The notion of Guaranteed Basic Income (GBI) has gained popularity as a possible solution to poverty and inequality. Individuals receive a set, unconditional cash stipend from GBI, regardless of their job situation.
Implementing a $1,000 per month GBI in the United States is expected to cost $2.8 trillion per year, more than the combined budgets of Social Security and Medicare.
Recent studies, like the OpenResearch Unconditional Cash Study (ORUS), has raised concerns regarding GBI’s impact on labor incentives.
The ORUS study, which included 3,000 participants, discovered that recipients were 4-5% less likely to remain employed than those who did not receive GBI, with household income falling by an average of $2,500 per year.
These data show that GBI may lower employment incentives, household wages, and dependency on welfare, rather than empowering individuals to achieve financial independence.
Insights from U.S. Pilot Programs
Recent tests with GBI programs in the United States have revealed various unfavorable consequences, particularly in terms of employment and financial independence. A significant example is the OpenResearch Unconditional Cash Study (ORUS), which lasted three years and included 3,000 participants from Illinois and Texas.
According to ORUS, participants who received $1,000 monthly payments were less likely to stay working than those in the control group. By the third year of the study, grantees worked an average of 1.3 hours less per week, for a 4-5% decrease in weekly working hours compared to non-recipients.
Furthermore, participants’ yearly household income was $2,500 lower than that of the control group, suggesting that guaranteed payments may impair motivation to increase or retain work-related earnings.
Impact on Employment and Household Income
The ORUS study’s findings call into question the idea that GBI recipients can obtain better-paying and more meaningful jobs. The findings revealed no substantial change in job quality or skill gain among participants.
Most participants choose to spend their extra time from reduced work hours on leisure activities rather than investing it in school or professional training.
Furthermore, the negative impact on household income went beyond the individual grantees. Family members of GBI beneficiaries also reduced their working hours, resulting in a considerable loss in overall household income.
This shows that the availability of unconditional income may limit the desire of not only recipients, but also other household members, to seek extra jobs or participate in skill-building activities.
Case Studies: Pilot Programs in Wisconsin
Two Wisconsin cities, Madison and Milwaukee, established pilot programs to explore the impact of guaranteed income on low-income households.
- Madison Pilot Program:Madison’s guaranteed income trial program, which began in 2022, paid 155 households $500 per month for a year. Early data from the program, which ended in August 2023, showed that participants worked fewer hours and participated in fewer education or skill-building activities, which mirrored the ORUS study’s findings.
- Milwaukee Bridge Project: Milwaukee’s program focused on pregnant moms in low-income neighborhoods. Preliminary results from the ongoing program show a similar decline in employment rewards. Mayor Cavalier Johnson expressed worries about the sustainability of using public finances for such initiatives, suggesting that relying on government resources may not be possible in the long run.
These findings indicate that GBI programs that do not include conditions that foster labor or skill development struggle to fulfill their intended goals of increasing financial independence and upward mobility.
Financial Implications of Guaranteed Basic Income
One of the biggest issues about GBI programs is the significant financial burden they create. For example, distributing $1,000 per month to every American adult would cost around $2.8 trillion per year—more than the combined budgets of Social Security and Medicare.
Even more targeted measures, such as paying $1,000 per month to the 50 million Americans earning less than 200% of the federal poverty level, would cost approximately $600 billion each year.
| Scope of Program | Estimated Annual Cost |
|---|---|
| Universal ($1,000 to all adults) | $2.8 trillion |
| Targeted (Low-income adults only) | $600 billion |
| Current Social Security Budget (2019) | $1 trillion |
| Current Medicare Budget (2019) | $800 billion |
Income Cliffs and Dependence on Welfare
Another problem with guaranteed income schemes is the establishment of a “income cliff,” in which recipients may lose eligibility for other forms of government aid when their income rises.
This might result in instances where people become worse off financially by raising their incomes, discouraging them from improving their financial condition. The income cliff effect creates a cycle of dependency, deterring people from seeking possibilities for financial advancement.
The ORUS study also found that beneficiaries of GBI payments were less motivated to actively seek work, resulting in a cycle of low earnings and long-term reliance on welfare.
Such a paradigm is intrinsically unsustainable, especially given the requirement for ongoing government financing to support guaranteed income programs.