetricbywhichtoevaluatetheUBI.TheUBIisexpected
toincreaseaftertaxincomeinthelowerportionoftheincomedistribution.Priorworkshows
thatincreasesingovernmenttransfersthatgeneratenetincreasesinresourcesleadto
improvementsinhealth(e.g.seereviewbyAlmondetal.,forthcoming).Moregenerally,life
satisfactionistheultimatemeasureofwelfareconsequences,butishardtomeasureinauseful
way.
C. Universality,Take-upandStigma
TheremaybepoliticalvalueintheuniversalaspectofaUBI,asawayofmaintaining
widespreadsupportfortheprogram(e.g.aswithuniversalprogramssuchassocialsecurityand
Medicare)andasawayofsignalingthateveryoneisvalued(Lowrey2018).Ifthisargumenthas
merit,ithasimplicationsforprogramdesignandthetaxesneededtopayforit.Ataxonnon-
UBIincomeeffectivelybecomesaprogramphase-out.Butseparatingouttheprogram,and
maintaininguniversality,fromthetaxesneededtopayforit,maybeadvantageousevenif
irrelevantfromanaccountingperspective.
AnotherimplicationofuniversalityisalackofstigmaforUBIrecipients.Inhighlymeanstested
andeligibility-restrictedprograms,participationrevealsinformationthatmanyconsider
private,andthusmaybestigmatized.Thisreducesprogramtake-upandthepotentialreach
andbenefitsofprograms(Currie2006),thoughmayalsohelptargettheprogramstothosewho
trulyneedthem.Take-upratesinAFDCwerequitelow(about50%)withstigmacitedasoneof
thereasons(Moffitt1983).Interestingly,theEITChasfairlyhightake-uprates(80%ormore,
seeScholz1994,Plueger2009),andethnographicresearchhasfoundlowstigmawith
recipientsviewingthecreditas“myworkbonus”ratherthanahandout(Halpern-Meekin,Edin,
TachandSykes2015).Howmuchthisderivesfromthe“inwork”natureofthecredit(G=0)or
itshighPrelativetootherU.S.means-testedprogramsisnotknown.TheUBIcouldleadto
similarresultsgivenauniversalstructure.
VI. Whatdoweknowfromtheresearch?
UBIsmeetingthedefinitionwelaidoutabove–largeenoughtoliveon,withoutphase-outor
othereligibilityrestrictions–haveneverbeenimplementedinarichcountryonalargescaleor
eveninapilotexperiment.WhatweknowaboutthelikelyeffectsofaUBIcomesfromanalyses
ofpoliciesthataresimilarinsomewaytoUBIs,thoughdifferentinothers,andfromthe
broaderlaborsupplyliterature.
A. Universalbutnotbasicincome
Weknowofonlytwoexamplesofuniversalprogramswithoutstricteligibilityrequirements,
thoughineachcasethetransfersaretoosmalltoqualifyasabasicincomeaswedefineit.
17
TheAlaskaPermanentFundisademogrant16
(withvaryingyearlypayments),financedbythe
state’soilrevenues.Paymentsinrecentyearsrangefrom$1,000to$2,000peryear.Jonesand
Marinescu(2018)useasyntheticcontroldesigntoevaluatetheprogramandfindthatthe
dividendhadnoeffectonemployment.Theyattributethistoapositivegeneralequilibrium
effect-theadditionalincomeleadstohigherconsumption,boostinglabordemand–that
offsetsthenegativeincomeeffect.
TheEasternCherokeeNativeAmericantribeprovidesademogranttoitsadultmembers,
financedoutofrevenuesfromtribalcasinos.Payments,around$4,000perpersonperyear,do
notdependonemploymentstatus,income,orresidenceonreservation.Severalstudies
identifyeffectsofthepaymentsusingdifference-in-differencesdesigns,comparingNative
Americanchildrenfromfamiliesreceivingthetransferstonon-Nativechildrenfromthesame
geographicareainNorthCarolina,beforeandafterthetransfersbegan.Thepaymentshad
positiveimpactsonchildren’seducationalattainmentandcriminalarrests(Akeeetal,2010)
andonchildren’semotionalandbehavioralhealth(Akeeetal.2018),thoughtheyincreased
children’sbodymassindices(Akeeetal.2013).Akeeetal.(2010)findnoimpactonlaborforce
participation,eventhoughthepaymentrecipientswerenotalargeshareofthelocallabor
forcesogeneralequilibriumeffectswereunlikely.
