An Honest Discussion About A Universal Basic Income 

The 70% marginal tax does not apply to a person's entire income. It starts taking effect after an amount, $10 million for example. So your $10,000,001st dollar is taxed at 70%. This is a very important detail.

I read about the finish experiment where some people (I think it was 10000 people) got an UBI for a few years. The experiment was intresting. The wellfare system in place basically makes it so that if you get a job or start a bussines you will start paying taxes at about the same rate you lose your unemployment benefits making it hard for some to see any reason to put an effort in it. With the money being unconditional the people in the experiment were able to start bussineses and get jobs and get the full benefit imediatly and the most drivven entrepreneurs were able to re use all the money they had earned to keep the bussines growing since they didn't lose their benefits and had to give them self a salary imediatly. Some of them stated that it would be imposible for them to get to that point in the traditional wellfare system in place, even though it is more generous than most.

"no one can predict the future, least of all economists" is a perfect catchphrase!

One of the challenges with a ubi is that you either do it or you don't. "Toned down alternatives" definitely won't work. For a ubi to work it has to hold people at or just over thr poverty line and it has to be UNIVERSAL. Anything less won't work. So the the alternative can't be a toned version it has to be something completely different. More likely a raft of alternatives from improved welfare systems to addressing the power imbalance between employees and employers and way more besides.

What's missing from the conversation is one good idea from UBI, just reducing bureaucracy. Welfare doesn't have to be universal, but it also doesn't have to be split among a hundred different programs that make it difficult to use and costly to operate. Giving people a single check that gradually phases out to a certain income threshold wouldn't require trillions in spending while making it cheaper to operate (so more money for the program itself) and much easier to use for those who need it.

If we implemented a UBI, I'd suggest we set it as a percentage of the GDP per capita, not a fixed dollar amount. That way, it would function as a share every citizen holds in the success of their country, and as a bonus the GDP per capita would actually mean something. It would also save politicians from wasting their time on debates about raising the amount as the economy grows, like we see for the minimum wage. For that matter, we should probably tie the value of minimum wage to inflation, rather than having a set amount. But alas, these ideas are common sense solutions to make life better for the people, and that does no good for politicians and business owners' careers, so I don't see much hope for them.

I think one of the biggest benefits of UBI is a better upbringing for children of poor households who are heavily affected by a stressful family life, and who may perform better in school, be less incentivized to do criminal activity, get better a education, and contribute more to the economy than they would otherwise. Early UBI-studies have shown signs of this effect.

The problem with a high tax rate vs a low tax rate when starting a business isn't that the entrepreneur might have to pay more taxes. The issue is that the higher tax rate reduces the margin of error for that business to succeed at all, which makes it less likely that the business will be started.

Two thoughts about the inflationary effects of UBI: 1) If the system is designed in a way that middle-income earners roughly break even, then the inflationary impact should be minimal. I think there have been surveys that showed that, if given more money, most people on the lower end of the income scale would use it to pay off debt. If that is wrong, and there are indications that inflationary pressures would be high, you could design it such that the payments phase in over a period of a few years. Also, once you reach a steady state (supply catches up with demand), inflation will return to normal. 2) Let's think about what it means morally if inflation is expected to increase a lot in an economy upon the implementation of UBI. From what I remember of my college econ classes, there's a term for the kinds of goods and services that low-income people buy - necessities. Wikipedia defines it as "product(s) and services that consumers will buy regardless of the changes in their income levels, therefore making these products less sensitive to income change." If merely bringing lower incomes to a lower-middle income results in a significant changes to the consumption of necessities, doesn't that mean that previously, your economy wasn't allowing people to get what they need, either to survive or to keep pace with change? Now linguistically, we can quibble over different definitions of "need" and "necessity", but IMO there's a good reason we use these words, and they really illustrate the problem here.

I think the proposals for UBI are the middle ground in the "what if automation" thought experiment. They are the middle ground between just letting the extra people starve and completely socializing all the benefits of automation.

In the case of UBI I think that the problem really comes down to how it is conceptualized since the whole thing is predicated on our current economic model. Current, of course, means an economic model that hasn't changed substantially for hundreds of years. My observation is that, especially in the common parlance, economics is nearly entirely focused on the concept of currency - fiat currency to be exact. The problem is that economics is actually about the distribution of resources and currency, fiat or otherwise, isn't a resource in and of itself, but rather a measure of the ability to acquire arbitrary resources. Put another way, much like saying that "I want 10 feet" doesn't make any sense unless it is followed by "of X", saying "I want 10 dollars" only makes sense if one has an idea of the resources they intend to acquire. Acquiring money for the sake of acquiring money is a pointless endeavor. The real question shouldn't be whether there is enough currency to meet people's needs, but rather whether or not there are enough resources. More specifically we have to ask what are the basic physical and psychological needs of an individual and do we have the resources to meet those needs. Insofar as the absolute basics are concerned (food, water, shelter, etc.) I believe the answer is, unequivocally, yes. Medicine is a bit stickier of an issue, although I refuse to believe that it, or any other issue, is inherently unsolvable if you put some effort into re-conceptualizing the problem. If we were to establish a minimum quality of life and build our economic system on that moral imperative we could remove a large chunk of the abject suffering that exists in the world. With every passing day we move closer to a post-scarcity world and, while this generally though of as a positive, it will be disruptive and dangerous. Our current economic system is ill-prepared to handle that reality without the world turning dystopian. We talk a lot about the individual's responsibility towards society, but rarely in my experience do we talk about society's responsibility to the individual. "Ask not what your country can do for you - ask what you can do for your country," is a fine sentiment in certain contexts. One can ask what the individual can do for their community, but framing it to exclude community's responsibility to the individual is absolutely reprehensible.

