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  • Nico Ortega
  • Business Impact

    Universal basic income had a rough 2018

    Some of the biggest and most promising experiments were plagued by delays and shutdowns.

    Silicon Valley loves the idea of universal basic income. Many in the tech elites tout it as the answer to job losses caused by automation, if only people would give it a chance.

    The idea is that all citizens receive a set amount of money from the government to cover food, housing, and clothing, without regard to income or employment status. This minimum stipend can be supplemented with wages from work. Advocates say it will help fight poverty by giving people the flexibility to find work and strengthen their safety net, or that it offers a way to support people who might be negatively affected by automation.

    Getting people on board with basic income requires data, which is what numerous tests have been trying to obtain. But this year, a number of experiments were cut short, delayed, or ended after a short time. That also means the possible data supply got cut off.

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    Back in June we declared, “Basic income could work—if you do it Canada style.” We talked to the people on the ground getting the checks in Ontario’s 4,000-person test and saw how it was changing the community. Then, just two months later, it was announced that the program is ending in the new year rather than running for three years. The last checks will be delivered to participants in March 2019.

    We’ve been waiting for basic-income data for a while. In 2016, MIT Technology Review predicted that “in 2017, we will find out if basic income makes sense.” There were two main tests we were waiting on. First there was Finland’s promising basic-income program, which received a lot of hype when it was launched in 2017. Then, in 2018, it was revealed that the program would not yet be extended beyond its original trial period. Another experiment, from tech incubator Y Combinator, has also faced more delays, pushing the experiment into 2019.

    That isn’t to say all tests of universal basic income have collapsed. In North America alone there are two programs that have been functioning for more than 20 years. Spain and Kenya also have their own high-profile tests under way. But the problems that plagued the Ontario, Finland, and Y Combinator programs illustrate the issues that basic-income programs constantly face.

    Problem 1: Politics

    In Finland, the scale of the test was kept relatively small. This was probably as a result of a conservative government that “had no intention of properly experimenting with UBI,” according to the founders of the think tank Parecon Finland, who called it “doomed it from the start.”

    The Ontario program was shut down by the province’s newly installed Conservative government. The program was initially launched by the previous Liberal government, so there was always a looming worry that it wouldn’t survive the election. Political switches make it difficult to maintain these tests unless the way they’re designed is something both parties can get behind.

    Problem 2: Funding

    As you might imagine, giving away free money is expensive. Private tests must rely on generous donors and often struggle to raise the cash they need. Y Combinator has had to raise $60 million from individuals, national foundations, and local philanthropic groups. It has said the test won’t start until all the funding is obtained. Government projects, on the other hand, have to get support from tax-paying citizens and politicians. Lisa MacLeod, Ontario’s minister in charge of social services, cited the high cost of the project ($150 million in Canadian dollars) as the reason for the cuts and said it was “clearly not the answer for Ontario families.”

    Problem 3: Disrupting existing benefits

    “Pilot leaders have been concerned that recipients could actually end up worse off in the long run from receiving basic income—for example, by becoming ineligible for other social programs,” says Catherine Thomas, a fellow at the Stanford Basic Income Lab. To avoid that, they’ve had to work with municipal and state agencies to get waivers for pilot recipients. But getting those waivers takes a lot of time and bureaucracy. “Y Combinator Research has been delayed by working with local government agencies to get waivers and by finding banking options that aren’t predatory or overly burdensome for low-income populations,” says Thomas. Finland has also sent mixed messages throughout the test regarding its stance on benefits for jobless people.

    On the other hand, Andrew Yang, who is running for the 2020 Democratic presidential nomination in the US, says the experiments that have already been run are enough to prove that basic income can be successful. “It’s wrong to think we don’t have information on this. We do,” Yang told MIT Technology Review. “There have been many implementations of basic-income-aligned programs over the last number of decades.”

    He’s right in that this is not a new idea: various programs have been around for a while, including the Alaska Permanent Dividend Fund, which has been providing data on basic income since 1982. An earlier incarnation of the idea was supported by the conservative economist Milton Friedman in the 1960s, and both Richard Nixon and his Democratic opponent, George McGovern, supported some version of it during the 1972 campaign. It was a rare instance of bipartisan support.

    For its advocates—and there are many, particularly in Silicon Valley—universal basic income is a radical idea that will not only alleviate poverty but also address the implications of further automation. But for others, it has the potential to shrink the labor force or cause the poorest in society to lose out.

    This discrepancy isn’t something that can just be argued away. The only way the idea can ever be embraced on any sort of large-scale, meaningful level is with more data and bigger tests. Without that, no matter how much support it gets from Silicon Valley, it seems unlikely that the public, at least in the US, will ever come around.

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