Thereisnoreasontoexpectthatfamilieswouldhavefeltstigmatizedforreceivingpayments
undereithertheAlaskaortheEasternCherokeeprograms.However,ineachcasethe
paymentswererelativelysmall.Itispossiblethatalargerpaymentwouldhavehadmore
transformativeeffectsonlaborsupply.Whatevidencewehavecomesfromstudiesoflottery
winners,whichdonotfindvariationinincomeelasticitieswithpayoutsize(Cesarinietal2017).
B. Programswithguaranteedincomeandlowphase-outpoints
Thereisalargerbodyofevidenceonprogramsthatprovidegovernmentincometransfersto
non-workers,withphase-outsthatbeginatlowearningslevels.
OnesetofevidencecomesfromevaluationsofAFDCandTANF.TheliteratureshowsthatAFDC
reducedlaborsupplyamongsinglemothersby10-50%relativetowhatwouldbeseenwithout
theprogram(seereviewsbyDanziger,HavemanandPlotnick1981;Moffitt1992,2003;and
Hoynes1997).Laborsupplyfornon-AFDCrecipientswasfairlylow(averaging20hours/week
includingnonworkers),however,sothemagnitudeofthereductioninhourswasnotverylarge.
AFDCeligibilitywaslargelylimitedtosingleparents,andparticipationwasheavilystigmatized.
Thosewhoparticipatedwerelikelypeoplewhohighlyvaluedthebenefit(e.g.,becausethey
weretrulyunabletowork).Thissuggeststhattheimpactonlaborsupplywaslikelysmaller
thanitwouldhavebeenwithamoreuniversalprogram.
16
Childrenandnon-citizenpermanentresidentsandrefugeesareeligible,butnewresidentsofthestatearenot.
18
NITssharethebasicfeaturesofcashwelfareprograms,buttypicalproposalshavehigherG,
lowerphase-outratesTandinmanycasesbroadereligibilityE.Nocountryhasimplementedan
NIT,butthereissignificantevidencefrompilotprograms.Inthemid-1970sU.S.Income
MaintenanceExperiments(IMEs),low-incomehouseholdsinfourlocationswererandomly
assignedtovariouscombinationsofbasetransfers(G)andtaxrates(T),inprogramsthat
phasedoutwiththefirstdollarofearnings(P=0).Forexample,intheSeattle-Denver
experiment,Grangedfrom$23,000to$34,000peryear(2017dollars),whileTrangedfrom50-
80%.
Robins(1985)usesthevarioustreatmentarmstoseparatelyidentifyincomeandsubstitution
elasticities.Hefindssubstitutionelasticitiesaround0.1-0.2(atthelowendforhusbands,abit
higherforsinglewomen,andhigherformarriedwomen),andincomeelasticitiesaround-0.1.
TheIMEslastedforjustafewyears,sosomeofthelaborsupplyresponsemayhavereflected
intertemporalsubstitution.Becauseintertemporallaborsupplyelasticitiesaregenerallyfound
tobelargerthanresponsestopermanentpricechanges,theestimatedresponsesmay
overstatetheeffectofapermanentprogram.
AroundthesametimeastheU.S.experiments,theCanadianprovinceofManitoba
implementedtheManitobaBasicAnnualIncomeExperiment(“Mincome”).Despiteitsname,
thistestedanNIT:Gwassettoaround50%ofmedianhouseholdincome,butthetransfer
phasedout(atataxrateTthatrangedbetween35%and75%)withthefirstdollarofearnings
(P=0).Estimatedeffectsonlaborsupplywerenegativebutsmallandstatisticallyinsignificant
(HumandSimpson1993).However,arecentnon-experimentalstudybasedontheMincome
“saturationsite,”aruraltownwhereallresidentswereeligibleforpayments,findsmuchlarger
negativeeffectsonlaborsupply,aresultthattheauthorsattributetocommunitycontext
effects(CalnitskyandLatner,2017).
