“Free money for all!”

I introduced the concept of Universal Basic Income (UBI) to my class the other day. The vast majority were unfamiliar with the notion.

To the readers unfamiliar with UBI, essentially it’s a social program that ensure each citizen of a nation receives a guaranteed income regardless of whether they receive an income from a job. Different versions call for different levels of income — some say an income at the poverty line is sufficient while others call for an income comparable to the middle class — however, the principles and ideology of the program remain the same. With UBI, citizens do not have to fear not being able to afford their basic needs.

Before I introduced UBI to a room full of 16 and 17 year old inner-city lower income students I naturally thought they’d applaud the idea. After all, it would alleviate the stress many of them face within their families. However, 75% of the students thought the concept was ridiculous and would only cause more problems than it solved. Their line of discussion did not centre solely at the benefits and detriments of the system, rather, the sheer logistics of the system. More accurately, they wondered who would pay for the system.

This is a question economists, theorists, and academics on the subject tend to offer no consistent solution to — at least not one that is feasible without rewiring the economy. The question is quite large and notably complex so I attempted to steer the conversation back to the potential benefits and detriments of the system in an attempt to spark debate within the class. However, when a student asked if bankruptcy would still be an option for individuals, something I did not anticipate when introducing the topic, I concluded that the question of who would pay for the UBI must be explored.

My answer was the following — the people who are currently paying for the social programs and the people currently responsible for keeping the economy running the way it currently is would foot the bill for Universal Basic Income. Keep in mind, whether you make $1 million per year or $26 000 per year, you would receive the same cheque of your fellow citizen under a Universal Basic Income plan.

Here’s how our economy currently works, in the simplest terms possible. The top 1% of income earners wield the vast majority of power and influence when it comes to the manufacturing and financing of the world’s goods and services. They rely on the other 99% to provide the physical and mental labour possible for the 1% to finance and to set up the infrastructure to manufacture and distribute the goods. The 1% sell these goods and services at margins that make them quite wealthy. However, being that the 1% is comprised of 1% of the population, they rely on the rest of the population not only to produce goods and services for them, they rely on them to buy the goods and services.

Now remember, the top 1% has about 35% of the world’s private wealth, which is more than 95% of the entire economy combined.* Which essentially means that 5% of the world has over 65% of the wealth, yet the other 95% are needed to provide both the labour and the buying power to keep the economy turning in an effort to raise profits for the other 5%. In turn, perhaps, the top 5% will increase the wages for the other 95%. This seems like a good business move given that if the bottom 95% have more money they’ll likely buy more things. The two rely on each other. If the top 1–5% decides to save money in order to increase profits, they run the risk of the other 95% of the population to cut back on their spending and no longer purchase their goods.

Of course, this is a simplification of our economy. There are many other factors at play including the fact that currency is loaned from a bank to a nation (keyword, loaned, meaning interest rates are applied) and that supply and demand affects cost, and concepts such as inflation plays a role in both the price of goods and services and wages. But, when explaining the economy and UBI to 16 and 17 year olds in an English Class (which I was teaching at the time) the above statement simplifies the concept of the economy to the crowd, enabling the class to get back to the question: Who’s going to pay for Universal Basic Income?

Again, there’s a reason why this question isn’t an easy one to answer, in the sense that there are misconceptions about the answer, for, the easiest answer to the question is that personal income and corporate taxes would foot the bill for UBI. Here we also run into a problem with the question and the motivation behind it; people are generally sensitive to how their tax dollars are spent and largely disagree if they don’t see a direct personal benefit to how they are spent. For instance, welfare programs are often scrutinized by taxpayers, especially those who feel those on welfare are unwilling to work and are being “rewarded” by those who are. Other social assistance programs come under similar scrutiny, just take a look at the state of health care (Obamacare) and the attitudes of the people of the United States. In Canada, an extreme case of this scrutiny is actually racially charged, as treaty rights require the federal government to institute social programs for the Aboriginal people (known as First Nation and Metis) in the country. Keep in mind that these treaties helped Canada prosper as a nation, the rights the Aboriginals have been afforded have been historically ignored, and many Aboriginal people live in third world conditions in one of the richest nations on the planet. Yet an overwhelmingly large number of people in Canada believe that Aboriginal people should not receive benefits designed only for them — but I digress.