Theoretically, a UBI is meant to be a stepping stone to a post-scarcity system. A post-scarcity economy is a theoretical economic system in which basic necessities (like food) can be produced in such abundance that they become almost free. Though this post scarcity would require replicators, infinite resources, etc.

The only way this sort of thing would actually work is if it was done in combination with incentivizing low-income housing builds HEAVILY because if not good old supply and demand would kick in and low-income apartments would go up 700$ and we're almost as bad off as we were before. I think a video talking about options when AI takes over x% of jobs would be an interesting topic, definitely something I've thought about a few times. edit: this comment really blew up, so I'd like to clarify a few things. First of all I do agree with the point many people made that affordable housing is a more important priority than UBI, making housing affordable could allow for a far far lower payout as it's a significant portion of many peoples expenses. Also I'm not by any means anti-working, I think this amount should be the minimum to have food and a leaky roof over your head while also working a reasonable part time job. Also "low-income housing" doesn't have to be an undesirable place to live, skip the hardwood floors, marble countertops and have one bedroom, it doesn't have to be expensive but still can look nice. Also empty homes are a huge issue that needs to be solved in someway too, and so is people's tendency to want to live in a city those issues aren't removed by offering affordable housing. I'm not an economist I'm just a normal guy weighing in my OPINION on this topic.

My interest in UBI is in balancing the labor economy. There is no "free" labor market in the U.S. Too people often have to take the job that they can get at whatever the pay may be, and it's not often tied to true demand. I would like to see flexibility in being able to leave a job (even temporarily) without it being financially disastrous. It's not like you can fall back on self sufficiency farming in a modern economy, if the labor market doesn't suit you. One truly does not have a choice! And because there is no choice, capitalist squeeze the working class by paying as little as possible while charging as much as possible for living essentials (also in part to poor infrastructure--like, you often can't opt out of owning a car in this country). UBI--in theory--does offer some relief there atleast.

I think if we implemented a system akin to UBI, it'd be better off to go for a negative income tax bracket ala Milton Friedman's proposal. Starting from $0 taxable income up to a set amount, the negative rate dictates how much money a person gets as a % of the difference between their taxable income and the bracket's cap. For example, say we had a negative tax bracket from $0 - $40k at 30%, for simplicity. In affect, this would mean that for every dollar you earned through taxable income (up to $40k), you'd receive 30c less from government: Someone earning no taxable income would receive (40k-0)*.3 = $12,000 p/a Someone earning $20k would receive (40k-20k)*.3 = $6,000 p/a which in addition to what they earned would total $26k income that year. Depending on size of the bracket and the rate this could be manipulated to improve incentive to work at low income or lower costs to government. For comparison, imagine this bracket is instead up to $24k at 50% to minimise government costs. So up to $24k, every taxable dollar earned would only net you 50c: Someone earning $0 would receive (24k-0)*.5 = $12,000 p/a Someone earning $20k would receive (24k-20k)*.5= $2,000 p/a, which in addition to what they earned would total $22k income that year. --- One advantage of this system over UBI is that it avoids giving money to people earning large amounts of taxable income who do not need it. Another use is that this can be used to replace welfare for unemployment, as it avoids creating a system where a person can be better off financially by not working at all versus working part-time or full-time (though it lacks the advantage UBI has in not affecting incentives at all). If desirable, one may also consider it worthwhile to have things like disability and single-parenthood increase the size of the bracket, in effect targeting vulnerable welfare groups to get more money due to higher costs of living/less opportunity to earn income. One potential issue though, is the need to review people's income more frequently in order to provide the negative tax benefits more frequently rather than an annual lump sum. How much this might impact the economy (for good or bad) is uncertain, but given how automated the tax process is in advanced economies, this could prove fairly simple.

Of course beyond the economic aspects of UBI, one of the other elements is to look through the society at all the people making not so intelligent decisions and asking "How much of that is the result of mental impairment due to excessive stress? And would removing some of the stress of trying to survive while being underpaid improve things?"

Fun fact: My home state passed a "Millionaire's tax" during the Financial Crisis years. After its passage, the state collected less tax from those intended targets than it had in prior years. Some of that was due to the crisis making some people no longer in the income bracket the tax was aimed at, but a lot was due to those people just moving or changing their state of residence. Additionally, there were some taxes proposed/passed on certain services designed to get money mostly from the upper middle income class and above but my home county, an extremely blue county normally happy to support tax increases to fund government programs and services, is the wealthiest in the state and suddenly started protesting new taxes vehemently as its population and representatives realized the "wealthy" in the state was no longer some nebulous other but themselves

I think a UBI can be great, but like a lot of proposals, the detail is what matters. A fairly cheap UBI could be coupled with Negative Income Taxation. What's interesting about a UBI is that Richard Nixon almost implemented one.

Great video as always. Surprised though that there was zero mention of having a potential UBI program coincide with the implementation of a financial literacy/ education program. That would make the biggest impact of anything else by far. I received expensive private education throughout my childhood and adolescence, and never learned more than how to balance a checkbook. Even if I had just learned what compound interest was in high school my life would be completely different. Teach a man to fish….

It's easy to forget that people with least money may and do actually generate costs for the society thats non neglible. The cost is probably bigger for countries with proper welfare, lesser for ones without it - but it's a cost nevertheless. I'm highly impressed how in modern times with modern tools we still tend to use simplified models that fail to catch overall pictures and are easy to manipulate. But an actual deep dive analysis is not something easy, nor probably cheap to do, that could be neatly and easilly shown with trivial iconographics. It's not a direct accusation here, as it's seen everywhere and the channel is pretty nice in bringing the topics in generall and doesnt seem too biased. I just would love to see a deeper dive than just that.

