The Benefits of Guaranteed Income Policies are Clearer than You Might Think

As he has done several times in the past, Pope Francis recently expressed support for universal basic income (UBI). UBI refers to policies that provide regular and unrestricted cash transfers by a government to its citizens with the goal of establishing an equitable baseline standard of living for all people.

Among Francis’ concerns is the possibility that increasing automation and the rise of artificial intelligence in the workplace could replace the jobs of working people around the world. UBI could provide people—irrespective of whether or not they have a job—with the ability to afford healthy food, access to primary and preventive medicine. It also has the potential to advance many other public health objectives.

Francis’ support for UBI, however, raises an important question: does it actually work?

Over the past several years, municipalities across the United States have begun experimenting with basic income pilot programs. While these pilot programs vary considerably, most aim to randomly assign people at pre-specified income levels to either receive or not receive some level of guaranteed income. This allows researchers to evaluate whether those experimentally “treated” with guaranteed income have better economic, health, and other outcomes than those who were untreated.

These efforts to study programs that provide guaranteed income appear to be producing mixed results.

For example, in a paper we published in the American Journal of Preventive Medicine, we report that a guaranteed income program in Alaska had beneficial public health outcomes. Alaska is the only state that has a guaranteed income program for all residents, called the “Alaska Permanent Fund.” Every year, the fund passes along a portion of revenues generated by selling oil to its residents.

In our study, we analyzed how a sharp increase in Permanent Fund payments, resulting from a change in Alaska’s tax code, impacted Alaskans’ primary care-seeking behaviors. We found that increased basic income payments were associated with an increased likelihood that Alaskans sought out primary and preventive care services compared to the previous year (benchmarked against the health behaviors of Americans living in the other 49 states).

[W]e urge those who pay attention to UBI research to ask themselves the following question: how much effort does each outcome studied require in order to inspire behavioral change?

However, unlike our research, some studies have documented some negative effects of UBI. For example, past summaries of the literature suggest that cash transfers tend to lead people to be less likely to seek out employment opportunities, thereby decreasing their ability to earn an income beyond (often, small) guaranteed income benefits. Moreover, a recent paper from the National Bureau of Economic Research found that UBI led to a slight decline in labor market participation. This finding shows no clear impact—either positive or negative—on the health of those receiving the guaranteed benefits.

While previous research has produced some conflicting results, we argue that the beneficial effects of basic income policies are clearer than they might seem. 

Here’s why.

Data on the effectiveness of guaranteed income programs seem mixed if we treat all potential outcomes as being more or less equal. In other words, UBI critics sometimes treat activities like seeking new avenues for educational attainment, changing diet and exercise, and applying for new employment opportunities as having similar opportunity costs.

This, we argue, may not be a tenable assumption.

For example, it is much more difficult (and time-consuming) to pursue a change of career or re-enroll in higher education than it is to book a routine physical with one’s physician. If guaranteed income is associated with decreased efforts to find new (and perhaps better-paying) jobs, then increased preventive care behavior may appear to generate a “mixed” pattern of results.  

We argue that characterizing these results as “mixed” lacks important nuance. Both employment-seeking behavior and routine primary care appointments may have beneficial (albeit quite different) effects. Yet the effort necessary to change one’s career may be much greater than the effort needed to book a primary care appointment.

What constitutes a productive use of guaranteed basic income benefits is often misunderstood. While some prioritize the importance of using basic income payments to improve educational training or job prospects, we believe that many non-labor-market activities can be good for your health. These include biking, cooking, taking vacations, and spending time with friends and family. If people are able to use UBI funds to finance non-work activities that benefit their health, the economy will ultimately reap the rewards in the form of decreased costs for medical care.

So, as pundits and policy analysts consider Pope Francis’ support for UBI, we suspect that some will characterize research on the benefits as “mixed” or “unclear.” Instead, we urge those who pay attention to UBI research to ask themselves the following question: how much effort does each outcome studied require in order to inspire behavioral change? If the answer to that question is that the amount of effort required would be substantial, then failing to detect an effect should not be all that surprising. It might even suggest that behavioral change requires more generous benefits.