An unconditional basic income (UBI) is a utopia in which all people receive a basic pension from the state without conditions, which is supposed to make a simple life possible. In Switzerland, the introduction of such a UBI was voted on in 2016. The proposal was for a basic income of 2500 francs for every adult resident in Switzerland and 625 francs per child. The proposal was rejected with over 75 per cent of the vote.
The demand for a UBI is made again and again. There are also repeated attempts to implement it on a limited and local level in order to empirically explore whether a UBI would be possible at all and what consequences would result from it. In surveys in Germany, more than half of the respondents have already spoken out in favour of a UBI - what do they expect from it?
Supporters
Proponents of a basic income argue, among other things, that the ever-increasing automation (keyword artificial intelligence) would lead to a situation in which there would soon be no more work for everyone. An unconditional basic income is therefore a necessity.
They also emphasise that such a system would be fairer and release potential. Where today people would only work in order to survive, people with a UBI would have the opportunity to develop themselves. There would be more room for creativity and new ideas would inspire the world. The UBI would lead to a more humane, just and equal world in which people would be happier and more content.
The UBI should first be financed by reducing bureaucracy. Where today all welfare recipients would be thoroughly checked and the whole system would be bureaucratic and complicated, in future only the money would have to be paid out. The whole means test would be eliminated, which would save costs. In addition, the UBI should be financed by a financial transaction tax, by an increase in VAT or by taxing the super-rich.
Of course, there are many more arguments in favour of the UBI, and there is plenty of material on the internet. But the problem is quite simple: a UBI cannot work. One can "philosophise" about it, but it will not be possible to implement it. This article will show why not.
Opponents
Automation
The frequently advanced argument of automation does not stand up to closer scrutiny. Up to now, more new jobs have been created with every surge in productivity. Of course, this could change at some point, but we will face a labour shortage in the next few years due to the ageing of society. However, if there really is great unemployment one day, a UBI will be even more impossible to finance.
Not unconditional
A UBI could never be unconditional. A UBI of 2,500 francs for all Swiss residents (i.e. a condition) would lead to a figurative wall having to be built around Switzerland, as one could support an entire family almost anywhere in the world with this amount. Massive immigration would therefore have to be expected. If one were to live in a rather small flat with ten people, the comfort would still be better than the comfort in many countries of the world - but one would receive 25,000 francs unconditionally without any compulsory service in return. In addition, there would have to be controls on who resides in Switzerland, which could quickly lead to rampant bureaucracy, which is precisely what we want to prevent.
For example, with a second home in Switzerland, a couple could live more than comfortably in a low-wage country with 5,000 francs. The small restaurant by the sea would then be financed crisis-proof. In order to prevent abuse, which would further torpedo the financing that is not possible anyway, further rules would therefore have to be established and controls carried out. As experience shows, this could easily develop into a dystopia.
Bureaucracy reduction
Unconditionality is emphasised above all because there is already basic security today, but it is linked to conditions. Without conditions, the argument goes, the whole bureaucratic superstructure would become superfluous, which would save costs. The problem is that the bureaucracy in the social system is not only used to distribute money, but also to provide help and support in various forms. Moreover, many people today receive more than 2,500 francs from the state. These people would therefore be worse off - or a large bureaucracy would still be needed. The savings potential would therefore be much smaller than is commonly imagined; unconditionality would lead to a reduction in social benefits - or would no longer be financially viable.
Market
Even the opponents of a UBI do not necessarily dispute that a UBI would make room for more creativity. But they doubt that the majority of these jobs would be productive or in line with the market. If, as a result of the UBI, many more people suddenly started painting or making music, this would not be an adequate substitute for society for the productive work that would be left behind because of the UBI. Of course, a UBI would not simply lead to everyone sitting at home in front of the TV (even if that could well be the case for too many). And there would certainly be some people who could develop exciting innovations with a UBI. For the economy, however, it is mainly jobs that are in demand on the market that are in demand, and it is at least doubtful whether precisely these would still be offered. But it doesn't matter, because the UBI is not financially viable anyway.
Financing the UBI
There are indeed calculations that show that a UBI could be financed. Mostly, however, some utopian taxes are used that should only hit the rich without considering that wealthy people would quickly leave a country after the introduction of a UBI. Financial transaction taxes, for example, only make sense internationally; they cannot be used for a locally introduced UBI. Moreover, it is often ignored that the UBI would have massive effects on the system. The calculations usually assume that all areas that are currently functioning well would remain the same - and only the negative aspects would be improved by a UBI. However, this is a view that is far removed from reality, as will be shown in the following.
Two UBI models
Basically, there are at least two forms of UBI, let's call them UBI1 and UBI2. We also take the monetary amounts proposed in Switzerland, these would of course be adjusted depending on the country and situation.
With UBI1, all adults in a defined area receive 2,500 francs in addition to their existing wages. With UBI2, the adults' income remains the same. The state pays all adults a UBI of 2,500 francs, but the employers reduce their wages by 2,500 francs and pay this amount to the state. This means that for those who have a paid job, nothing will change in terms of wages: they will simply receive 2,500 francs less from their employer, but will also receive the UBI of 2,500 francs from the state. Those who do not have a paid job, however, will now receive 2,500 francs UBI from the state instead of the previous conditional unemployment benefits or social benefits.
