How serious is the universal basic income? Or the poverty of social science

Bob Hancké, PEACS

15 May 2025

Every few years the universal basic income (UBI) makes a reappearance in policy debates. The idea behind it is simple. Every citizen (resident?) of a country receives a monthly stipend regardless of their economic status. They then have the choice to work or not, full-time or not, save money to take a sabbatical, etc. In the big scheme of emancipation from the uncertainty associated with markets - pretty much the central goal, or at least one of the central goals, of the welfare state since the Second World War in the rich economies – the UBI sounds too good to be true. I fear it is.

What’s wrong and right with the UBI?

Much of the debate on the UBI has revolved around two ideas. The first counterpoint, almost as radical as the UBI itself, is that exempting people from market discipline is almost always a bad idea. Neo-liberal and Third-Way social-democratic policies from different starting points share that critique. Over the past thirty-odd years, they have therefore introduced welfare and labour market reforms to lower the reservation wage, occasionally accompanied by activation policies and ‘social investment’. For those, on the other hand, who think the UBI is a good idea, the debate is one of implementation problems: how would it be funded, who is eligible, how high does the UBI have to be, what is the appropriate administrative structure, etc?

While the debate around the UBI is over a century old, it has become more important since the economic crises of the 1970s and 1980s. Recent fears of automation and mass unemployment have triggered the next round in the UBI debate. The idea is simple: since most jobs are now threatened by automation, robots and AI, employment will eventually become a luxury. A UBI, financed through taxes, saves the day. It is not quite clear what exactly should be taxed – capital, wealth, income from the few who have jobs, or other? While these are plausible revenue sources, they all require a serious political battle, which is far from won.

Clear, simple and wrong

I have been very sceptical about the UBI for a while and think that both these counterpoints miss the crucial problem. To me, the UBI seems like another instance of HL Mencken’s famous dictum that ‘For every complex problem there is an answer that is clear, simple and wrong.’ The problem I have with the UBI is not that citizens should be subjected to more market discipline. While I can understand that some form of competition, in a context of a well-functioning social protection system to support citizens, can be beneficial, I am generally quite critical of the idea of markets sorting out things, especially in labour markets and welfare. I also do not think that, because the principle is correct, the UBI’s key problems reside in implementation. The problems seem to me considerably more fundamental. There are two very serious, overlooked, concerns with the idea, which, though analytically different, are related. Individually they are a body blow to the idea; combined, they are lethal.

From a hamster wheel to a poverty trap

First, for the groups that are most affected by changes in society, economy and especially the labour market, it solves essentially nothing. If you are a single mother with two children, even a relatively high monthly net stipend of €1000 changes very little. In many big cities, where the jobs are, that sum barely covers rent and utilities. In other words, to feed and clothe her kids, she needs a job; hence the need to live in the city where the jobs are, and where rents are high. Remember that the UBI is supposed to replace all welfare payments, so housing benefits are not on the books. (That would be cheating in the argument: UBI + income-contingent benefits + wage to cover essentials is not what the proponents suggest. And if they do, the question of financing the UBI becomes even more pregnant. In any case, there are literally loads of other, considerably more effective, solutions we could produce with the political and monetary capital expended on such a vast passive support programme.)

The simple fact is that the UBI fails in the explicit task that it has set itself, as it will not cover the basics that guarantee a decent life. In addition, because it imposes work beside the UBI and therefore privileges living in the city, its main net effect is to put downward pressure on wages – all low-income people need a job, many of which may be in low-wage low-skill jobs – and upward pressure on rents, since everybody needs a roof over their heads. For the single mum with two kids, the UBI is a net curse, likely to trap her in poverty.

Meanwhile, on the other side of town

But the world is very different if you are, say, a middle-aged academic. You likely own your home outright with your partner, if you have kids they will have left the house and graduated from university, you earn a nice salary for what is effectively a 20-hour week, and you have a nice pension to fall back on. Being offered €1000 sounds fantastic.

In fact, it gets better. Assuming the €1000 stipend post-tax or untaxed, and taking into account the shadow income of the rent that does not have to be paid (and which, if it is payable, is paid after income taxes), the UBI offers two academics in a couple (it happens…) an annual pre-tax income of between €40,000 and €70,000 (2 x €1000 x 12 months + 12 x rent à c.€1500); assuming this is post-tax revenue, multiply the sum by 1.4 to reflect a marginal tax rate of 40%, and you arrive at a gross income of €70k. The monthly €1000 UBI has morphed into a pre-tax household income that would put this couple in the top 10% of the income distributions of most advanced capitalist economies. And, while the single mum needs a job, these two have not even worked a day!

A sociology of knowledge of the UBI

That brings me to the second problem with the UBI. Like other well-meaning ivory-tower pipe dreams – think of ‘de-growth’ as a plan to solve the climate crisis – the UBI is a strategy that works extremely well for the academics that cook them up but much less so for much of the rest of the population (de-growth affects academic jobs considerably less than other jobs because of relatively inelastic demand). If it weren’t embarrassing, it would be funny. But it is not so much funny as a classic case of, in the words of Marx, social being determining consciousness. I’d really be interested in a sociology of knowledge study of such half-baked ideas (and their effects) that academics take very seriously. Start with the UBI, then take on de-growth, and so on. Please post suggestions for other themes in the comments below. Whatever we will end up studying, I do not think it will make for pleasant reading.

A universal job guarantee

While critique should be allowed without proposing alternatives, especially of a pipe dream like UBI, there actually is a very different way of thinking about the problem. Based on Keynes and Minsky, full employment is the answer. In its simplest form, we either increase demand, thus raise growth, and employment will follow. That probably will require a hefty dose of socialised control over investment to make sure demand remains high and firms innovate. And if we then invest in skills to increase productivity, good jobs with high wages are the result. If that fails and the economy slumps nonetheless, government should become the employer of last resort, creating jobs with a social benefit, such as cleaning up cities, large (green) infrastructure and the like. If that all goes well, we raise self-confidence, self-worth and self-reliance among the bottom half of the income distribution, secure wages, and make the world a cleaner, better place. That seems more like the emancipatory policy we are looking for than the UBI will ever be.