Skip to main content

UBI: Universal Basic Income as a Recession Safety Net

UBI could be our ticket to true financial freedom.

UBI could be our ticket to true financial freedom.

Would you say you have enough disposable income, even when prices keep getting more out of control?

You may not be familiar with the concept of handing everyone free money—no strings attached and no distinction—on a regular, sustained basis. But many countries have had their own version of this program, commonly known as universal basic income (UBI).

Time and again, experiments done by governments who decided to adopt the idea have produced promising results. But it’s clear that many are still not in favor of UBI. And only time will tell whether we decide to elect policymakers who like the idea.

It's obvious to many UBI advocates why they’re in favor of it, but those against it cite reasons such as:

  • No one would want to work anymore.
  • Having a job would no longer have purpose.
  • Giving people free money is essentially socialism.
  • Free money in place of safety nets would just worsen poverty.
  • People would become more dependent on government.
  • Prices for goods and services would go out of control.
  • It's too expensive for governments to even consider.

To some degree, UBI opposers may have a point. However, many of these reasons can easily be debunked through logical counterarguments, plus good data. Here, we will focus on one specific reason as to why we should advocate for UBI—it’s a safety net during recessions.

The State of UBI Acceptance

Looking across different governments around the world, it’s easy to say that UBI acceptance is pretty much experimental. Various trials have been and continue to be conducted, and in varying forms. The general conclusion is that participants, which are specific segments of the population, are better off with UBI than without.

As far as Americans go, UBI acceptance is split. New York Times bestselling author Dan Schawbel cites three surveys:

  • A 2018 Gallup poll of 3,000 adults found that 48 percent of Americans support UBI.
  • A 2019 survey by USC found that 37 percent support it, and those with household incomes below median are also more likely to support it.
  • A 2019 study by Harris found that 55 percent of people ages 18 to 34 support it, while only 21 percent for people over the age of 65.

Sadly, the overall sentiment isn't compelling enough for lawmakers to enact a radical change. Perhaps thinking about economic downturns would make the undecided reconsider.

The Inevitability of Recessions

It’s commonly accepted that recessions are simply part of the way that capitalism works. We’ve experienced boom and bust cycles throughout human history. In some years, the market expands at a very fast pace and companies can’t keep up with hiring demands, like when world markets rebounded as Covid-19 restrictions fell out.

And at various points in time, every few years—usually once per decade—market growth falls off a cliff. The inevitable shrinkage of the economy happens, as outlined in these examples:

1920: Post WWI economic recession.

1929: The Great Depression: 15 million Americans were left jobless during this period.

1937: Despite recovering from the Great Depression, this “Own Goal Recession” was caused by a series of federal policies such as increasing the reserve requirement for banks and sterilizing gold inflows.

1945: The V-Day recession. U.S. government spending was cut after WWII.

1973: The oil embargo recession. This was a long and deep economic contraction due to the Arab oil embargo, in which oil prices quadrupled. The dollar also suffered from devaluation.

2001: The dot-com bubble recession. This was a relatively mild recession, and it is thought that the 9-11 attacks hastened recovery.

2007: The Great Recession. The housing market crash, and the worst recession since 1937.

2020: The Covid-19 recession. For the U.S., this only lasted two months but it was a very sharp decline.

Since recessions are expected, why can’t UBI be standardized?

History has shown that recessions are inevitable. And with recessions normally come mass layoffs, leaving an unignorable portion of the population left without a means to live.

Despite this, whichever country you may live in, it’s obvious that UBI has a long way to go. It needs to go from a level where we are no longer putting too much meaning towards our jobs—to a point where not having any job at all is considered normal.

We should be working a job not because it’s the only way we can sustain our lives, but because it’s what makes us feel happy and fulfilled. Right now, unfortunately, it’s still hard for us, especially us in developing countries, to accept the idea that jobs are not just for survival. Sadly, our need to work is tied too much to extrinsic motivation, as opposed to a more organic, intrinsic need to work.

UBI, I believe, can’t be standardized if people in a democracy don’t trust in the idea’s benefits. It starts with people, because they are the ones electing those whom they believe will enact laws and policies to standardize UBI. The electorate is ultimately responsible for taking UBI from a mere experiment and making it a reality.

UBI as a Safety Net for Downturns

The country I live in, the Philippines, has a poverty incidence of more than 20 percent. This metric implies that 2 out of 10 people need a minimum cash handout just to get by. Granted, since 2007, we already have a version of UBI in place—the Pantawid Pamilyang Pilipino Program (4P’s).

And while I’m disappointed with how this welfare program has fallen into being politicized—such as when government officials threatened to withhold it from those who refused to get vaccinated—in general, it has worked out well.

In 7 Reasons Why Universal Basic Income Is Gaining Momentum, I highlighted the points on why UBI advocates want to make it standardized. And I’d like to echo those same reasons here:

1. UBI has passed many tests

How many more experiments do we need to run?

UBI has, and is being tested in more than 130 countries. Notably, Finland did a two-year study of UBI, randomly picking 2,000 people nationwide to participate in the experiment.