I'm in support for some form of basic income, but know that its success would be greatly affected by its implementation and how other economic policies are formed. Thank you for highlighting some of the difficulties in such a program! It's important discussions to be had

For the record the $5 trillion excess COVID spending was just the directly COVID-related spending. The budget introduced authorized up to $14 trillion in excess spending, over 90% of which has been used if I’m not mistaken. Let’s never do this again please.

Fantastic job on this video. Very well thought out and very well balanced. Kudos for tackling a difficult job and covering most (if not all) the angles.

A few important points about UBI that I think this video missed: Removing overhead costs for welfare is still a good thing even if it can't offset a sudden expansion of welfare expenditures. UBI is usually floated as an idea for a country to do more for its people, not the same amount but through different means; it's intended to be a way to redistribute wealth from the incredibly wealthy to the other 99%. UBI is more resistant against means testing and legislative negligence. When the benefits are universal, it's harder for a political party to argue against stripping it away from needy people because of quibbling over "where the line is" for the welfare. If you index it to inflation/GDP, it also doesn't need to be consistently reviewed and updated to stay relevant over decades of support. As far as price of living goes, extending UBI to the state/provincial level could help make sure that people receive equitable payouts through the program. As far as capital flight goes, a vast amount of wealth is already squirreled away into shell accounts in tax havens. There's only so much we can do to reign in tax avoidance without international action. The bottom line is that the more developed nations that adopt a UBI, the fewer options for "citizenship shopping" wealthy expats have to look for. This is an issue for all tax reform, not just UBI.

I think it should have been mentioned that a lot of jurisdictions have tested the UBI concept on a small scale over the last fifty-some years, and in general they've been fairly successful on their short-term timescales. In Manitoba, Canada in the 1970s, a program was tested by the tory government with a control group with standard tax practice and a test group that received a basic income and a flat tax rate of 60% on every dollar over the stipend. The result was a 5% reduction in working hours, but also an increase in school test scores in children of participating families, reduced dropout rates, and increased rates of adults in post-secondary education. The expectation, had the experiment not ended, was that the long-term effect would be significantly improved education rates and earning potential.

I think the fact that most lower income households in the US don't have any savings when compared to the rest of the world they would be considered very wealthy tells you a lot. In my country $12k per year is a good salary, but in the US it's below the poverty line. Most people in the world would be happy to have the standard of living that even the bottom class of society in high income countries enjoys. You need to take this into perspective, because if you don't, you are missing the point of UBI. UBI should guarantee that each individual can survive, buy food and have a roof over their head, in essence to provide them with basic existence. It should NOT be used to increase the living standards beyond this point, which, as the author pointed out, will cause inflation and so forth. Equal opportunties, not equal outcome.

6:24 Basic universal income wouldn't remove the need for other welfare systems and their bureaucracy, but it would allow said bureaucracyto operate with lower funding and fewer rules and still provide something for those that would otherwise fall between the cracks of the system, and it would make getting a application handled less urgent.

Can we have a video on the results of UBI research experiments rather than speculation of what we think can be or could be?

I highly recommend reaching out to Scott Santens (One of the foremost experts on UBI), talking with him, and making a follow-up video after. It would make for much richer content with more nuance. The largest thing missing is the "social vaccine" sort of effect that UBI could have. For example, what costs would be reduced in health care if everyone had a UBI. What burdens of society are being unloaded in other places that would not even exist if there was a UBI, etc. Love your stuff. Please consider!

11:11 "for alot of wealthy people who are already paying alot of tax" No, they don't pay their taxes. They use rightoffs, tax havens and loopholes to pay next to nothing. Raising the base tax rate across the board would force them to ACTUALLY pay some amount of taxes because theres no way to come up with enough acceptably fraudulent write offs .

This leaves out a large number of important considerations: 1. Tax flight - there is plenty of research on this and we have a pretty good idea of how it scales. While it lowers the expected income of larger tax raises on top earners somewhat, it still leaves plenty of net gain up to around 70% top tax rate. 2. Further cost savings resulting from UBI. Especially factors like public health, crime, and education greatly benefit from financial safety. The whole country becomes more efficient, beyond the immediate benefit of saving on the (often excessively large and expensive) means-testing bureaucracy. 3. The far more complicated nature of inflation, which more often does not behave according to the simplified ideal of "supply and demand of money". In reality it is more often driven by other external influences, such as the Ukraine war, or driven by financial decisions of the wealthy far moreso than by the finances of low income earners. Industries that cater to low incomes are also extremely price competitive and tend to have far lower inflation, so general inflation figures represent its dynamics very poorly - unless it is influenced by external factors like the labour and shipping situation during Covid or the supply issues caused by the Russian invasion.

It would be really interesting if you could cover the pros and cons of Milton Friedman's proposal of a Negative Income Tax.

Alaska has a UBI that is working out pretty well. It is not like the ones usually proposed, but I like the idea of instituting a carbon tax and dividing the proceeds up equally amongst the people that have to live with the externalities … UBI.

There is another economic effect I've wondered about with UBI that I've not seen discussed much. The pandemic highlighted that there are minimum wage jobs that are crucial to society. They are minimum wage because of the lack of “qualifications” needed. If people no longer had to work to avoid going hungry/becoming homeless, we could see jobs that society can’t go without that aren’t the most fun/pleasant (e.g. rubbish collection) start to become better paid. As a software engineer I’ve never had to put up with bad work environments or bosses if I don’t want to. I don’t know about the economic effects, but the social effects of everyone having more of an option to leave a bad job could see major improvements to pay and conditions for a lot of people.

