What will the evidence say about a universal basic income?

By Catherine Cheney 18 July 2016

A GiveDirectly recipient works at his furniture workshop. Using the money, he built a house and chicken coop as well as woodworking tools for his workshop. Photo by: Jennifer Huxta / GiveDirectly

When individuals in eight out of 20 villages in Madhya Pradesh, India, were provided with monthly payments as part of a randomized control trial on universal basic income, the results defied what some top economists had expected.

More than 6,000 people received the unconditional cash transfers, which at 300 rupees per adult and 150 rupees per child were calculated as being at or just above the poverty line. Rather than losing their incentive to work, recipients worked and produced more; and rather than wasting the money, many of them invested it — in better seeds, equipment repairs, and even new businesses.

The idea of a universal basic income is nothing new. Thomas More floated it in his 16th century “Utopia.” A modern day update, “Utopia for Realists,” argues that it should transition from radical thinking to mainstream policy. Rising income inequality, growing frustrations with modern social welfare programs and other efforts to fight poverty, and concerns about the future of the global workforce are all adding urgency to the debate. Some lift universal basic income up as a solution to the automation revolution, which could see more jobs performed by machines. Others call it a poor tool to fight poverty. Even champions of the controversial idea acknowledge it would be challenging, if not impossible, to implement at a large scale.

Now an organization known for changing the way aid dollars are delivered and a Silicon Valley startup incubator are testing universal basic income in two very different contexts. Their aim is to build an evidence base that speaks to real results, not ideology.

“We know short term cash transfers work well and universal basic income is basically a long term cash transfer. We've never done a long term transfer like that and given the ongoing debates over basic income thought it would be an important thing to do,” said Ian Bassin, who is part of the team planning a pilot of universal basic income for the nonprofit organization GiveDirectly. It will be universal, in that everyone within a region gets it, basic, in that it is sufficient for people to live on, and income, in that it is long term with the potential to change a life trajectory.

GiveDirectly is building on its experience with unconditional cash transfers and randomized control trials in Kenya and Uganda by launching this basic income pilot with more than 6,000 Kenyan households for the next 10 to 15 years. The organization has already shown how recipients tend to invest the cash they receive in priorities such as health and education rather than goods like alcohol and tobacco. These upcoming randomized control trials will test what happens when recipients receive cash over a long term. With a $30 million budget across approximately 200 villages, GiveDirectly will have a control arm that does not receive any transfers, an arm in which everyone gets a long term transfer, and at least one other transfer arm to test for the effects of universal basic income. While the team is still raising funds, it has teamed up with leading academic researchers to test the impacts, and plans to launch this year.

GiveDirectly has met with Y Combinator, which is gearing up for a basic income pilot program with 100 residents of Oakland, California, to gather insights that will inform a larger five-year study. GiveDirectly and Y Combinator have evaluated past pilots from India to Namibia, and watched closely as upcoming pilots in Finland and the Netherlands gather momentum. And the two organizations continue to trade notes with each other.

Y Combinator founder Sam Altman launched his first “Request for Research” on the topic of universal basic income because he wanted a data-driven answer to questions such as whether people would create more economic value than they receive.

“I think that, combined with innovation driving down the cost of having a great life, by doing something like this we could eventually make real progress towards eliminating poverty,” he wrote in a blog post earlier this year.

The research director for the Y Combinator pilot is Elizabeth Rhodes, whose doctoral research focused on health and education in Nairobi’s slums. While it is far more affordable to apply rigorous scientific study to basic income in developing countries, at a price point of under $500 a year versus about $10,000 a year or more in most developed markets, Rhodes has pointed to the value in conducting a pilot closer to where Y Combinator is based in order to be “closer to the people involved.”

Not everyone is on board with the idea yet, though.

Y Combinator’s interest in universal basic income was the basis for a piece that called the idea an example of the unchecked arrogance of Silicon Valley. “I am extremely skeptical of its utility, and I am even more skeptical when I hear it coming from Silicon Valley,” Lenny Mendonca, a former director at McKinsey & Co. and co-author of the piece, told Devex. “I applaud the interest in trying to help people who need help. I just think they’re going about it the wrong way, and they’re the wrong messengers.”