Additional,morerecentevidencecomesfromthetransitionfromAFDCtoitssuccessor
programTANF.Priortothefederalreform,therewereanumberofexperimentsbasedonstate
waiverstotheAFDCrestrictions.Studiesofthesewaiverexperimentsandnonexperimental
evidenceonthenationaltransitionfoundincreasesinlaborsupply,reductionsinwelfare
participationpayments,andeitherreductionsinorlittlechangeinincome(Moffitt2003,Ziliak
2016).ThefindingssuggestTANFincreasedlaborsupplythroughlimitingbenefitsfornon-
workers,anaspectoftheprogramthatisatoddswiththeoriginalintentofaguaranteed
incomeprogram.Welfarewaiversthatincreasedworkdisregards(particularlythosethatdidso
withouttimelimitsandstringentworkrequirements)causedincreasesinlaborsupplyand
familyincome.
C. In-worktaxcredits(EITC)
AnextensiveliteratureusesvariationgeneratedfromexpansionsinthefederalEITCaswellas
theintroductionandexpansionofstateEITCsandfocusesonimpactsonsingleparents,who
receiveaboutthreequartersoftotalEITCcredits.Theresearchfindsthatthecreditleadsto
increasesinemploymentofsinglemotherswithlittleevidenceofreductionsinearningsfor
19
thoseinthelabormarket(HotzandScholz2003;EissaandHoynes2006;NicholsandRothstein
2016).
Thegainsinearningscombinewiththecredittoincreasefamilyafter-taxincomeandreduce
poverty.Forexample,HoynesandPatel(forthcoming)findthatamongsinglemotherswithless
thanacollegedegree,a$1,000increaseinEITCbenefitsleadstoa7.4percentagepoint
increaseinemploymentandan8.4percentagepointreductioninpoverty.HoynesandPatel
findthathalfthepovertyreductioncomesfromincreasesinearnings.Additionally,thereis
evidencethattheEITCleadstopositiveeffectsonmaternalmentalandgeneralhealth(Evans
andGarthwaite2014).
D. Laborsupplyresponseestimatesfromothersettings
Theabovediscussionfocusesonspecificprograms.Anotherwaytogaininsightintotheeffects
ofaUBIistoidentifytheunderlyingparametersthatareneededtoevaluateitsimpact.The
mostimportantparameterforunderstandingtheimpactofapureUBIonstaticlaborsupplyis
theincomeelasticity.Thishasbeenestimatedinawiderangeofsettings,usingarangeof
methodologies.BlundellandMaCurdy(1999)provideacomprehensivereviewoftheliterature
andconcludetheincomeelasticityoflaborsupplyaveragesabout-0.05formenand-0.20for
marriedwomen.
TheincomeelasticityisasufficientstatisticfortheimpactsofapureUBI,withoutaphase-out.
TheimpactsofaUBIthatincludesaphase-outdependsonthesubstitutionelasticityaswell.
BlundellandMaCurdy(1999)findthemediancompensatedsubstitutionelasticityis0.08for
menand0.78formarriedwomen.
Wecanusetheseestimates,whicharegenerallyconsistentwiththeexperimentalandquasi-
experimentalliterature,toprovideguidanceonestimatedimpactsofaUBI.A$12,000peradult
UBI,withoutaphase-out,wouldleadtoa33%increaseinincomeatthemeanamongsingle
adultfamiliesora25%increaseamongmarriedcouplefamilies.Incomeelasticitiesintherange
of-0.05to-0.10wouldleadto1.6%-3.3%reductionsinhoursworked.
NowconsideraUBIthatphasesoutgraduallybetweenthe50th
and75th
percentilesofthe
familyincomedistribution.Thiscreatesanaverageimplicittaxrateofabout27percentfor
singleadultfamiliesand55percentformarriedcouplefamiliesoverthisrange.Witha
substitutionelasticityof0.3,aggregatelaborsupplywouldfallbyapproximately3%.17
17
Amongthosewithincomesinthethirdquartile,laborsupplyispredictedtodeclineby9percentforsingle
parentsand17percentformarriedcouples.Nonlineartaxmodelssuggestthatfamilieswithincomesjustabove
themedianwillreducesupplybylessthanthis,tojustthemedian,whilefamilieswithincomesabovethe75th
percentilemightreducetheirsupplytobelowit.Theseeffectsoffset,andarenotlikelytobequantitatively
importantonnetrelativetooursimplecalculation.
