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Dec 6, 20206 min read

Should UBI replace means-tested welfare programs?

By: Sneha Bhale


The Pope, Martin Luther King Jr, and most recently, former Democratic presidential nominee Andrew Yang, have all advocated for policies similar to what is known as a Universal Basic Income. As Ioana Marinescu describes, a research fellow at the National Bureau of Economic Research, UBI is a cash sum given to the entire population within a geographic area that's distributed unconditionally, regularly, and on a long-term basis.


Has UBI been implemented before?

In a randomized controlled trial that ran from June 2011 to November 2012 in India, a universal monthly grant was given to every adult and child in the selected villages. Two notable basic income experiments were conducted in New Delhi and rural Madhya Pradesh by the Self Employed Women’s Association. The experiment In New Delhi assigned a monthly income of 1,000 rupees to 100 BPL families, for a year. In Madhya Pradesh, 6,000 individuals were provided with monthly allowances ranging from 150 to 300 rupees, for a period of three years. Both experiments yielded positive results. The Madhya Pradesh trial, in particular, revealed that individuals receiving supplemental income were more likely to see improvements in regards to housing, debt clearance, asset management, education, and health.

Furthermore in India, the occurrences of common illnesses diminished greatly when participants had an incentive to attend regular health check-ups, minimizing more serious and costly health problems from developing. This is important considering low-income groups don’t have access to the same healthcare services as higher-income groups, making them more prone to intense diseases and medical problems. Implementing UBI in India in the long-term would close the gap of quality in medical services between lower and higher-income groups, leading to serious diseases being caught early on and better treatment of patients.

The success of UBI in India and other countries has prompted discussions of implementing UBI to replace means-tested welfare programs. The six major welfare programs are EITC, housing assistance, Medicaid, SNAP, SSI, and TANF.

The positives of UBI replacing means-tested welfare programs

Healthcare

The US government spends more money and time on healthcare issues than any other country in the world. In 2017, the US spent about $3.5 trillion on health expenditures, which is twice the average amount among developed countries. Additionally, despite the medical plans available, healthcare is still too expensive for most Americans. Less than 40 percent of Americans said that they had enough money to cover a $1,000 emergency and this is due to the fact that loans continue to grow, while middle-class incomes are on a decline.

Millions of Americans, almost 25% of the population, are delaying getting medical help because of the skyrocketing costs of healthcare and medicines. Over 45,000 Americans die every year as a direct result of not having any health insurance coverage. Additionally, the CDC states that in 2017 nearly ⅓ of Americans used their prescribed medicine differently in an attempt to lower the costs or opted out of taking their prescription at all to save money. In 2017, the average cost of healthcare was almost $11,000. However, with a UBI, these problems will no longer exist because, with a consistent monthly income, people will be able to afford access to doctors and medicines that can help save their lives. Even means-tested welfare programs like Medicaid can’t bring these drugs within reach, as only 20% of all money spent on Medicaid actually benefits the recipients. The last resort for millions of suffering Americans is a Universal Basic Income. Fortunately, income supplements, like UBI, enabled access to better nutrition and healthcare in various studies of UBI implementation. For example, UBI resulted in a 14% decreased likelihood of low birth weight, with results more significant for less-educated mothers.


Immigration

The Supreme Court is filled with cases related to Immigration, with cases about taking undocumented immigrants out of the US census or the future of DACA; making immigration status extremely unpredictable. Over 26 million immigrants could drop out of benefits programs rather than face the risk of being deported. However, providing for US immigrants is crucial since immigrants are quicker than their native-born peers to move around the country and fill job gaps whenever workers are in short supply. Specifically, immigrants filling labor market shortages earns the US economy between 5 and 10 million dollars each year. Putting a stop to this massive inequality and providing for the rights of immigrants is contingent on the implementation of a universal basic income.