While Mendonca acknowledged that the pilot from GiveDirectly in Kenya adds value by bringing evidence to the debate on universal basic income, he called the pilot Y Combinator is planning in Oakland an example of a “techno-libertarian fantasy” that risks distracting from more effective responses to underlying problems such as homelessness.

“There is a lot of cynicism about Silicon Valley’s interest in this,” Natalie Foster, an expert on the future of work and fellow at the New America California and the Institute for the Future. “But when you’re planning and thinking about how what you’re working on will impact society, I think it makes sense that in the off hours you think, ‘well what are we going to do if there aren’t jobs or if there aren’t good jobs?” she said.

The interest the tech community has taken in this topic is one part guilt over the impact technology is having on job markets and one part optimism about the power of big ideas, Foster said. Even for those who see automation as a distant threat to the workforce, or who believe that as technology displaces jobs new ones will be created, the fact remains that as national incomes have grown, wages have not kept pace. So as economic growth is decoupled from wage and job growth on a global scale, universal basic income represents one way to decouple work from income, she said.

“To me the real question is what kinds of social contracts will we as a nation and global community move toward as work shifts fundamentally?” Foster said.

Both internationally and domestically, universal basic income represents one potential way to smooth what is sure to be a disruptive transition to an unprecedented era of technological change, said Sean Kline, who recently transitioned from a career in global development work to lead San Francisco’s Office of Financial Empowerment.

“Rather than continuing to watch the rise of inequality and a new class of contingent workers struggling to survive, it's time to rethink our social safety net, based on a basic minimum income,” he said.

With a basic income people could be freed up to do only the work they want to do, versus the work they have to do. That could mean more people working on issues like those contained among the Sustainable Development Goals, from improving health and well-being to advancing gender equality, Kline said.

“The moment you don’t have to worry about money for survival, that is the moment where you can use your social capital and your intelligence to actually start something meaningful,” said Federico Pistono, author of “Robots Will Steal Your Job, But That’s OK,” in a talk at a summit on the future of work. When he wrote his book, he was against the idea of basic income, explaining that he had concerns about the impact it might have on happiness and self worth. But as he studied the data, he saw that whereas some unemployment benefits can create perverse incentives and psychological traps, once that money become universal and unconditional, those problems seemed to disappear.

Pistono said he was struck by the results of the randomized control trial in Madhya Pradesh, India, where the cash transfers were universal and unconditional. That study left room for further testing across India and in other markets because the money distributed in the test was not enough to meet basic needs nor provided over the long term.

“What makes sense logically in our heads does not necessary translate into reality,” he said. “You have to see what actually happens in the real world.”

Only rigorous testing can provide an evidence-based answer to what might happen if the world moved from a patchwork of overlapping poverty reduction interventions tackling different issues to this new social safety net, argued Michael Faye and Paul Niehaus, the co-founders of GiveDirectly, in a blog post for Slate.

It is a natural human instinct to be suspicious of cash with no strings attached, Bassin of GiveDirectly said. It was evidence that led unconditional cash transfers from being dismissed as a crazy idea to becoming a benchmark for foreign aid effectiveness, he added.

Even as the tech community and the global development community study how universal basic income might affect behavior or change the poverty landscape from California to Kenya, some governments are already toying with putting the idea into practice. Last month, Switzerland was the first country to put universal basic income to a vote, and while the proposal failed, voters expressed interest in seeing more testing.

“Basic income is in a similar space right now as cash was five years ago, where there was a healthy skepticism,” Bassin said. “Since then, a wave of additional research showing the positive impacts of cash transfers has really helped pave the way forward. Whether basic income will travel a similar road is what we intend to find out.”

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About the author

Catherine cheney devex
Catherine Cheneycatherinecheney

Catherine Cheney covers the West Coast global development community for Devex. Since graduating from Yale University, where she earned bachelor's and master's degrees in political science, Catherine has worked as a reporter and editor for a range of publications including World Politics Review, POLITICO, and NationSwell, a media company and membership network she helped to build. She is also an ambassador for the Solutions Journalism Network and the Franklin Project at the Aspen Institute.


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