20
Thesecalculationsassumethatbothincomeandsubstitutionelasticitiesareconstant.Itis
possiblethatresponsestolargetransfers,liketheUBI,arenotproportionatetoresponsesto
thesmallershocksusedtoidentifytheseelasticities.Inparticular,theparticipationresponseto
anincomeshockmightbelargerwhenGislargeenoughtosurviveonwithoutwork.Asnoted
abovetheevidenceonthisisscant,butstudiesoflotterywinnersshowincomeelasticitiesare
quitestablewiththepayoutsize(Cesarinietal2017).
E. Longer-runeffects
ThediscussioninSectionVsuggeststhatthelonger-runeffectoftheUBImaydifferfromthat
seenintheshortrun.Onechannelforthelongerrunlaborsupplyeffectsoperatesthrough
childhealthanddevelopment.Welfarewaiverstudiesfoundpositiveimpactsonachievement
amongyoungchildren,butonlyforpoliciesthatincreasedmaternalemploymentandfamily
income(Morrisetal2009).SNAPandtheEITCimprovehealthatbirth(Almond,Hoynesand
Schanzenbach2011,Hoynes,MillerandSimon2015,Strullyetal2010)andchildrenhavefewer
schoolabsenceswhentheyhavegreateraccessorlargerpurchasingpowerofSNAP(Bronchetti
etal2018;East2017).TheEITCalsoleadstoincreasesinchildren’sachievement(Dahland
Lochner2012,Chettyetal2011)andeducationalattainment(BastianandMichelmore2018;
ManoliandTurner2018).ItisnotclearwhethertheEITCeffectsreflectthevalueofadditional
financialresources–whichcouldoperatethroughgreaterconsumptionorthroughimproved
parentingbehaviorduetoreducedstress(MullainathanandShafir2013)–ortheimpactof
increasedmaternalemployment.TheformerwouldlikelygeneralizetoaUBI,butthelatter
wouldworkintheoppositedirectionintheUBI(atleastintheshortrun)sowouldnot
generalize.
Inthelongerrun,accesstocashwelfareinchildhoodleadstoincreasesinhealth,educational
attainment,andageatdeath(Aizeretal2016).SNAPinearlychildhoodleadstoimprovements
inadulthealthand,formen,economicoutcomes(Hoynesetal2016).Theseeffectsmore
clearlyreflecttheimpactofadditionalresources,sogeneralizemorereadilytoaUBI.Whilewe
havemuchmoretolearn,theworktodateshowsthat“two-generation”benefitsmaybean
importantanduntilrecentlylargelyoverlookedpartofthebenefitsofthesetransferprograms
(HoynesandSchanzenbach2018).
VII. OngoingUBIpilotsandtheresearchagendagoingforward
Aswe’veseen,wehaveagooddealofevidencefromarangeofsettingsthatsubstitution
effectsonshort-runlaborsupplyaremoderateandincomeeffectsaresmall.Thereisalsoclear
evidencethatadditionalfamilyresourcesimprovechildren’soutcomes,includinghealthand
schoolachievement.
ThemajoropenquestionsaboutUBIs,inourview,relatetolonger-runeffects,whicharemuch
hardertostudyusingrandomizedandnaturalexperiments.Wedoknowthatmoreresourcesin
childhoodhavelong-runeffectsonchilddevelopmentandhealth.Butdomoreresourcesin
adolescenceandearlyadulthoodleadtogreaterhumancapitalinvestment,translatinginto
21
increasedlaborsupplylater?Doesgreaterincomeinperiodsofjoblessnessleadtotrainingor
otherinvestmentsthatimproveoutcomesinthelongerrun?Doesfinancialstabilityaffect
willingnesstotakerisksorlong-termplanning?Weknowlittleaboutthese.
Second,dolargetransfershavequalitativelydifferentimpactsthansmallertransfers?The
availableevidencecomesfromstudiesoflotterywinnersanditisunclearwhetherthisapplies
toaUBI.