The following graphs show the three situations in a simplified way: today's situation with unemployment benefit and social assistance, the UBI1 and the UBI2.
UBI1
UBI1 is obviously not affordable. Let's make a simple calculation. In 2020, there will be about 6.72 million adults and 1.68 million children in Switzerland. If all adults receive 2,500 Swiss francs unconditionally and all minors 650 Swiss francs unconditionally, the costs will be 17.85 billion Swiss francs per month (6,720,000*2,500+1,680,000*650). In other words, 214 billion francs per year would have to be spent on the UBI for Switzerland alone.
In 2020, however, the Confederation spent a total (!) of only CHF 75 billion. That is the amount for all expenditures including infrastructure, bureaucracy, military, agriculture, social welfare etc. In addition, there are expenses of the cantons and municipalities, but it is obvious that the UBI alone would cost much more than the state spends today on all existing services. However, these services would still be needed, which is why financing UBI1 is unthinkable. It would require additional revenue, which could not be generated by taxes that are not yet known.
This is also reflected in the fact that Switzerland's gross domestic product in 2020 was around 750 billion Swiss francs. The UBI would therefore cost just under a third of Switzerland's total economic output. Or vice versa: if one were to pay out a UBI1 , this would automatically lead to hyperinflation and the currency would lose value more or less in line with the value of the UBI, so that one would ultimately hardly be able to buy anything with the 2,500 francs.
UBI2
UBI2, on the other hand, would be financeable at first glance. Financing would be based almost exclusively on two pillars: the elimination of social bureaucracy and a levy on wages.
The savings from the elimination of social bureaucracy are often overestimated. After all, social assistance involves much more than just paying out money. There are care services, further education is organised and financed, etc. All of this would also be eliminated with the UBI2 - or would have to continue to be financed, which would reduce the savings. Another problem is that today many people receive more social assistance than the UBI of 2,500 francs. They would therefore possibly receive less money with the UBI2 than today - or it would again require a needs assessment including social bureaucracy.
But even more problematic is the levy on wages, which seems so convincing at first glance. Advocates of a UBI2 assume that employers would reliably hand over the first 2,500 francs of a worker's wages to the state without control. The employer would pay the worker 2,500 francs less than today, but would deliver 2,500 francs per worker to the state. The state would then pay all people, including the workers, these 2,500 francs "unconditionally".
An apparent zero-sum game, supposedly hardly anything would change. Where previously the employee had received 5,000 francs from the employer, he would now receive 2,500 francs each from the employer and 2,500 francs from the state, so money would simply be "shifted".
This somewhat strange construction is necessary because all people without exception should receive the UBI. The UBI would be financed by the state, paid for largely by the savings of the first 2,500 francs of the employees. Without this construction, we immediately end up back at the unfinanceable UBI1, so it is the central element of UBI2. But this construction would have serious consequences.
Today, for example, someone who has a job receives 5,000 francs, with a 50 per cent job 2,500 francs and without a job (and without social benefits) 0 francs. With the UBI, someone working 100 per cent would receive 5,000 francs, with 50 per cent 2,500 francs - the same as if he or she did not work at all.
So there would be no difference between not working at all and working 50 per cent. Especially in the low-wage sector, this would have serious consequences - who would work in an unpleasant job if they received 500 or 1,000 francs more for it than if they did no paid work? Wouldn't it be more lucrative to perform services now and then for an hourly wage or in kind?
This is precisely what would have to be prevented at great expense. The financing of the UBI2 is based on the fact that the first 2,500 francs earned have to be handed over to the state. So if instead of working 100 per cent for 1,000 francs more, you were to cut your friends' hair for an hourly wage, you would also have to hand over the first 2,500 francs to the state. It would be impossible to claim this money, but without it the financing would no longer be secured.
However, undeclared work would not only be interesting in the semi-private sector and for hourly wages, but also for salaried employees, because the employer would have to pay the state CHF 2,500 for each employee. This amount would not apply to undeclared work, which could therefore be divided between employer and employee, from which both would benefit. Controlling this would be very costly for the state. And there would be another difficulty: what would happen if someone had two or more employers? Which employer would then have to pay the levy to the state? What would happen in the case of self-employed people who do not pay themselves a salary? In order to clarify such cases, conditions and controls would immediately be needed again. This time, not in relation to those who currently receive social benefits, but in relation to employers. The unconditional nature of the basic income could only be financed if new conditions were formulated elsewhere, which would make the whole thing absurd.
UBI at most in poor countries
Without more or less equal wages worldwide, a UBI could not be introduced - except perhaps in a very poor country. If one million people earn an average of 2 dollars per day, the annual cost of a UBI would be about 730 million dollars. Since such a country also has very low productivity, it is conceivable that this could actually increase productivity and allow the country to develop. Possibly, development aid money would even be better invested in this way - of course, this is not certain. What can be said with certainty, however, is that the introduction of a UBI in a rich country like Switzerland would drag the country into the abyss directly at the time of the changeover or shortly thereafter.
Conclusion
The idea of the UBI always leads to exciting discussions. What if people only had to work if they wanted to have more than the subsistence level at their disposal? Would people with a UBI perhaps even work more because they would have more leisure and be more likely to become self-employed? Such ideological and ideological questions, however, are confronted with reality in the case of the UBI: a truly living wage UBI cannot be financed and it would not be unconditional. The conditions would only shift to other places.