What Is Universal Basic Income, and Does It Work?

Lorrine Paradela, UBI — Lorrine Paradela poses for a photograph in Stockton, California, on Feb. 7, 2020. Paradela, a 45-year-old single mother, was one of the 125 Stockton residents receiving monthly cash disbursements under a pilot universal basic income. NICK OTTO/AFP via Getty Images

Near the end of Martin Luther King Jr.'s life, he turned his attention to fighting poverty and became convinced that "the simplest approach will prove to be the most effective," he wrote in "Where Do We Go From Here: Chaos Or Community?" "The solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income."

Over half a century later, nearly 12 percent of Americans (37.9 million people) are still living below the poverty line, according to the Census Bureau. Millions more jobs threatened by automation and artificial intelligence, yet MLK's notion of a guaranteed income — writing a monthly check to every American adult, no questions asked — remains a radical idea in many economic and political circles.

In 2020, we spoke with Stacia Martin-West, a professor of social work at the University of Tennessee and co-principal investigator (with Amy Castro Baker of the University of Pennsylvania) of the Stockton Economic Power Demonstration (SEED), one of the only active programs testing guaranteed income, also known as universal basic income, on real Americans.

Under the SEED program, 125 residents of Stockton, California, were given a guaranteed income of $500 a month for 24 months, to see how this cash payment would affect their lives. The program began in 2019 and ended in 2021. We'll find out what happened later in this article.

As Martin-West explained, universal basic income (UBI) holds tremendous promise for alleviating not only the financial burden of poverty, but also the damaging ripple effects of economic insecurity on health and family.

Yet she admited that the very idea of a federal program paying poor Americans hundreds or even thousands of dollars a month faces tremendous political opposition, not only for its cost but because of the pervasive, if unproven, belief that "free government handouts" discourage people from working and foster dependence on the state.

How Universal Basic Income Works

If you are poor in the United States, there already exists a "safety net" of both state and federal programs designed to help struggling individuals and families, but all of those programs are "means-tested," which means that they come with certain strings attached.

To receive SNAP food benefits or housing assistance, for example, you need to prove that your income is below a certain threshold. To collect unemployment benefits, you need to show that you're actively looking for work. To collect Social Security retirement benefits, you need to have worked for a minimum number of years.

That's why universal basic income is such a radical departure from the existing "welfare" programs. There is no means testing or "proof" required to qualify. Under a UBI scheme, every single American adult would receive a check — $500 or even $1,000 a month — with absolutely no strings attached. The cash is unconditional, leaving it up to the individual or family to decide how best to use it. (In other countries, UBI grants are sometimes linked to recipients getting medical checkups or sending their kids to school.)

Recipients of UBI could use the extra money to pay for groceries, cover rent or mortgage, or buy clothes for the kids. They could also enroll in an online class or job skills program; take time off to raise a baby or care for a sick parent or invest it in starting up a new business.

The key is that even at $1,000 a month, universal basic income wouldn't fully replace earnings from a job, but it would provide a much-needed cushion for underpaid, overstressed workers who have never had the luxury of financial security.

"UBI is 'basic' in that it meets your basic needs, and it's 'guaranteed income' in that you know that it's coming," said Martin-West. With the pilot SEED program, Martin-West and her collaborators tested whether those two income characteristics, basic and guaranteed, were powerful enough to change people's lives.

The Potential Pros of Universal Basic Income

"There are people dying from capitalism now," said Martin-West, like the millions of Americans who work physically taxing jobs with unpredictable pay and hours. "The inability to predict what your paycheck is going to be from week to week or month to month has pretty devastating impacts on a person's stress levels and manifests in poor health outcomes like cardiovascular health decline, increased rates of diabetes, and more."

Stockton resident Tomas Vargas was one of those chosen to receive a $500 check every month through the SEED program. His shifts at a warehouse job were unpredictable, said Martin-West, so Vargas had to work odd jobs late into the night to support a family he hardly had a chance to see. With the extra $500, he was able to skip a shift at the warehouse and interview for a new job with better pay and fixed hours, freeing him to spend more time with his family.

UBI proponents like Martin-West argue that this is one of the secondary effects of guaranteed income: A cushion of $500 or $1,000 makes workers feel less desperate to take any job that comes along, even if the pay is bad and working conditions are lousy.

"Nobody cares more about labor supply than these big companies that tend to not treat their employees very well," said Martin-West. "If you have employees saying, 'I can do better than this and now I have this bargaining power,' then you may see improved working conditions."