Third,weknowlittleabouttheroleofuniversality.Doesauniversalprogrammeaningfully
reducestigma,sothatUBIreceiptwillbeseenasanindicationthattherecipientisvaluedby
society?Arethereimportantgeneralequilibriumeffects,operatingeitherthroughchangesin
wagesduetosupplyshiftsortotheadditionaldemandcreatedbyconsumerswithmore
moneytospend?Wehaveveryfewstudiesofuniversalprogramsthatusecredibleresearch
designs,soweknowlittleaboutthis.
Finally,asourdiscussioninSectionIVindicates,acrucialpartofthedesignofanyUBIpolicyis
theneedtofinanceit.Aswehaveemphasizedthroughoutthisreview,fundingaprogramthat
isbothuniversalandprovidesabasicincomewillrequireraisingenormousnewrevenues.The
financingmechanismis,therefore,likelytohavequiteimportanteffectsonitsown,bothin
termsoflaborsupplyimpactsofnewtaxesaswellasthepoliticaleconomyaspectsofthis
change.Theexistinglaborsupplyliteratureprovidesusefulevidenceforunderstandingthe
laborsupplyeffects.Butthepoliticaleconomyeffectsarehardertopredict.Acrucialquestion
iswhetherthe(perceived)benefitsofuniversalitycanbemaintainedinthepresenceof
substantialnewtaxesleviedonasmallshareofthepopulation.
TherenewedinterestinUBIsinrecentyearshasledtoanexplosionofpolicydevelopmentand
researcheffort.Inparticular,thereareseveralongoingpilotsandexperimentalstudies,and
othersintheplanningstage,thatwilltestprogramsbilledasUBIs.
ThehighestprofilestudyisonebeingfinancedbytheSiliconValleyventurecapitalfirmY
Combinator,withacommitmentof$100millioninfunding.Apilotstudyisprovidingpayments
toafewdozenfamilies,andalarger,randomizedstudyisplannedinwhich1,000peoplewill
receiveaUBIof$1,000permonthforthreeorfiveyears.Ascurrentlyplanned(seeRhodes
2017),eligibilitywillbebasedonage(21-40),andpre-enrollmentincomelessthanthecounty
median.Planningdocumentsindicatethatthisismeanttobeinformativeaboutamore
universalprogram,andthattheresearchersexpectprogrameffectstobelargerforlow-income
families.Researchersplantonegotiatewaiversfromeligibilityrequirementsforothermeans-
testedprograms,enablingtheUBIpaymentstosupplementratherthanreplaceexisting
transfers.Asdiscussedabove,anylarge-scaleUBIwouldprobablybefinancedinpartby
eliminatingmostothermeans-testedtransfers,soitisnotclearwhethertheeffectofaUBI
supplementistheparameterofinterest.
KeyresearchquestionsfortheYCombinatorstudyconcerntheeffectsoftheUBIontimeuse
(includingbutnotlimitedtolaborsupply),objectivehealthandsubjectivewell-being,financial
22
health,riskandtimepreferences,politicalandsocialattitudes,andcrime,aswellasspillovers
torecipients’familiesandsocialnetworks.
Asecondhigh-profilestudyisinplanningstagesinStockton,California.Thisstudy,fundedby
theEconomicSecurityProject,willprovidepaymentsof$500permonthtoapproximately100
families,forapproximately12-18months.Asofthiswriting,eligibilityrequirementsandthe
researchdesignhavenotbeenfinalized,thoughthestudyseemslikelytofocusonhealthand
subjectivewell-beingimpacts.
Wearealsoawareofearly-stageconversationsaboutsimilarpilotsinanumberofotherU.S.
locations,includingNewYorkCity(Balakrishnanetal.,2018).