The test was simple: give the random participants, who were initially unemployed, 560 Euros. This cash handout was guaranteed, automatic, and unconditional. The outcome of the Finnish experiment was that there was a small uptick in employment and significantly improved the participants’ well-being.

UBI is also working well in Brazil, which implemented the Bolsa Familia welfare program that provides an average of $34 per month.

In 2017, Spain launched its “B-MINCOME” experiment which guaranteed almost $2,000 to each household per month. The success of that experiment likely helped make the case for once again launching in June 2020 its UBI of $1,145, a scheme which could cost the government at least 3 billion Euros a year.

2. Income inequality continues to be a serious social issue

Income inequality isn’t going anywhere. Having a UBI implemented as part of welfare programs partially addresses the growing wealth gap. While UBI won’t put an end to income inequality, it at least gives cash-strapped people some dignity and money to spend on basic necessities.

3. Work continues to change fast

The mainstream adoption of remote work and hybrid models has made a huge portion of the workforce rethink work. Some jobs were found to be still effectively performed wherever the location of the worker may have been.

The changes that happened throughout this workstyle upheaval have both rendered some jobs unnecessary and created flexibility in several jobs. All the people who lost their jobs because of these changes—where will they go?

Those who lost their jobs because of this reshaping did so without their own doing, and if the mass layoffs early in the pandemic were a sign, governments need to create a safety net for those temporarily or permanently without jobs.

4. Automation is a constant threat

Futurists fear that automation will one day remove so many jobs that a huge segment of the population will be out of work. You’ve probably heard about the fulfillment centers of Walmart and Amazon—companies that for some time had a difficult time hiring workers—are now operated with efficiency and automation. It’s also inevitable that the manpower needed to operate these centers will continue to decline.

It’s better for governments to be proactive when it comes to technological advancements that change the landscape of work. Time and again, legislators find themselves on the reactionary (after-the-fact) side, like it did with Facebook and Google on data privacy and now with cryptocurrency companies on pump-and-dump schemes.

Job automation is inevitable and has been happening throughout history, and technology will continually churn out labor-saving devices. Governments therefore need to step in before the time comes that not enough jobs will be available for the workers that are available.

5. It can help combat sudden high inflation

While it feels counterintuitive, giving people free money doesn’t necessarily lead to high inflation. We have to distinguish “giving money” from “printing money,” because it is the latter that causes high inflation. We did see inflation soar after stimulus checks were given to Americans during the Covid-19 pandemic, and that outcome may lead to a hesitancy by policymakers in considering UBI.

However, it must be noted that these extra cash handouts were only partly to blame. There were a host of other reasons why inflation soared as the economy opened back up.

High inflation can be caused by various factors, such as labor shortages, supply chain issues, high tariffs—the list goes on. But UBI shouldn’t get the blame for permanent high inflation. Instead, it’s a safety net for sudden inflation, as people will have that buffer of income already in place.

Reallocating money (which was what the government did) is completely different from printing cash. And it is in this difference where UBI opposers get the whole idea wrong.

6. UBI will allow society to focus on more pressing issues

It’s time that society focuses on other more pressing issues, instead of just fixating on addressing poverty. Imagine if Steve Jobs, Elon Musk, or Bill Gates never had the chance to show the world their genius because they grew up in a poor nation, raised by a poor family, and had to fight their way out of poverty first.

Would they have been able to deliver transcendent products, and change the world to what it is today?

We need to displace the attention away from poverty, and into other serious global issues. This gives our collective minds the space needed to focus on the recurring threat of infectious diseases, climate change, sustainable energy, and so much more.

Are influential people in favor of UBI?

Elon Musk, in a 2016 CNBC interview, said that there’s “a pretty good chance we’ll end up with a universal basic income, or something like that, due to automation.” From his statement, you can say he took a futurist’s approach in being in favor of UBI.

This is no surprise coming from him, having founded and invested in Neuralink, a company with the aim of creating a symbiotic relationship between man and machine. And being one the most influential people in tech, Musk knows AI and automation will ultimately replace millions, if not billions of jobs.

In a 2021 interview with the Wall Street Journal, Musk echoed his sentiments on labor automation:

“Well, [the use of robots] has the potential to be a generalized substitute for human labor over time … The fundamental constraint is labor … I can’t emphasize this enough, there are not enough people … ”

While Musk’s issue then was the lack of able bodies to do the available work, the day is looming where there will no longer be enough jobs to be worked by anybody.

UBI and the Future of Work

Aware of the threat automation will pose to the labor market, Elon Musk is just one of many prominent people backing UBI for this reason. AI will enable robots and machines to work labor-intensive jobs better, faster, and more efficiently than humans ever could. And language models like ChatGPT could also threaten the existence of many low-level knowledge work jobs.

While many things are uncertain about the future of work, it’s clear that some jobs will eventually be replaced because of AI and other technologies. Time and again, we’ve seen this happen. But this doesn’t mean that we won’t have any jobs left over. What this might signal is that the jobs we’ll be left with are jobs we'll actually want to do.

This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.

© 2023 Greg de la Cruz