I only believe in ubi IF you remove the perverse incentives. Means-testing creates the perverse incentive for people to stay below a certain income level/ remain under-employed/ work "under the table", etc. "universal" should imply everyone gets it no matter how much money they earn but that seems to get lost in the pilot programs, (and most welfare programs in general tbh) I also like the Negative Income Tax idea, as this also seems to eliminate the perverse incentive to remain unemployed/ under-employed.

UBI payment amounts should be linked to GPD so there is a feedback loop linking the payment, productivity and the number of people choosing to work. It should also ramp up slowly over 10 to 20 years to allow the economy to adjust organically

Could you look at Milton Freidman's proposed negative income tax? People often mistake it as synonymous with UBI - they are different. Would be interesting to hear your views/research in a modern context. Cheers, Patrick (I'm from NZ and we can't afford economists so I'm hoping as an educated Australian you may be able to shed some light).

I've been waiting so long for Economics Explained to finally make a video on UBI!

part of UBI is you're going to get rid of most of your individual social programs, which would at least make it more efficient to get money to the people who are already on or should be on these programs, but since you're expanding the pools to everybody the overall cost goes up

It is worth exploring the Douglas Social Credit Theory. In this theory, the amount of National Dividend ( UBI) must not be in fixed amount to be given to the people so it is not always $1000/month but will be based on the the gap between the rate of cost/price generated and the rate of income distributed. The bigger gap, more national dividends(ubi), smaller gap, smaller national dividends(ubi) , so no gap, no dividends. This makes sense when the automation takes almost all of the jobs, the rate of income distribution will decrease therefore increasing the gap which means that more money to be given to the people to balance the purchasing power and the goods produced.

You need a transition time between ubi and how things are normally done. Per year you increase monthly ubi 100$ so in 10 to 13 year you get full ubi

When I think of the UBI, I think of that study on how much money a person has affects their happiness. If we took the figures from that and used it as a border. So, for instance, once someone earns more than that figure, half the additions go back to the government? I feel like something like that might help, at least a little bit.

Please keep in mind that no welfare system is perfect, and speaking as an American who was below the poverty line my whole life and did not qualify for all the support we needed, there are people who fall in the cracks. My family ended up with nearly $50k in credit card debt, to us clothed and fed. We did not dare get sick enough to need a doctor... at least my parents didn't. They were able to get me on Kid's Care, but that still meant the sliding scale (which was still generally more than we could afford). Because my mother was a substitute teacher working in multiple districts, they required her to provide stubs monthly to determine our eligibility for the next month... so we qualified sometimes, but the months we needed it the most, we did not qualify. I like the idea of a UBI, but we need other things with it... namely, tax incentives to businesses that provide a living wage, a ceiling on inflation levels, rent caps or relief, Universal Healthcare, Proper funding for public works.

Have you ever considered the negative income tax model proposed by Milton Friedman? Seems like the only thing that is being talked about nowadays is flat rate payments.

TLDR; UBI should not be rejected as a thought experiment. Farming subsidies have demonstrated the effects on a large economy, and cash in hand aid has demonstrated the genuine benefits to individuals. Basic Payment Scheme, The EU's Basic Payment Scheme (aka SFP, then SPS, now BPS) is essentially a UBI for the agricultural economy. BPS has significantly reduced food prices by boosting the agricultural outputs of Europe. BPS has been particularly effective towards reducing the cost of ruminant meats. Research has also suggested the capital provided by BPS has reduced costs of several agricultural inputs by stabling markets. An example of the stabilisation was storage of fertilisers, and purchase histories of machinery. Direct Aid, There is many examples of Direct Aid (giving individuals money, instead of top-down aid) being much more successful for helping communities break out of poverty. Inflation, There evidence shown from both these examples shows, yes there is inflation, but it is a spike that stabilised after a short period. SFP tended to be implemented over 5 years, in the UK this was for ~10% subsidy of the economy. Capital Flight, Capital flight is way over blow, and you agree. A UBI would bring quality of life up for all, reducing social friction (increasing the feeling of safety and pleasance of public spaces). A UBI would also diversify markets (through the same stabilisation seen in the last 15 years of EU agriculture). I'm sure we can see how this increases the desire to stay in a state with higher taxes. Cost of UBI, It's expensive, and most states could only pay for pandemic bailouts because everyone was doing it. But freeing up labour markets would be huge in our overemployment age. A decade of research has debunked much of these arguments against UBI. And we can always say "more research is required".

The reason why many people would like and support the idea of a universal basic income is that most people agree that a basic human dignity should be granted to everyone and that everyone should have the opportunity to live their life freely with lots of options instead of being forced to work in low-wage jobs just to survive. Thus, my very simple and direct idea as a counter argument to the inflation problem you raised regarding the UBI, is to just make the basic needs of everyone as close to free as possible, while also giving incentives to be productive. If everyone had a simple home (maybe 30-60 m² for single households?) available if they needed or wanted it (without huge amounts of bureaucracy and income or property proof) as well as free healthy food and water (luxurious food would not be included, like alcohol, caviar and a lot that isn't basic), I believe it would be just as good as a UBI. It would be good enough to live in such a small apartment for quite a few years, but not good enough that you would want to stay there if you had the opportunity to move into a bigger/better apartment or house in a better location. If those free apartments then also had different classes (worst to best) which you would get based on (your) need and service (you bring to the country), I believe it might be possible to create a system where not everyone takes advantage of free housing (you would have to actually live there to have one) and people do their best to move into their own housing once they can afford one, despite the free housing not being terrible. This idea is a bit idealistic and still has many problems that need to be solved when implemented in real life, but I believe this has a greater potential than UBI.

Great video on unpacking this subject. It's hard to find level-headed conversations about this and I appreciate the take.