InEurope,discussionsseemtocenteraroundusingUBIsasreplacementsforexistingtransfer
programs,whichcomparedtothoseintheU.S.tendtobemoregenerous,withwidereligibility,
andcreatelargerdisincentivestowork.UBIsareseenasattractivebecausetheymakeit
feasibletoreturntowork.Onlyonestudyhascometofruitiontoourknowledge,however,in
Finland.There,theprogramwasrestrictedtopeopleaged25-58alreadyreceivingalabor
marketsubsidyorunemploymentallowance.2,000wererandomlyselectedtoreceiveabasic
incomepaymentof560Eurospermonth;therewasnooptionnottoparticipate.Recipients
remaineligibleforotherprograms,butthebasicincomeisdeductedsothatparticipantsget
themaximumofthebasicincomeorwhattheywouldotherwisereceive.Paymentsbeganin
2017andarescheduledtocontinuethroughtheendof2018.Thestudywillfocusonlabor
supplyasanoutcome.InApril2018thegovernmentdeclinedtofundaplannedextensionof
theexperimenttothebroaderpopulation.
AfinalpilotstudyenrolledparticipantsinApril2018inthreesitesinOntario,Canada.Onlylow-
income(under$34,000CANforsinglesor$48,000CANforcouples)peoplewereeligible,and
participantswererandomlyselectedfromamongapplicantswithinthesesites.(Inonesite,the
studyistestingcommunity-leveloutcomes,sothereisnocomparisongroup.)Thepaymentis
structuredasanNIT:AguaranteeofG=$16,989CANforasinglepersonorG=$24,027CANfora
marriedcouplethatbeginsphasingoutimmediatelywithearnings(P=0)ataT=50%rate.The
programdoesnotdisplacechildbenefits,butitdoesreplaceemploymentinsurance,pension,
welfare,anddisabilityprogrampayments.
Thesepilotstudieswillprovidevaluableproofs-of-conceptabouttheadministrationofUBIs,
andaboutlaborsupply.However,wedonotanticipatethattheywilldramaticallyaddtoour
knowledgeaboutthekeyunresolvedquestionsthatweoutlineabove.Thisisinpartbecause
thesamplesarequitesmall,afunctionofthehighcostofprovidingaUBI(andacautionarytale
aboutthefeasibilityofimplementingaUBIatalargescale).Butevenwithlargersamples,the
designsarequitesimilartothoseofearlierstudies.Theywillgenerateestimatesofshort-run
incomeelasticitiesonlaborsupply,exactlytheparameterthatiswellidentifiedbytheNIT
experimentsandmanyotherstudiesintheliterature.Theywillallowtestsoftheextrapolation
fromsmallerprogramsthatweusedabovetoassessUBIlaborsupplyeffectsbasedonthe
existingliterature(thoughstatisticalpowerisamajorconcern).Buttheywillshedlittleorno
23
lightonanylong-termeffects,suchasthoseoperatingthroughhumancapitalaccumulation,or
onthepsychologicalandpoliticaleffectsofuniversality.
VIII. Conclusion
InterestinuniversalbasicincomeisontheriseintheU.S.andotheradvancedcountries.
Decadesofwagestagnationandconcernsaboutautomation,robots,andjobdestruction,as
wellasdiscontentwiththecurrentsocialsafetynet,providethefoundationforinterestinthis
area.SupportforUBIshasledtoseveralpilotprogramsandpolicyproposalsintheU.S.,
Canada,FinlandandSwitzerland.Despiteallofthis,thereisalackofclarityonwhatmakesa
UBI,whatproblemitismeanttosolve,whetherthesocialsafetynetcanorisprovidingthese
benefits,andwhat(ifanything)canbelearnedfromthepilotprogramsthatwedon’talready
knowfromthedecadesofexistingresearchonindividualandhouseholdresponsestothesocial
safetynet,andwagesandincomeopportunitiesmorebroadly.Ourpaperseekstofillthisgap.
A“pure”UBI(providingasetbenefittoallregardlessofincome,age,etc.)fundedtomeetbasic
needsforahouseholdwithoutearningswouldbeextremelyexpensive,abouttwicethecostof
allexistingtransfersintheU.S.Fundingthiswouldrequiresubstantialnewrevenue.Thesource
ofthenewfundsisafirstorderissue,andwillhavesubstantialimpactsonthedistributional
effectsofthepolicyanditsabilitytotargetthosemostinneedofassistance.Inparticular,
replacingexistinganti-povertyprogramswithaUBIwouldbehighlyregressive,unless
substantialadditionalfundswereputin.
