An Equal Playing Field: Why UBI Is Preferable to GI

Given the current climate, one might wonder whether this is the time for a report on universal basic income (UBI). But speaking as two people who’ve advocated UBI since the early 2000s: Current prospects for a UBI may be no worse than they were back then. This piece discusses UBI in comparison to what some regard as a competitor policy, guaranteed income (GI), and argues that a UBI would better promote economic security at a time when US residents need a democratic economy that works for all of us.¹

UBI is a cash benefit paid periodically to individuals residing within a given country (or other political jurisdiction), regardless of income, without a means test or work requirement. GI is like UBI but with two differences: (1) it’s targeted, and (2) benefits don’t have to be allocated to individuals but may be dispensed to entire families or households.² Means testing is one kind of targeting. Others are based on statuses such as being pregnant, aging out of foster care, being a Black mother, etc.—sometimes in service of a pilot program studying the effects on a particular population and sometimes because that is the population the policymaker most wishes to benefit.

 There are two types of GI supporters: (1) those who prefer UBI but support GI, hoping it will eventually evolve into UBI, and (2) those who oppose UBI altogether.³ This second type of GI supporter believes that cash grants should be targeted toward the most marginalized and worry that a universal benefit would dilute the effectiveness of the benefit for the poorest residents.

 We are both, first and foremost, UBI supporters, but we’d support GI if it were a definite stepping stone to UBI—so we’re “type one” GI supporters. However, we too are concerned about the most marginalized and want a program that has longevity and cultural support to benefit those who need it most. We think, perhaps counterintuitively, that UBI may better address these concerns than GI. 

First, consider political and cultural support. Since UBI would go to everyone in a political jurisdiction, everyone in that jurisdiction would have a direct interest in preserving the policy. With a GI, those not targeted for the benefit would have no self-regarding reason to preserve it. 

We aren’t the first to say this, and others who’ve done so typically point to the difference between how Social Security is regarded politically and culturally compared to the Temporary Assistance for Needy Families (TANF) program. Polling data reveals that Social Security, the program that provides benefits to retirees, is much more popular than TANF, the one that primarily benefits unmarried young mothers and their children.⁴ A majority of Americans across political parties support giving more funding to Social Security; most do not feel the same way about TANF. 

Some might argue that the difference between how Social Security and TANF are viewed has less to do with the fact that one is universal and the other targeted than that one (Social Security) requires recipients to have a work history while the other (TANF) doesn’t. Social Security might be viewed as a reward for working during one’s earlier years. But it is also true that Social Security is a program that benefits people of various races, ethnicities, and income levels. It is not seen as a program that only benefits low-income, marginalized Americans. We can’t help but think that this contrast explains some of the difference between how the two programs are regarded. 

Thus, another reason we prefer UBI to GI relates to stigma. The type of targeting that would need to be associated with GI might result in eligible people choosing not to apply for benefits. They might believe that people who receive benefits are regarded as “lazy” and may forgo applying to ward off this threat to their self-respect. There’s evidence of this type of stigma in relation to TANF.⁵ Since a UBI would go to everyone, stigma wouldn’t factor in. 

The potential for error in determining eligibility is a third reason to prefer UBI to GI. Targeting benefits would require some way of determining whether applicants meet eligibility criteria. Since neither humans nor computers are infallible, there would be applicants who’re eligible for GI whose applications would be rejected as well as those who’re ineligible who would receive benefits. A universal program does not face these difficulties and places less administrative burden on recipients than do means-tested ones.⁶ 

One claim we often hear in support of GI is that it would only provide cash to those who need it. UBI, the claim goes, would be wasteful because it would provide money to those who already have plenty of it. One way to meet this concern still favors UBI over GI. 

GI is typically structured as a negative income tax (NIT). NIT only provides benefits to those whose income falls below a certain level, called the break-even point. The more one’s income falls below this level, the higher the GI benefit one receives, up to some maximum. For example, suppose the maximum GI was $12,000 a year: Someone with no other income would receive $12,000. NIT also has a benefit reduction rate associated with it, which is the rate at which one’s GI decreases as one’s other income increases. Suppose this rate was 20 percent; this would mean that for each $1 of other income, one’s GI would decline by 20 cents up to the break-even point. At breakeven, the person would receive $0 in GI as well as pay $0 in income tax. This would be a way to ensure that benefits only go to those who need them. UBI, however, could be structured to do the same thing. Everyone could be given a UBI of $12,000, and all other income could be taxed at 20 percent. This would have the same net effect as an NIT with a 20 percent benefit reduction rate.⁷

One could think of GI/NIT as front-end targeting, while a UBI with the same net effect could be thought of as back-end targeting. But going the UBI route avoids some of the problems associated with targeting that we mentioned earlier in this essay. That is, the problem may not be targeting in and of itself but the kind of explicit front-end targeting associated with means-tested programs like TANF.

We could get more money to poor and moderate-income folks, on a more permanent basis, if we got it to them through a program, like UBI, that benefits everyone. We aren’t arguing that there’s no place for targeted benefits. We’re saying that, ideally, a program designed to provide economic security through an income floor isn’t the place where targeting should occur—that floor should go to everyone. Any targeting that occurs should be in addition to that.

Scarcity, disaster, and destitution can have devastating impacts, not only on the current generation but on future ones as well. Since cash can buffer individuals and entire communities from such impacts, a UBI would provide an invaluable cushion against future disasters that are sure to come.