Great video! I have a few follow-up questions: 1. In the Great Depression, the high water mark for economic armageddon, unemployment nearly reached 25%. Once general AI reaches and surpasses the level of humans, something that could quite conceivably happen this century, even conservative estimates of the unemployment (and unemployability) that would follow far outstrip that 25% figure. What would a non-UBI economic structure look like in that scenario? You mentioned a sliding scale from "let them starve" to "free money" UBI, but it's pretty clear that "let them starve" isn't a realistic solution. 2. You mentioned that even if a UBI proposal is 100% offset by tax increases, increasing the velocity of money would lead to more inflation, but isn't that a cost we as societies have to face sooner or later? After all, there are obscene amounts of wealth sitting inactive in Scrooge McDuck-like vaults (possibly an exaggeration); any effort to re-introduce those reserves to the economy would necessarily constitute either an increase in the money supply or an increase in velocity. 3. On a similar note to 2, we have many people living under the poverty line. As noted, if they received UBI, they have needs they would then spend that money on, applying upward inflationary pressure through an increase in aggregate demand. But doesn't the very fact that they have needs they're not currently able to afford to meet mean that aggregate demand is, in a way, artificially depressed? Am I missing something? 4. If (and this is a real "I don't know" if, not a rhetorical one) lifting people currently living under the poverty line out of poverty DOES necessarily exert upwards inflationary pressure, what can governments do in tandem with welfare programs and/or UBI to mitigate the damage from that inflation? 5. You used yourself as an example when discussing capital flight. I really appreciate the frank honesty in admitting you'd likely shop for alternatives; I think most people would in your situation. However, most people *aren't* making RU-vid videos for a living. In the corporate world, yes, work from home has gained decent traction, but it's also receiving heavy resistance from leadership structures. Further, many high income earners are entrepreneurs whose businesses are not easily relocated, let alone across international borders. This is to say nothing of the realities that international relocation brings. Sure, being a multimillionaire is great no matter where you are. But, is having $100million in Somalia better than just paying the tax and having $30million in California? I'd wager it's not for most people. So my questions are: How significant/likely is capital flight as a problem in currently wealthy nations? and What can governments or coalitions of governments do to combat/mitigate it? I appreciate any and all insight on these topics; I'll even look forward to hearing you talk more about any of them in future videos! Cheers, mate! :)

Can you also make a video about the other type of UBI? Universal Basic Insurance, especially from the perspective of a developing country.

The world always needs more discussion on topics imo. Just "discussion" and not random off the cuff thoughts. My one issue with the flat payment is location living costs. It really needs to be tailored in some way.

Although I'm ideologically opposed to UBI today, I understand that it makes sense the closer we get to a post-scarcity world. The entire point of an economy is to fairly distribute resources in a scarce world. If machines are mining and manufacturing and distributing far more than people actually need with far fewer people than the number of work capable adults, it would be unethical to not have UBI.

UBI is a dream, the amount would be just the new zero or starting point

One of the benefits of UBI that doesn't get enough attention in these discussions is what it would do to the balance of power between employees and employers. On the radical end it's much easier to go in strike if you still get a trickle of income, but on the less radical end it allows people to negotiate for better wages, or when looking for a job to be more choosy about which one they take, leading to better matches and better productivity. Also from the employers side, the laziest prospective employees will choose to live of the UBI perhaps supplemented with family support or something, which means the pool of employees becomes a lot better, making hiring less difficult and stressful on both sides. And I have done both and it sucks to have to hire someone. It also sucks to go through the interview process.

I think a combination of two things could work. One is reimplementing FDR's New Deal with modern adjustments due to it not being 1933. This will give everyone something they could do for employment and a small wage. On top of this, you implement a degrading subsidy based on current income. The closer you are to the poverty line, the less you get from the subsidy but the amount given will always make raises worth something as the regression is offset a ways from the poverty line. Some 10% above the poverty line the subsidy finally ends.

One point I've seen before about the cost of a UBI (In The Conversation's article _Universal Basic Income Costs Far Less Than You Think)_ is that it isn't quite as expensive as it looks because UBI can be better likened to a waterwheel powered pump, or (if we liken an money in an economy to the flow of energy in a living body) a beating heart than a project with a straightforward cost. Money, water, and blood flow through each of these, respectively, but each kind of pump only consumes a portion of what it moves. If, for instance, someone pays more in tax than they receive in UBI, then effectively, that program is just a government rebate on their taxes, parceled out over the course of the year, while someone in the middle is at least somewhat ameliorating the costs. Looked at in this way the cost drops to something like a sixth of what it was before. It's still in the mid hundreds of billions in a lot of cases, mind, but that's also still far short of the trillions first glance would suggest, and well in line with traditional big ticket items like defense spending or other welfare programs.

Big bosses of corporations calling their prices on the products they didn't even produce is what destroying social security, inflating prices as they think that they could pocket a lot more cash is going to make poverty in societies even worse.

I think one of the things missing from inflation discussions is always the assumption that supply is constrained... Companies produce based on their forecasts of demand. They know short term stimulus won't last and so won't increase production which takes time and money to ramp up. Indeed they'll even scale back production to reduce risk during uncertain times. They'd much rather just ride the wave of temporary higher prices until "normalcy" returns. On the flip side, if the new "normal" becomes higher demand long term then it becomes a competitive necessity to produce more otherwise they will simply lose market share to competitors.

I'd suggest we reduce taxes first before even considering UBI. The less money taken out of your paychecks, the more money you already have (and your average low-income earner is already out almost $10k to $30k by the end of a year due to taxes).

well-made, thorough-researched and fair video. Thank you!