MuchabouttheeffectsofaUBI,onlaborsupply,incomeandfamilywellbeing,canbegleaned
fromtheexistingresearch,whichwebrieflyreviewhere.Weidentifyafewoutstanding
questions,suchastheimpactofatrulyuniversalprogram(presumablywithoutstigma)aswell
astheeffectsonhumancapitaland,hence,laborsupplyinthelongerrun.Unfortunately,the
plannedandongoingpilotsarenotwellsuitedtoanswerthesequestions.
24
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Figure1.GrowinginterestinUniversalBasicIncomesisevidencedinnewspaperusage
Note:Figureshowsannualusesoftheterms“UniversalBasicIncome”and“BasicIncome”intheNewYorkTimes.Figure2.Anillustrative,hypotheticaltransferprogram
Figure3.ComparingaUBItootherexistingprograms
Figure4.Averagehouseholdtransfers,byfamilytypeandprogram
Source:Authors’tabulationsofthe2017CurrentPopulationSurveyAnnualSocialandEconomicSupplement.
Figure5.Averagehouseholdtransfers,byfamilytype,anddecileofafter-taxandtransferincome
Source:Authors’tabulationsofthe2017CurrentPopulationSurveyAnnualSocialandEconomicSupplement.
Figure6.Averagehouseholdtransfers,byfamilytype,andearningsdecile
Source:Authors’tabulationsofthe2017CurrentPopulationSurveyAnnualSocialandEconomicSupplement.
Figure7.Distributionofhouseholdtransfers,byfamilytype,andearningsdecile
Source:Authors’tabulationsof2017CurrentPopulationSurveyAnnualSocialandEconomicSupplement.
Table1.Parametersofselectedtransferprograms
ProgramType Cashwelfare
In-workbenefits
Disabilitybenefits
RetirementChild
allowanceNIT UBI
ExampleProgram AFDC EITC SSI SocialSecurity
Shaeferetal(2016)
ExofCanonical
ExofCanonical
Guarantee(G) $7,285/yr $0 $8,820/yr $16,392/yr $3,000/yr $5000/yr $12,000/yrSubsidyrate(S) 0% 40% 0% 0% 0% 0% 0%Maximumtransfer(M) $7,285/yr $5,616/yr $8,820/yr $16,392/yr $3,000/yr $5000/yr $12,000/yrBeginningofphase-outoftransfer(P) $90/mo $18,340/yr $85/mo $0 $0 $0 infiniteTaxrateinphase-out(T) 100% 21% 50% 0% 0% 50% 0%
Eligibilityrestrictions(E)Singleparents
Mustbe25-64;and
thereisonlyasmallcreditforthosewithoutchildren
Documenteddisability
Over62withsufficient
workhistory
Allfamilieswith
childrenAllfamilies Alladults
Notes:Severalprogramshaveadditionaleligibilitycriteria(e.g.,assetlimits)notshownhere.AFDCbenefitsarebasedonthe1996scheduleforasingleparentwithtwochildreninthemedianstate,andarein2017dollars.PandTreflectthepolicyafter12monthsofwork;earlier,PishigherandTislower.EITCbenefitsareforanunmarriedparentwithtwochildrenin2017,andreflectonlythefederalcredit.SSIamountisforanindividualwithoutdependentsin2017.SocialSecurityparametersarefortheaverageretirementamountin2018,andignoretheearningstest,whichreducescurrentbenefitsbutrecyclesthemintohigherlaterbenefits.
Table2.UBIproposalsandpilots
Proposals Pilots
Murray(2016)
Stern(2016)
Switzerland Stockton Finland Ontario YCombinator
Guarentee(G) $10,000 $12,000 $31,938 $6,000 $6,000 $9,848 $12,000Subsidyrate(S) 0% 0% 0% 0% 0% 0% 0%Maximumtransfer(M) $10,000 $12,000 $31,938 $6,000 $6,000 $9,848 $12,000Beginningofphase-outoftransfer(P) $25,000 infinite infinite infinite infinite $0 Areamedian
incomeTaxrateinphase-out(T) 20% 0% 0% 0% 0% 50% InfiniteEligibilityrestrictions(E) U.S.