By far one of the biggest benefits of universal basic income is that it would provide a steady paycheck to people currently doing critical work for free, namely stay-at-home parents and other unpaid caregivers who are far more likely to be women.

Criticisms of Universal Basic Income

Sign supporting Yang's $1,000 UBI — A man carries a sign supporting Democratic presidential candidate Andrew Yang's plan for a $1,000 monthly universal basic income during a rally in Washington Square Park, May 14, 2019 in New York City. Drew Angerer/Getty Images

The biggest criticism of UBI is how much it would cost. Presidential hopeful Andrew Yang had pitched a "Freedom Dividend" plan in 2019, where each of America's 236 million adults would receive $12,000 a year for a total of $2.8 trillion, which was more than half of the 2020 federal budget. Yang's plan allowed older Americans the option of keeping their current Social Security and Medicare benefits, while other UBI proposals vowed to replace the entire welfare state with one guaranteed monthly check.

Even though some of the money could be offset by doing away with other "entitlement" programs, the federal government would have to raise taxes substantially to pay for a UBI program. Some of those taxes would target the wealthiest 1 percent and the very technology companies that are making human workers obsolete, but regular Americans would get hit, too. For example, Yang and others proposed a "value-added tax" (VAT) of 10 percent on all manufactured goods. Yang also thought that his Freedom Dividend would produce more economic growth, therefore increasing the tax base.

"It is more likely that his overall plan would reduce the long-run size of the economy and the tax base. The three major taxes in his plan (VAT, carbon tax, and payroll tax increase), while efficient sources of revenue, would tend to reduce labor force participation by reducing the after-tax returns to working," wrote Kyle Pomerleau at the nonpartisan Tax Foundation website. "We estimate that one option to make his proposal sustainable would be to raise the VAT rate to 22 percent and reduce the cash transfer to $9,000 per year."

UBI supporters like Martin-West agree that a nationwide guaranteed income program would be enormously expensive, but disagree that it's not worth the investment.

"Like all the decisions this country makes, it really comes down to, 'What is our priority?'" said Martin-West. "If our priority is to let people waste away in poverty, have ill health, have their work not be valued, then we won't prioritize a guaranteed income as part of our national budget. But if we do, in fact, honor the social contract that we have in the U.S., that means we should likely look at something like a UBI."

Which leads to the second and arguably more difficult obstacle to creating a national UBI program — the belief, deeply held by many Americans, that a guaranteed income is just another form of government "handout" that encourages people not to work.

There have only been a few real-world studies so far on universal basic income. For instance, people involved in a UBI trial in Finland reported less stress and greater feelings of well-being compared to people who didn't receive the extra cash. But they weren't more likely to seek out employment, even though they wouldn't lose the benefit if they did, reported The Guardian.

Results of the SEED UBI Experiment

So what happened with the SEED program? A team of independent researchers determined that "full-time employment rose among those who received the guaranteed income and that their financial, physical and emotional health improved," NPR reported in 2021 when preliminary results were released.

In February 2019 (at the start of the program), 28 percent of recipients had full-time employment. One year later, 40 percent were working full-time, according to a white paper on the SEED website. (The control group only saw a 5 percent increase in employment). The gain was attributed to the fact that people could reduce their gig work or part-time shifts and do things like take internships or training which would allow them to apply for better-paying positions. Emotional well-being also improved because recipients now had a little extra each month to take their kids out for a treat or pay an unexpected bill. The percentage of people who now could pay a $400 unexpected expense rose from 25 percent to 52 percent.

"Before SEED came along, I was paying a lot of bills and didn't know how I was gonna eat ... it's like being able to breathe," said a participant named Laura on the SEED website.

During the COVID pandemic, some participants were forced to quit work to care for elderly parents or children kept home from school and found the UBI to be a financial lifeline, as well.

The pilot ended in January 2023 and final results were published in the Journal of Urban Health in April 2023. "Our findings show that guaranteed income programs mitigate the negative financial and health consequences associated with income volatility," said Amy Castro in a press statement.

Other pilot programs in cities ranging from Jackson, Mississippi to Chicago to Seattle have been launched by a group called Mayors for a Guaranteed Income.

"As one of the leaders of guaranteed income research, I'll be the first to say that we're only at the beginning of studying UBI in this country in the modern macroeconomic landscape," said Martin-West.