Universal basic income: Should the government give ‘unconditional money’ or ‘freebies’ to the poor?

India’s economy seems to be doing well, but not many Indians are. Securing basic amenities such as food and housing is something that a rather large sect of our population still seems to be struggling with. During these trying times, providing unconditional financial assistance to those in need might seem like the thing to do — if only things were as simple as that.

This concept of a guaranteed or universal basic income (GBI or UBI) is a form of ‘freebie’ — a term that many Indian politicians use to refer to the give-aways from the state. The concept is relevant to every part of the world facing issues around social welfare and economic inequality, the US being one of them. The very concept of government handing out money or goods and services for free invokes a sense of notion of state socialism that is usually at the loggerheads with the current economic model of capitalism.

But as the economic divide widens, is there some merit to this idea of state helping the poorest? This is where results of the experiment conducted by Sam Altman’s OpenResearch could help shed some much-needed light on this pervasive issue.

Upward economic mobility through GBI

The three-year study, conducted by OpenResearch — a nonprofit research organisation backed by OpenAI CEO Sam Altman — explored the impact of a $1,000 monthly, no-strings-attached cash transfer on lower-income individuals. This study is the most extensive of its kind yet, providing compelling evidence on how such cash payments can help families meet basic needs.

“We’re all finding the same results,” said Stacia West, co-founder and director of the University of Pennsylvania’s Center for Guaranteed Income Research. “You give people cash, and they make great decisions for themselves and their family in a way that promotes upward economic mobility."

Initiated in 2020, the study involved 3,000 lower-income participants from Illinois and Texas. One thousand participants received $1,000 monthly, while a control group of 2,000 participants received $50 monthly. Researchers highlighted that cash payments offer critical flexibility, allowing recipients to address their diverse and shifting needs. Here are some key findings:

• Spending patterns: increased spending by an average of $310 per month, primarily on essentials like food, housing and transportation.
• Passing on the gift: $22 more was spent monthly on financial support for others, including gifts, loans, donations and alimony.
• Work and leisure: Recipients worked 1.3 hours less per week than the control group, enjoying more leisure time while remaining active in the workforce.
• Healthcare utilisation: 26% increase in hospital visits and a 10% increase in dental and emergency room visits.
• A notable decrease in problematic alcohol and some illicit drug use was also reported.
• Mobility and housing: 4.4 percentage points more likely to move neighborhoods. Future analyses will explore the impact of cash transfers on housing stability and neighborhood quality.
• Entrepreneurial activity: Especially among Black and female recipients, there was a higher likelihood of having a business idea and starting a business within five years.

However, cash payments were not a panacea. The study found no significant effects on physical health, healthcare access, or behaviors like exercise and sleep. Improvements in stress, mental distress, and food security were observed primarily in the first year, with these benefits fading by the second year due to factors like inflation and the end of pandemic-era aid.

A push towards guaranteed basic income

Sevly Snguon, co-founder and co-chair of the Guaranteed Income Health Consortium at Johns Hopkins Bloomberg School of Public Health, emphasised that guaranteed income is one piece of the puzzle. “There’s still a need for additional resources for parents, affordable housing, and healthcare,” Snguon noted. “But guaranteed income helps during key transition periods.”

OpenResearch plans to release further findings on the effects of cash transfers on housing outcomes, political attitudes, and recipients’ children in the coming months.

The idea of GBI has garnered support from various tech industry leaders, including OpenAI’s Sam Altman. In a 2016 blog post, Altman expressed his interest in basic income as a response to technology-driven job displacement, envisioning a future where such initiatives could help eliminate poverty.

Notable advocates like former Twitter CEO Jack Dorsey and Tesla CEO Elon Musk have also supported GBI, leading to the launch of numerous pilot programs across the country. Research shows that basic income can significantly reduce poverty. For instance, a 2020 study by Columbia University found that $250 monthly payments could reduce poverty by 40%.

Battling public opinions and other challenges

Despite promising research, GBI faces opposition. A 2020 Pew Research Center survey found that over half of US adults opposed a universal basic income of $1,000 a month, with the greatest opposition among white adults. Some states, including Iowa and South Dakota, have even passed legislation to prevent local governments from implementing such programs, arguing that they might discourage work.

Sara Kimberlin, executive director of the Stanford Center on Poverty and Inequality, notes that the impact of basic income on employment varies. While some studies show increased employment, others indicate a decrease, often for positive reasons like caregiving.

“There really isn't anywhere in the United States where someone can live on just $1,000 a month,” Kimberlin said. “So of course people are working and have other income sources, with needs that go beyond what $1,000 a month can cover.”

India faces similar challenges. GBI is usually included under the umbrella of ‘freebies’ in the country and is often thought of as political parties’ way to curry the public’s favour ahead of the elections. However, several research studies have shown that some of these measures such as free television, transportation, and groceries can act as a safety net for the poorest, contributing to sustainable development goals like no poverty and no hunger.

For now, the OpenResearch study provides valuable real-world insights into the potential of GBI to support lower-income families. While not a cure-all, cash payments offer significant benefits, helping recipients navigate economic challenges and improve their quality of life, the study has shown. As more research unfolds, the push for guaranteed basic income continues to evolve, aiming to create a more equitable and secure future for all.