citizen,age21+
Age18+. None None Age25-58.Receiptofunemploymentpaymentspriortopilot
Age18-64withlowincome<$48,000/yrforcouples
Ages21-40
Notes:Tabledoesnotreflectallcomplexitiesofproposalsandpilots.Forexample,undertheMurrayproposal,thetransferwouldphaseoutonlyto$5,000peradultperyear.UndertheSternproposal,theprogramdiffersforseniors.Swissproposalparametersarebasedonsuggestionsadvancedbysupportersofthereferendum,andapplytoafamilywithtwoadultsandonechild.Ontarioparametersareforacouple.Non-U.S.programsareconvertedtoU.S.dollarsusingpurchasingpowerparity.
Program Eligibility[E]
Totalexpenditures(billions)
Numberofrecipients(millions)
CashwelfareTANF Singleparent,workrequirements 7.4 2.8SSI/Elderly 65+ 5.4 1.2SSIchildren underage18,blindordisabled 9.3 1.2
In-kind,near-cashwelfareSNAP nearuniversal 63.6 42.1SchoolLunch K-12children 12.3 22.0SchoolBreakfast K-12children 4.5 12.5WIC pregnant,postnatalwomen&children<5 5.6 7.3
Section8&PublicHousing universal,butrationed 26.9 9.4In-worktaxcredits
EITC Earners25-64forchildless 69.8 69.7CTC Familieswithchildrenwithearnedincome 52.8 105.9
Disabilityprograms
SSDI Documentedworklimitingdisability 142.7 10.4
SSI/Disability Documentedworklimitingdisability 39.6 5.9SocialInsurance
SocialSecurityretirement Retirementage,withworkhistory 680.2 45.5SocialSecuritysurvivors 118.3 6.0Unemploymentinsurance Workhistory,activelylookingforwork 29.9 5.7
HealthinsuranceMedicare 65+,Disabled 689.0 57.0Medicaid Lowincome 368.0 82.2CHIP Children 14.3 9.2
TOTALCOST ALLPROGRAMS $2,340EXCLUDEHEALTH $1,268EXCLUDEHEALTH&SSRETIREMENT $588
PotentialUBIsCanonical Ages18+ $3,025 252.1
PhasedoutaroundmedianY Ages18+ $1,512 126.0Age-limited Ages18-64 $2,414 201.2
Table3.NumberofrecipientsandtotalexpendituresfromselectedtransferprogramsandpotentialUBIs
Sources:TANFrecipientsandexpendituresfromtheU.S.DepartmentofHealthandHumanServices,Administration
forChildrenandFamiliesprogramreportsfor2016;SSIinformationfromtheSocialSecurityAdministration’s(SSA)
2017AnnualReportoftheSupplementalSecurityIncomeProgram;SNAPandWICreceiptandexpenditure,andschool
mealreceipt,datafromtheUSDAFoodandNutritionService(FNS)programreportsfor2017;schoolmealenrollment
datafromtheFNSCongressionalJustificationfor2018;EITCandCTCenrollmentandexpendituredatafromthe
InternalRevenueServiceStatisticsofIncome2016preliminarydatarelease;SocialSecurityenrollmentand
expendituresfromtheSSAbeneficiarystatisticsandpaymentsummarytablesfor2017;Medicareenrollmentdata
fromtheCentersforMedicareandMedicaidServicesfor2016,andexpendituredatafromtheCongressionalBudget
Office’s(CBO)June2017baseline;MedicaidandCHIPenrollmentfromMACPAC’sMedicaidandCHIPDataBookfor
2016;Medicaidexpendituredata(bothfederalandstateshares)fromKaiserFamilyFoundation;andCHIPexpenditure
fromCBO’s2017baseline.
Appendixfigure1:Distributionoffamiliesacrossafter-taxandtransferincomedeciles,byfamilytype
Source:Authors’tabulationsof2017CurrentPopulationSurveyAnnualSocialandEconomicSupplement.
Appendixfigure2:Distributionoffamiliesacrossearningsdeciles,byfamilytype
Source:Authors’tabulationsof2017CurrentPopulationSurveyAnnualSocialandEconomicSupplement.