Let’s get back to the point. Who will pay for UBI? The simple answer: the same people who are paying for the economy to currently run. The people who are buying and making the goods take on the majority of the burden.

Universal Basic Income will become synonymous with term Automation, the concept that advances in robotics, artificial intelligence, and other software and hardware will begin to phase out the need for human labour. This is great for corporations who no longer have to be concerned with the safety, wages, and human element of human labour. While automation is often tied to jobs that don’t require an academic level of thinking (for instance, many jobs in manufacturing or service industry where skills are largely physical and/or repetitive) automation also has implications in the world of finance, law, insurance, and health care. Cutting out human labour will, in theory, increase profit margins. However, this practice will remove people from the workforce and could ultimately raise unemployment levels. If people aren’t working, they’re less likely unable to afford the goods and services produced. In turn, corporations lose profits.

Instinctively, people assume a social program such as UBI ultimately favours those who don’t want to work. But we’re facing a world where robotics and automation will replace an exponentially increasing amount of jobs. Those without jobs receiving UBI cheques will be expected to spend those UBI cheques in such a way that supports the economy. Corporations very survival relies on it. Keep in mind that social mobility for those who rely on only UBI funding will be severely limited (cue the death of the American dream, for real this time) so one can argue the effectiveness of the actual benefits to the middle and lower class as to the actual benefits to these people. An optimist would hope that if these people were unable to find employment their efforts would support bettering their community, along with their continued contribution to the economy.

By now you’re liking thinking to yourself that lower income people will benefit greatly from this scheme we refer to as UBI, that corporations will be paying higher taxes in order to fund people unable (or according to some unwilling) to find employment. However, make no mistake that corporations do everything they can to turn a profit, from cutting costs, laying people off, and paying as little taxes as possible. It’s their fiduciary responsibility to do so, especially in the case of publicly traded corporations who have a responsibility to investors to make them as much money as possible. Likely companies are already mindful of this possibility, knowing the precise cost points that moving to a technology based workforce makes more financial sense than a human workforce. At the same time they will be ready to begin lobbying the government to institute social programs, such as UBI, in order to keep those they used to employ — and relied on to also purchase their goods — active in the economy.

With that statement you might be thinking that corporations don’t think this way, that they often offer single products and wouldn’t look at their employees as both the labourer and consumers their company relies on. Without getting into too much detail, I encourage you to jump on your favourite search engine and look up what some of the biggest conglomerates in this world own. Often corporations have parent companies. Companies are diverse and connected. This is a simple explanation of a conglomerate. A single conglomerate can have a portfolio that ranges from consumer tech, energy, jewellery, and finance. So yes, corporations are always very aware of their customers ability to buy products. Likely, these major corporations — the richest of the rich — will convince governments to allow them to pay the least amount of taxes (which would fund UBI) as possible, perhaps even shifting the tax burden to the middle class, those who enjoy UBI cheques along with wages. As the details of UBI are discussed it begins clear that the intricacies of a program like this could have widespread ramifications and major alterations to the way our economy works would likely follow.

Now we go back to the question and answer. Who will pay for UBI? Answer: the same people who pay for the economy right now. The poor, the middle class, the rich. They all rely on each other. They all rely on money changing hands in exchange for goods and services. The rich rely on margins and crafty business moves in order to distance themselves from the 99% of the rest of the world. And while a guaranteed income might seem like an ideal situation to end poverty and the stress associated with a fluctuating economy, it can also set the stage for the inability for social mobility, which relies so heavily on the earnings of one’s household. While the economy could potentially stabilize, it would still continue to rely on the 99% of the world buying goods and services largely controlled by the 1%.

We’re all paying for UBI. It’s really not as big of a shift as one might think.