23-07-2025
Universal basic income is not the answer if AI comes for your job
As artificial intelligence upends the world of work, brace for renewed advocacy of a universal basic income (UBI). Tech enthusiasts, certain AI will turbocharge productivity but at the cost of millions of jobs, see UBI as a necessary monetary cushion for technological unemployment. And their cause attracts strange bedfellows. Social democrats salivate at the prospect of having more stigma-free redistribution; libertarians hope UBI might supplant employment regulation and the means-tested welfare state.
Yet UBI's most fervent supporters foresee much broader benefits. To many, UBI isn't just a palliative for creative destruction or even a welfare reform. No, its proponents claim a modest government-guaranteed income is the key to unlocking a freer, healthier, more entrepreneurial society.
If only it were that simple. Interest from the tech world has enabled expensive randomised controlled trials of UBI-inspired policies in the US. The results are largely disappointing.
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In the OpenResearch Unconditional Income Study, 1,000 low-income participants across Texas and Illinois were given $1,000 a month, no strings attached, for three years. A control group of 2,000 received $50. One working paper released this week confirms the findings of another last year: the policy was no silver bullet for most economic and social problems.
Advocates hoped extra income for families would mean more attentive parenting, greater investment in children's education and reduced family stress. And yes, parents receiving more money reported smacking their kids less and spending $32 more on them each month, including for clothes and essentials. Yet this didn't translate into educational gains or improved behavioural outcomes.
In fact, parents reported a jump in issues such as child hyperactivity and fights between children. The researchers speculate that the extra cash freed parents to monitor children more closely, so noticing these problems. But might more intense supervision — edging towards helicopter parenting — itself worsen these outcomes?
Nor did parents themselves get lasting relief. Sure, there was a brief improvement in their mental health in year one, but this faded quickly. By year two, anxiety and stress were back where they started. Free cash might calm nerves temporarily, but it didn't buy lasting peace of mind.
A paper last year on the same experiment poured cold water on the idea that a guaranteed income would free people to invest in their productive future, too. Recipients, on average, banked the extra cash and enjoyed more leisure time, reducing their earned income.
Yet there was little evidence that they used those extra hours to find better job matches, invest in education, or start (rather than just thinking about starting) a business. Instead, passive dependency grew. Even health outcomes showed scant improvement, with self-reported disability rising somewhat.
Predictably, UBI's most die-hard supporters have questioned these disappointing results. Is it really a test of 'universal' income if the cash isn't given to everyone, permanently, but targeted temporarily at a young group volunteering to trial?
But their quibbles cut both ways. The main reason governments reject UBI out-of-hand is that it is prohibitively expensive. With 69.6 million people, giving everyone in the UK £1,000 monthly would cost £835 billion a year — almost four times the NHS budget.
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Trials like this, conveniently, never test the higher taxes required to redistribute such sums. And being targeted at those on low incomes to begin with, one suspects this trial's results are, if anything, biased towards overestimating any benefits of the policy.
Surely the uncomfortable truth is that most economic and social problems are too complex to solve by handing out cash. Children's development, adult mental wellbeing, and accessing fulfilling work require robust institutions, skills, and countless other factors that money can't buy.
Yes, cash definitely helps ease poverty, and this trial confirms that beneficiaries were able to spend and save more. Yet as UBI enthusiasm resurfaces, the results suggest that seeing taxpayer-funded cash handouts as the path to widespread happiness and self-actualisation isn't visionary; it's delusional.
Ryan Bourne is an economist at the Cato Institute and editor of the book The War on Prices
