This Study Shows What Happens When You Implement Universal Basic Income – The Findings Aren’t Good
Universal basic income is a popular solution to addressing technological job disruptions. But what are the long-term consequences of unconditional cash payments?
What would you do with an extra $1,000?
This is a question a San Francisco based research firm tasked itself with finding out. Over the summer OpenResearch published a report titled How Unconditional Cash Transfers Filled The Gap. It analyzed data OpenResearch collected to provide a better understanding of how universal, unconditional income could help everyday Americans.
With technological job displacements already underway, universal basic income is a solution that could provide immediate financial benefits to workers.
But is UBI actually a good idea?
OpenResearch’s study attempted to prove that UBI could work but based on the parameters of their study, they may have inadvertently demonstrated UBI could do more harm than good.
This essay will evaluate OpenResearch’s unconditional cash transfer study. It will argue that parameters of the study were narrowly confined to a small subset of the population. The conclusions derived from the study reveal that UBI leads to a greater risk of complacency rather than economic growth.
UBI may be a bandaid but unless fundamental concerns around inflationary economic policy and social expectations around work are also addressed, UBI could lead to economic stagnation in the long run.
OpenResearch – a research organization backed by OpenAI’s Sam Altman – conducted a three-year study to evaluate the impact of unconditional universal income.
AI will likely displace jobs faster than they can be replaced. In the interim, a number of policy proposals are being evaluated to solve the impending cash flow crisis speeding towards workers.
One of the most studied policies is UBI or universal basic income. According to Stanford’s Basic Income Lab, UBI is a universal and unconditional cash payment that is made to individuals on a recurring basis.
Proponents of UBI argue unconditional cash payments would alleviate wealth inequality and reduce poverty. Opponents, on the other hand, argue that UBI could increase government spending and lead to more inequality as financial resources are inequitably distributed across the economy.
In recent years pilots of UBI programs have been piloted to get a better understanding of how they might actually work. In 2017, a UBI pilot in Finland found that UBI freed up time and energy for recipients to do more productive things like build new companies. This in turned led to an improvement in their overall mental well-being according to a separate analysis from McKinsey
Similar studies are now being done in the United States. OpenResearch is a San Francisco-based nonprofit research organization who funds research to study open-ended questions in the public’s interest, like UBI. The organization has received funding from OpenAI’s Sam Altman as well as notable organizations like the Bill & Melinda Gates Foundation.
In their Unconditional Cash Study, OpenResearch enrolled 3,000 participants – mostly women – from low-income households in Illinois and Texas. From 2020 to 2023, two-thirds of participants were given $50 per month as part of a control group while 1,000 participants received $1,000 UBI cash transfer.
The study found that it gave participants more flexibility. Bloomberg reports:
After three years of distributing $1,000 monthly to beneficiaries in Illinois and Texas, the organization has released a trio of research papers on its findings. Like many of the other studies released before it, OpenResearch finds that recipients spend more to meet their basic needs and assist others, and don't drop out of the workforce — although they work slightly fewer hours. But the researchers’ biggest takeaway is that cash provides flexibility.
But while it gave participants flexibility to meet their unique needs, it didn’t necessarily improve their well-being. Rather than drawing new conclusions about whether or not unconditional cash benefits may benefit society, OpenResearch may have inadvertently made the case for why UBI might not work after all.
OpenResearch’s study left out educated, middle class workers. These are the workers who will face immediate exposure to technological job disruptions and don’t have a social safety net to fall back on.
There’s no question that all levels of the economy will feel some sort of disruption from AI-generated job losses. When middle managers begin losing their jobs, so will the dry cleaners and baristas that used to cater to them. But the disruption won’t be felt equally across the workforce.
The people most exposed to technological disruption are the people who have few if any social safety nets to catch them – middle class workers.