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What Is Universal Basic Income?

Universal basic income can provide cash with no strings attached. But there may be caveats—and not everyone’s on board with the idea.

Written by Devon Delfino / September 2, 2022

Quick Bites

  • Universal basic income is the idea of giving people a set amount of money on a regular basis, separate from wages.
  • There are many models of UBI, some of which impose restrictions on who gets the UBI payments and how they can be used.
  • Some have criticized the concept for disincentivizing work and being too broad.
  • UBI has been experimented with around the world, including in the U.S.

What if you were guaranteed more money than you earned? How would it impact your quality of life? What would that look like?

These are the questions that universal basic income (UBI) is trying to answer. And it’s not just a theory, either. It’s been implemented and tested, applauded and criticized—and it remains a polarizing concept.

Here’s what you should know about UBI.

Inside this article

  1. What is universal basic income?
  2. How does UBI work?
  3. Criticism of UBI
  4. UBI vs. stimulus: What gives?
  5. Frequently asked questions

What is universal basic income?

Universal basic income is the idea of giving a specified amount of money to people on a regular basis, like monthly or annually. That cash would be separate from their wages, and would act as a sort of income floor.[1]

For example, if you were earning the minimum wage and barely affording your rent and food expenses, you’d have access to additional funds to afford other things. Or if you were to lose your job, you would theoretically still have money to pay for at least some necessities, depending on the UBI payment amount.

It may sound far-fetched, but UBI has actually been proposed in the U.S. You may recall, for example, that businessman Andrew Yang campaigned for the 2020 presidency on the idea of a “freedom dividend” which would pay every American adult $1,000 per month. That would have been a form of UBI.[1] Also, the city of Chicago is currently conducting the largest UBI experiment in the country: It’s providing 5,000 low-income individuals who experienced financial hardship during the pandemic a $500 monthly payment for a year.[2-3]

You may also see other names for UBI programs, like guaranteed income or unconditional basic income.[4]

How does universal basic income work?

It depends. There are several models for universal basic income. The most pure form of it would be to collect the funds from taxes, and pay out money to everyone, says Fennie Wang, founder and CEO of Humanity Cash, a company that’s trying to create a circular economy using UBI and community currency.

For context, here are the factors that can change, depending on the UBI model[4]:

RecipientsPayment basisAmountFrequency
Some programs may be universal (meaning they’re open to residents as well as citizens), and others may be limited to adults. Or, it may be restricted to those whose income falls under a certain threshold. Payments may be based on either individuals or households. It will depend on the experiment or program design. It can be paid weekly, monthly or annually.

UBI has been tried around the world. For example, Iran, Kenya, Mexico and Italy all have some form of UBI—either as an experiment or as a permanent program.[5-8]

Criticism of universal basic income

One of the original criticisms of UBI is that giving people money might disincentivize them to work, which would have negative impacts on national productivity. However, this has repeatedly been shown to be false. In fact, in cases where UBI is truly unconditional, almost no one receiving those benefits stops working.[9]

There’s also the concern that there should be limitations on what people can use that money for, and fears that it could be used for nefarious purposes. But that argument has been debunked, says Wang.

“What UBI pilots have shown is that people do spend the majority of their money on their basic needs, like healthcare, child care and education,” she says, adding that it’s about giving people the dignity of choice.

Finally, there’s the question of who else benefits from UBI besides those who are receiving the funds firsthand. It’s not who you might think.

Take the food stamps program—now known as Supplemental Nutrition Assistance Program or SNAP—in the U.S. as an example. “About 80% of [SNAP proceeds] are spent with large corporations, and 53% spent with superstores like Amazon and Walmart,” says Wang. So in effect, that money “ends up in the pockets of large corporations that don’t need…extra funds.

That’s a potential problem, but one that could be solved by requiring participants to shop locally, like with their family-owned corner bodega, says Wang. That’s how Humanity Cash’s UBI program is handling this vital question.

“That dollar is now benefiting the family that’s running that convenience store,” she says. “So the community as a whole gets more of the oomph of that same dollar.”

Universal basic income vs. stimulus payments: What’s the difference?

The COVID-19-era economic stimulus payments—as well as the Paycheck Protection Program (PPP) and Child Tax Credit payments—are similar to UBI in that they provided cash to Americans. But the main difference is that UBI is a long-term solution, says Wang, and those payments offer a reliable source of income over time, allowing people to plan for their long-term needs. By contrast, the stimulus payments and the PPP acted more as a temporary windfall. 

Frequently asked questions

What countries have tried UBI?

It’s been tried in places like Iran, Kenya, Mexico and Italy, as well as in the U.S.

What are the pros and cons of UBI?
Is UBI possible in the U.S.?
Who pays for UBI?
Article Sources
  1. Logan Ward, “The pros and cons of universal basic income,” University of North Carolina, March 10, 2021, https://college.unc.edu/2021/03/universal-basic-income/.
  2. “Chicago to pilot nation’s largest guaranteed income program: How University experts will help evaluate,” University of Chicago News, May 11, 2022, https://news.uchicago.edu/story/chicago-guaranteed-income-program-pilot-inclusive-economy-lab-carmelo-barbaro.
  3. “Chicago Resilient Communities Pilot Distributes First Set of $500 Monthly Cash Payments to Over 3,500 Households,” Chicago Office of the Mayor, July 11, 2022, https://www.chicago.gov/city/en/depts/mayor/press_room/press_releases/2022/july/ChicagoResilientCommunitiesPilotDistributes.html.
  4. Sarah Berger Gonzalez and Juliana Bidadanure, “Universal Basic Income: What’s in a Name?” Stanford Basic Income Lab, August 2020, https://basicincome.stanford.edu/uploads/whats-in-a-name-white-paper__final.pdf.
  5. “Iran introduced a basic income scheme, and something strange happened,” World Economic Forum, May 31, 2017, https://www.weforum.org/agenda/2017/05/iran-introduced-a-basic-income-scheme-and-something-strange-happened/.
  6. “Give Directly UBI Study,” Give Directly, https://www.givedirectly.org/ubi-study/.
  7. Sarah L. Barber and Paul J. Gertler, “The impact of Mexico's conditional cash transfer programme, Oportunidades, on birthweight,” National Institute of Health: National Library of Medicine, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2846434/.
  8. Angela Giuffrida, “Italy rolls out 'citizens' income' for the poor amid criticisms,” The Guardian, March 6, 2019, https://www.theguardian.com/world/2019/mar/06/italy-rolls-out-citizens-income-for-the-poor-amid-criticisms.
  9. Ioana Marinescu, “What Happens When People Get Cash With No Strings Attached?” The Roosevelt Institute, May 16, 2017, https://rooseveltinstitute.org/2017/05/16/what-happens-when-people-get-cash-with-no-strings-attached/.

About the Author

Devon Delfino

Devon Delfino

Devon Delfino is a writer who’s covered personal finance—including everything from student loans to budgeting to saving for retirement and beyond—for the past six years. Her financial reporting has appeared in publications like the L.A. Times, U.S. News and World Report, Teen Vogue, Masha

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