The fear of high-earners fleeing the country due to higher taxes is overblown. Up until 1981 the US's top marginal tax rate was 70% and the rich didn't flee the country. This is because they value other things more, such as good roads, stable politics, access to high quality services, decent policing, etc. And a wealth tax which was heavily based on property would avoid much of the concern about flight of the wealthy. A property mogul who owns a dozen office buildings in downtown Manhattan may flee the country but he won't be able to take those buildings with him: they could still be taxed. The cost of UBI is also somewhat misrepresented. Yes, giving $1,000 a month to every adult in the US would cost $2.2 trillion, but that money would be taxed back from the rich and middle classes. If we assume that only a third of Americans are poor enough to see a net benefit that would give a cost closer to $700 billion, which isn't all that far off from the $500 billion that the US already spends on welfare. There are also some countervailing effects which work in UBI's favor. For example, if high earners decide to leave the country to avoid higher taxes then much of their spending would also leave the country helping to counteract any inflationary pressures brought on by the UBI. Countries with significantly lower taxes also tend to be significantly poorer and spreading high earners among those poorer countries would help to address global inequality, though that might be cold comfort for the country they left. Finally, UBI might encourage more people who are currently on welfare to seek employment since they won't risk losing it the way that they do with welfare benefits. Does all of this make UBI feasible? I don't know, but I'm sure there will be plenty of studies in the future for us to chew over.

11:00 The solution really isn't that complicated. You do business in the country, you pay taxes to that country. Beef up the IRS to make sure companies don't shuffle their income to "friendly" countries.

The solution that has come in on the research that I haven't seen many people talk about is wage adjustments. Because everyone on the lower-earning side would have a survival budget supplied by the UBI the businesses could pay less in wages. Survival would be covered by the UBI while employment becomes a source of quality of life and luxury access. In this case, the wage expenditures go down for employers of unskilled labor for example. If an employer is supplying a full budget of $3000 per month for the employee they would then be able to pay $2000 per month under the UBI amount from the video knowing that the employee has the same buying power. The difference can now go toward other budgets within the company with the possibility of growing the value and return of the company as a whole. This would lead to more small business entities which have historically proven to improve economies and function as the "backbone" of growth and stability.

It would have to either change how people are taxed or be targeted guaranteed basic income. It would also be best implemented alongside legislation that revolutionizes how we treat the housing market. Either introducing enough public housing for cheap as to adequately compete with rentals or introducing strict rental price restrictions and easing zoning restrictions to allow better low income housing options.

You covered the argument that ubi would disincentivise entrepreneurs, but one of the arguments for ubi is just the opposite. If people didn't need to work gruelling hours just to survive we would be in a much better position to start our own businesses.

“Business opportunities are like buses, there’s always another one coming.” - Richard Branson. Thanks for the video :)

People will absolutely not start a company because of the taxes. An an entrepreneur, it’s already so much risk and so expensive already. The only reason I do it at all, is the outsized returns.

An honest discussion about a universal basic income should probably be a multidisciplinary discussion. Only looking at it from a financial perspective is a bit hollow in my opinion. For example I've read some examples where giving poor people UBI for only a couple of years makes them use a lot less alcohol and drugs, take better care of their children, start new studies etc which while being positive for the economy in many ways also makes a country more humane and lowers stress levels (and all consequences of high stress because of not knowing if you can pay next months rent for example). One of the problems in my country with the welfare system is that there are a lot of strings attached that add a lot of stress to one of the most stressfull situations a person can find themself in, not having the money to pay for their basic needs (food, house etc). I think UBI or some form of UBI could be part of becoming a more humane society.

One thing most people don't talk about when it comes to the ubi is that more people can take out larger debts at lower costs. If a government garuntees ur income any Banker will be crazy not to give u that loan and they will just take part or all of the ubi to pay it off over years. It will single handedly destroy the predatory debt industry.

If we ever get to the point of needing a UBI it will be past the point of job lotteries when a significant amount of industry is fully automated and people can't easily find work. It will be much easier to implement a UBI in a command economy where the government has a significant control over what is being produced and can set prices of goods. Otherwise, companies will take advantage of a UBI by raising prices to meet demand. A UBI has a disadvantage of making money less scarce and therefore less valuable.

Even after over 30 years of research into UBI, it still requires consideration from a broader vantage than existing economic theories and monetary policies. Never seen a study that shows negative results for UBI (though some studies have been wrongly interpreted that way), but the fact is that until it's done at scale, we just don't know for sure. As for inflation, oh my, so many factors. However, the percentage impact which US government checks have played on US inflation certainly seems minimal compared to supply chain issues and profit gauging. As such, I remain in convinced that inflation on a properly taxed and managed economy would immediately result in inflation. Then again, when basic nessecities like housing and food are viewed solely as markets where profit I king, then any opportunity for raising prices will be taken. It might require more 'controls' to stop runaway inflation. P.S. As someone who followed Andrew Yang's campaign with a lot of 'skeptical/hopeful interest', I think he certainly got to the point that he truly believed it was not only minimally possible but practically possible, though he always knew it was a long shot, to get UBI to happen.

There is also the Romer and Romer(2010) study, which established that the tax level at which you maximise revenue is 33%. So the hump of the Laffer curve occurs much sooner than people used to think.

Great episode! I wish you mentioned Andrew Yang's VAT (value added tax) idea and your analysis of it as a way to pay for UBI.