Domestic/ Sexual Violence

*TW: mentions of sexual violence and domestic abuse in households

According to the CDC, every year nearly 5 million women suffer from physical abuse and 2.5 million women suffer from sexual abuse in their relationships. Additionally, research by Women’s Aid stated that one in five women interviewed said they couldn’t leave an abusive relationship because they had no money of their own, and the same number said financial abuse had left them unable to manage money.

The reason women can’t leave these abusive relationships is money. Fortunately, a universal basic income provides a solution by providing accessibility. Money meant for welfare is given to state governments with few provisions on how it really has to be spent. As a result, much of it ends up with rich households and only a fourth of low-income families get the help they need. Therefore, Income support that reaches all low-income families could provide economic stability.

The negatives of UBI replacing means-tested welfare programs

Debt

Implementing UBI in the United States would result in a massive increase in the US government’s debt. The U.S. government's public debt is now more than $22 trillion which is the highest it has ever been. Such a huge draw on federal financial resources would also exclude other government priorities, such as infrastructure development, including the building of hospitals and the construction of affordable housing. A UBI is simply not financially feasible as what we are already accounting for hurts the US more than a means-tested welfare program for several reasons.

Property Dividend- Financing a UBI with means-tested welfare would be insufficient and would increase both poverty and hardship. If the US were to cut all its means-tested welfare programs and use the money to fund a UBI that gave each adult $10,000 per year, the government would still have to cover an additional 1.3 trillion dollars in costs and this extra funding is just not possible.

Additionally, even if we were to remove programs like Medicaid, ETIC, VAT, and housing vouchers, we still would be far short of financing a UBI. To sufficiently finance a UBI, the government would have to eliminate all means-tested programs outside health care - including grants, refundable tax credits, and low-income housing programs. Even after that, the annual UBI would fall short of $1,600 per person. This is well below the level of support most low-income families now receive, as $1,600 per year falls short of covering basic welfare-provided benefits like health care and food.


Replacing the welfare state would be a massive wealth transfer away from the elderly, disabled, and low-income families. Many existing programs in the US have eligibility requirements, this means that characteristics of individuals or families are used to determine “need” beyond income. Using these markers of need-based income allows for more efficiency because the government can avoid giving transfer payments to individuals who are trying to get the help that they don’t need.


Increasing poverty- Means-tested welfare lifted 44.9 million people out of poverty in 2017. When we switch to UBI, money, and help targeted towards the poor is taken away and redistributed universally, increasing inequality and poverty and hurting the most vulnerable people in society. The OECD did a particularly close analysis of how UBI would impact four countries. In three of the four countries, they find that UBI would actually raise poverty rates by at least 1%. A study modeling UBI schemes found that UBI increases child poverty by over 60%.


Welfare Programs- In the fiscal year of 2018, the Medicaid program cost $582 billion which is 14 percent of total government spending. After social security, Medicaid was the second-largest program in the federal budget last year. Furthermore, in 2018, Medicaid benefit payments totaled $731 billion, which was $462 billion more than in 2008.

Both Medicare and Medicaid are government-sponsored health insurance plans. Medicare is federally-administered and covers older or disabled Americans, while Medicaid operates at the state level and covers low-income families. National health care spending reached 3.5 trillion dollars in 2017 and is expected to grow to 8 billion dollars in 2021.

UBI is said to give each adult $1,000 each month but if it were to replace the costs of social programs, it wouldn’t be enough. If someone had a chronic long term illness, Medicaid would be able to help towards that. But if UBI replaced these programs, the funds allocated towards it such as the 1000 dollars per month wouldn’t be enough. A person with a long term chronic illness would need around 100,000 dollars to pay for necessities such as scans, treatment, medication, and UBI, it simply doesn’t have the funds to do so.


Discussion Questions

  • Will UBI get bipartisan support?

  • Will UBI be implemented in the future?

  • How are Stimulus checks and UBI similar?

Sources Used/Further Reading


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