Universal basic income (UBI) is a concept being debated more frequently as well as more fervently in contemporary economic discourse. It has its detractors as well as its proponents.
What it boils down to is that those members of society who are struggling to make ends meet, or maybe even all members of society, will be granted a basic income to cover certain “requisite” expenses such as healthcare, education, food, housing, etc., or at least to cover it to a certain degree. Of course, there are many variants UBI, but this is the main gist of it.
Proponents of UBI point out the possible benefit of making people, especially those struggling financially, more productive as well as afford them more social mobility. Opponents, on the other hand, point out the possible disadvantage of UBI: it may disincentivize work if it is too high and thus cause the labor force participation rate to decrease.
Whilst the debate is far from being settled and the results from small-scale UBI experiments are still filtering in, there is a fringe group of happy-go-lucky hippies on social media who are making a certain meme do the rounds. The meme roughly reads as follows: “Universal basic income, because life is not just about getting a job”. What makes this reasoning the epitome of irony is that it actually strengthens the case against UBI.
The reasoning is pretty straightforward:
UBI is a welfare system implemented by the government and funded through taxes. In other words, someone has to pay for it, and the less productive a society is the more difficult it will be to fund because the tax base has shrunk. Think of it this way: if large swathes of people decide that UBI is enough for them and that they will subsequently exit the labor force, economic output is reduced because of the fact that there are fewer people producing wealth, wealth that is required in order for taxes to be levied to pay for UBI. At the end of the day, if too many people aspire to this notion that life is not just about getting a job because UBI is enough, then UBI will become its own downfall.
I’m not saying that this will indeed be the case. In fact, most of us are hardwired to contribute something for something in return. However, should this mindset of rent-seeking take hold in society, those who subscribe to it will be their own worst enemy.
A healthy, productive, wealth-producing system of enterprise coupled with entrepreneurial flair is the foundation of successful welfare programs, as no such programs can exist without people contributing something in the market and in the process creating wealth.
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