Some added benefits from adding a UBI that you missed. It won't just negate the cost of the bureaucracy behind it. This will replace things like food stamps and support for the homeless which is already billions. It also raises the floor of society since it does not replace things like Welfare and Disability. $1,000 a month plus Welfare should be enough for a person to rent a room in a house. Usually, it actually costs taxpayers more more to support a homeless person being homeless through support programs and temporary housing that doesn't actually improve their situation, than it is to give them welfare + $1,000. It's up to welfare for that region to cover any variable cost of living which you mentioned. (Yes I acknowledge there are some people that need mental health care in order to get off the street, but that $1,000 could go towards getting them that help.) Not only will this pretty much end homelessness, much like how they're doing so in Europe, it also prevents people from being a wage slave. Why would someone allow their bosses to abuse them if they had the financial ability to just quit their job and they would be okay until they found another one? We wouldn't need to raise minimum wage if the workers suddenly had negotiating power. I should mention that living like this would be like living in quarantine, so most people would go stir crazy and would push to do something with their lives if you were worried about creating a multitude of lazy leeches in the system. There are, and always will be leeches, to assume that there aren't now is just silly. Those leeches would still be putting that $1,000 back into the economy which is still better than giving it to billionaires as they will not spend it. That $1,000 can also cover the cost of child care or transportation so people could get to work in the first place. Yes, there are lots of people who are too poor to work. Long term, this would also help health care costs as healthier food is more expensive than junk food, take a bottle of water and a can of pop for example. Being able to afford better food means a healthier life, which translates to less health problems down the line. If all of these people are suddenly able to become employed, then the tax from their income will go back into funding the program. The cost of a UBI would be going down every year, unless there's another pandemic, but then the government wouldn't have to worry about supporting their citizens that can't go to to work. As for how the rich would use it, you were right that they probably wouldn't even notice. There's essentially a point in income rates where they would get that 12k a year but then just be taxed an extra 12k. They get the interest rate from it from their bank but that's it. As for inflation, well, it's already at 11% without this, so obviously there's more problems with inflation then investing in the lower class of society. I also like to think of a UBI as trickle up economics as one way we could also pay for this is to stop supplementing businesses from the government. Instead of just giving these corporations bailout money, they give all the people their bailout money and they have to fight for it on the free market just like everyone else. As you can see, from a capitalist point of view, they probably hate this idea because it takes so much power and wealth away from them. Therefore, I firmly believe that lobbyists are pushing against a UBI, because it makes it so they are unable to exploit the working class in many different ways.

UBI will likely become possible through the increasing automation of labour over the next few decades. By taxing the labour of machines and AI, a lot of money would likely become available UBI should be structured based on your qualifications though. That way we can continue to incentivise education

Markets, left to their own devices, follow a power law. Lots of money accumulate with a few. That's not ideal for loads of reasons. It puts a lot of power in the hands of a few, it puts a few people in gatekeeper positions for larger commercial/communal ideas, etc. A UBI counteracts the power law. It moves money from the few to those with less. It moves power through society. It allows more ideas to get funded and grow. It accelerates progress.

Uploaded 2 minutes ago? As if a Friday could get any better!

Excellent video. Huge fan of EE! Sometimes I ply episodes that relate to topics I am teaching in my High School Business classes. Thank you for the Content!

Well I guess if I find these videos entertaining/ interesting. Then I'm officially an adult lol. On my 5th one in a row. Been listening to them while working today. Suppose I should subscribe now. Keep up the good work, love the quality of the videos. Well, the audio aspect that is. Hard to watch a video with your screen off.

Funny thing is, with a $1000/month UBI payment, workers in the US and Canada would still only be making about half what their parents or grandparents were making back in the 70's before tax policies changed, diverting 100% of productivity increases to the people at the top while clawing back workers saleries, benifits and social programs.

Get up to $10,000 when you transfer your account from another brokerage depending on the amount. Sign up at ➡ public.com/EE A quick note that I should have made more clear in the video is that the half trillion dollar welfare figure does not include disability insurance or old age survivor insurance. These are pay in systems and just like medicare and medicaid are not going to be replaced by any seriously proposed UBI system. If you want to learn more I suggest reading this article from the Washington Post: www.washingtonpost.com/news/wonk/wp/2014/01/12/no-we-dont-spend-1-trillion-on-welfare-each-year/

8:00 in the USA, if someone sells their company for a lot of money let’s say millions or more, depending on a variety of factors they’d probably pay 23.8% or 20% on all or most of that capital gain as opposed to 15%.

1) the stimulus checks for people was not the cause of inflation (contrary to what those in power cry out), you can thank businesses for deciding to jack up the prices and then BRAG about record profits over the last few years, which in turn means that it was profits to businesses that led to massive inflation. 2) It won't matter what you say once automation displaces over half the world population and makes work essentially impossible for them.

There's a number which bugs me in this. It's that the US would only spend .5tr $ in "welfare". A UBI wouldn't only replace welfare expenditure. It would replace any form of direct gov payouts and subsidies up to the value of the UBI as well. Meaning most social security and many forms of tax breaks as well. UBI doesn't mean slap a handout ontop of the current system - it means a fairly comprehensive overhaul of social security, welfare and tax system, reducing bureaucracy across the board and reducing the need to use taxation as a bludgeoning tool on the economy.

We kind of had a natural UBI experiment during covid. Most people ended up using their extra money on paying down their debts/credit cards/student loans/etc. That kind of shows us what would have a bigger positive impact on the most people...Cancel people's debts and do a jubilee. Constant debt hanging around people's necks is what prevents early family development. How can people afford children? A world without children is a world without a future.

Thanks for yet another great content! Talking of liquidity injected by the US and other major economies is it appalling to you the number of major companies that have revised their outlook for 2022 and so many they are in a really bad shape? Is it really possible they did not see this coming ? Would be great to see some content around this topic (it has been a while since you covered organizations) thanks!

The biggest problem with any UBI that is short of truly universal, is that literally any system of means testing will be exploited by those who currently have power to prevent it from disrupting the existing class structure. The biggest reason UBI won't happen in developed countries, is that the power and influence held by the upper reaches of the upper class is structurally dependent on wealth inequality, and they will and have spent well beyond the amount of any real financial harm they would have experienced by implementing reforms in order to stop them because the existence of a class of captive laborers is as important to them as the actual value of their assets.

We have to make the change from a consumer society to a needs society. We have to do this together. And we will all feel better after. The Universal Basic Income is one step in the right direction to end poverty. An other thing is a Health Insurance for everybody and Studying has to be free for everybody.

I would find it interesting for this channel to cover UBI's little sibling, negative income tax. Creating an income floor for a society. The main problem I see with this is the political will required for getting everyone on UBI is much less than a negative income tax. But it seems like a topic that would be interesting to explore

One could keep the tax brackets the same and increase effective tax rate by changing what deductions and credits are available to individuals and businesses, and increase enforcement of the tax law. Not saying i personally would be in favor of this but it’s a relevant point. An extreme example to emphasize the point is: If you raise the tax brackets to say 70% but allow people to deducted any money they spend, no one is going to actually be taxed at 70%. They’ll spend more money. And if you don’t enforce the tax law people will just say they spent the money on their return and keep the money and pray they don’t get audited which they probably won’t if audit rates are similar to what they have been the last few years.

Id be really interested in seeing a similar video on the economics of "basic" as done in the books of "The Expanse". Honestly, just a discussion on the economics of that world would be fascinating.

As someone who in their career had to evaluate for government serious and practical UBI proposals - both for their economic effects and their administrative viability - I could easily make a comment that is much longer than this video. A UBI is both economically and financially feasible. The net loss of GDP as measured with static allocative models (some of which I built) is of the order of 2% in return for basically abolishing poverty and giving everyone more economic freedom - a big gain in aggregate wellbeing. The long run DYNAMIC effects (ie on innovation and productivity) are extremely uncertain but more likely, on a priori grounds, to be positive. And a proper BI/FT system is administratively far simpler than what have, both on the payments and tax side. But I also think the political economy, not the economic or social effects, of it is dreadful. It is not POLITICALLY sustainable because people have a deep intuition of "deserves" and wish to punish the undeserving (probably founded in evolutionary game theory). They will not tolerate "my money" going to "the undeserving", whether they consider someone undeserving because they are a billionaire, or because they are poor and being punished by God, or are a bad parent, or just because they have the wrong skin colour. They'll always find an excuse to punish - that's just what people are.

UBI itself is an amazingly good idea for resolving the biggest problems in modern society right now. Simplifying taxation to a flat % allows for simple and elegant solutions. Giving a flat amount of money to each person would effectively make the % taxation higher for high incomes, lower for people of moderate incomes and negative for low incomes. Also you should absolutely include under 18 in UBI, those are literally the primary people that need financial assistance. As for the 70% taxation and such, I don't see it being much more than just spiteful stupidity. If you earn more you pay more without increasing the percentage taken. By making complicated tax laws you encourage bad actors to utilize loopholes to optimize their personal benefits, such as distributing that income within their family or other underhanded ways to make it appear as if their income is lower. This only serves to hurt the competitive advantage of people who play by the rules as intended.

I reckon a 4 day work week will work better if wages don’t decrease by regulation (but wage increases might suffer)

The problem with UBI is it can be taken away by those who disagree with you.

An elegant way to finance a UBI would be to tax every transaction of money by as little as 0.01%. So everytime money changes its owner, you would have to pay a tiny amount of it in tax. The idea is, that the total annual transaction volume is somewhere in the quadrillions. Only a fraction of it would be needed to finance a UBI. This way you would naturally tax high income earners more as well, without it feeling like pure punishment. As a low income earner, you wouldn‘t even notice it much.

Once AI and robotics truly become good enough to begin replacing humans in the economy en masse, two things will occur: 1) The governments of the world's advanced nations will have no choice but to begin creating payment schemes based on IQ. Fundamentally, for example, if any person with IQ below 100 can be replaced with a robot in any job which they can conceivably be trained to do, then this person is de facto disabled from birth. But this person is still a voter. So... These schemes will, perforce, rapidly take on the character of a UBI, especially if the prowess of AI keeps increasing until the majority of people around the world are unemployable. 2) The cost of goods and services will simultaneously drop through the floor. Robots don't get sick, don't have bad/sad/lazy days, don't take vacations, don't have children, can work 24/7/365, etc, etc, etc. So, suddenly, the cost of manufacturing a good begins to asymptotically approach the cost of raw materials plus energy. This means that a UBI will actually become affordable. Basic food, housing and clothing will suddenly be so cheap, that it will not be a problem to provide a comfortable baseline living standard to literally every citizen, regardless of their social position.

I really loved the idea of an UBI but I was concerned for some of the same reasons you brought up in the video (mainly inflation). It's sad that you reached a similar conclusion to what I did but it's nice that now I'm more well informed.

You didn’t really mention one of the best things about a UBI replacing current welfare and that is that it doesn’t incentivise people to stay poor. Currently if you get a job then you will lose your benefits but if you have your UBI no matter what then you can take any kind of job and it isn’t just the money the bureaucracy costs that you save but also the time the people on welfare have to spend to apply for it and proof needed to keep getting it etc. I agree that a UBI in addition to the costs we have now isn’t a good thing but replacing traditional welfare would work. Certain individuals can still apply for more if absolutely necessary but saying that cost of living in your region is too expensive isn’t an excuse since you can move anywhere and still get the UBI. There also would be no need for a minimum wage as people have the basics covered. Businesses would only need to pay enough to make it worth working.

Great video, mate! I dunno how I feel about all this. I got a UTI in uni and I itched so bad I couldn't concentrate on class. Major downer.

a lot of those problems can quite easily be solved by it being truly universal, not just local.