Universal Basic Income Is Not Communism

The concept of universal basic income, or UBI, has been discussed by economists for quite some time, yet many people have either not heard of it, or have heard of it only recently. Andrew Yang’s campaign announcement has, however, brought this issue to the minds of more people. While some have responded positively, others have raised objections. In this article, I’m not going to explore practical objections, such as exactly how much a UBI would cost. Instead, I’d like to address two philosophical objections to the idea:

  1. UBI is essentially communism.
  2. It is unethical to give people other people’s money.

What Is a UBI?

UBI is a policy under which every citizen or resident receives a certain amount of money from the government. For example, Yang proposes to give every American $1000 per month. Other proponents have advocated for different figures. People can keep any additional moneys earned through working, investments, etc., less a percentage deducted for taxes.

UBI is, in its practical effects, identical to a negative income tax, or NIT, a measure favored by Milton Friedman. Under a negative income tax, people who make below a certain base level receive a percentage of the difference between that base quantity and their income from the government. Let’s say that the tax a person owes is given by the formula (income – $30,000)*(1/3). Then a person who makes $60,000 would owe $10,000 in taxes, while a person who makes $30,000 would owe $0 in taxes. But people who make less than $30,000 would owe negative income tax: someone who makes no money at all, for example, would owe -$10,000. A negative amount owed means that they would actually receive this money from the government.

Of course, this is just a simple example, in which the tax rate is 33.33% for everyone. In reality, the tax rate might be more complicated than this. However, this suffices to illustrate the general concept.

Although this might sound different from a universal basic income, the practical result is the same. In both cases, people who make no money receive a certain amount of money from the government. In both cases, any money that is earned gets taxed. Thus, the net transfer between the taxpayer and the government will work out the same for both a UBI and a NIT, assuming that we choose the right rate for the UBI and the right base income or negative tax rate. In both cases, people who make a lot of money will pay a net transfer of money to the government, and people who make very little or no money will receive a net transfer from the government.

Because their end results are essentially the same, we will refer to both a UBI and an NIT in this article.

Not Communism

Let us consider the objection that a UBI is really just a form of communism. The first problem with this idea is that a UBI does not even make sense unless private ownership of goods and money is a part of the economic system. Although the means of production do not have to be privately owned for a UBI to make sense, we do at least need to have private ownership of private goods.

However, on top of this, there is nothing about a UBI or a NIT that suggests we should do away with private ownership of capital and the means of production. Indeed, very little would change about our market system for those who are in the upper middle class and above: they would continue to pay taxes and to own their own homes, cars, businesses, etc. Thus, economically, a UBI is not communism, in that it does not in any way entail doing away with private property or private capital.

However, there is a related objection: UBI would encounter the same problems as communism does, under which people lack motivation to work. This deserves careful consideration. We need to consider why people are motivated to work in general, and why they lack motivation to work under communism. Much of this discussion will make reference to Stephen Pinker’s excellent points about communism in The Blank Slate.

Humans are, in a broad sense, motivated by positive and negative outcomes (positive reinforcement and negative reinforcement, although humans do not necessarily need to experience the reinforcement per se, since we can anticipate it in many cases). The following case about communism is adapted from Pinker. Under communism, everyone receives essentially the same goods and services, regardless of how hard they work. Therefore, there are no natural negative consequences for not working (e.g. you’ll starve and become homeless), nor any positive consequences for working hard. The result, Pinker observes, is that, under communism, people tend to be lazy (and thus, instead of having enough goods to redistribute to everyone, the entire society ends up with a deficit in goods). To get people to work, it is therefore necessary to add some kind of motivation, generally in the form of punishment for failing to work sufficiently hard. But, without any positive consequences for hard work, people will generally do the bare minimum to avoid punishment. Pinker traces the low quality and general lack of goods in the Soviet Bloc to this fundamental psychological problem: people lack motivation to work under communism, except to avoid whatever punishments their leaders assign, and they lack all motivation to work harder than the bare minimum. Pinker points out that communists hoped to overcome this issue by re-educating or re-conditioning people—a hope based on a fundamentally flawed blank slate view of human nature.

Now, let us consider how Pinker’s analysis is linked to UBI, and our present welfare programs.

Under communism, the positive rewards for working hard are taken away, as well as (in theory) the negative rewards for not working hard. But a UBI is very different. It mitigates the negative consequences of not working hard, but as long as a person works, they will be personally better off. This is because your net post-tax gains will always be higher if you make more money. While communism does away with the positive psychological motivations for being employed at a paying job, a UBI leaves them intact. Since people are rarely satisfied with the bare minimum, if they see any reasonable way of improving their lot, there is good reason to think that most people will want to have paying jobs, even with a UBI. There is certainly no reason to think that a UBI would lead to a communism-style psychological trap, in which most people have no interest in working.

Indeed, a UBI is also better, psychologically, than our current welfare system. This is because, in our means-based welfare system, people will often find that they are no better off, financially, if they work than if they remain on welfare. Why bother getting off welfare, if your net income will remain approximately unchanged—and you will have to deal with an unpleasant boss, a commute and greatly reduced leisure time?

Of course, in a means-based welfare system, we may be able to prevent exploitation of the system, and encourage people to work, by cutting welfare off from those who could work but choose not to. This ignores the fact that these people may want to do meaningful, important, but not necessarily paid, tasks—volunteer work, artistic endeavors, etc.—which may ultimately be very good choices. And it has two other flaws. First, it requires an extensive bureaucracy to implement this kind of means testing. A UBI or NIT requires virtually no additional overheads, since it can easily be baked into the existing tax infrastructure. Second, this is a proposal to solve a problem (people not wanting to work because they escape the negative consequences of not working) that is unlikely to exist under a UBI anyway—people will generally be motivated to work in order to improve their financial situation under a UBI. This is only likely to be a significant problem in means-based welfare systems, in which people are just as well off, financially, if they choose not to work, as if they choose to work.

Giving Your Money to Other People?

The second common objection to UBI is that it is unethical to give money that you earned to other people. This sounds like a valid idea: if you earned it, you should get to keep it, and it should not go to other people, who did not earn it. However, this objection turns on two separate issues:

  1. The ethics of levying taxes at all.
  2. Whether a UBI is a good use of government resources.

So if the objection to a UBI is about the ethics of giving your money to other people, what about all the tax money that is used to fund public programs like road construction and maintenance? Anyone can use those roads, even if they paid far less in taxes than you did. Or what about using taxes to fund public education or healthcare (something done far more extensively in Europe than the US, though, even in the US, there are public healthcare programs for the very poor, such as Medicaid). What about using tax money to run a police department that (at least in theory) provides equal protections to everyone, no matter how much they paid in taxes?

If a UBI is unethical because it is taking your money, then the objection is not so much to a UBI, but to taxes in general. While some extreme libertarians do hold this view, most people are more pragmatic than that, and agree that some degree of taxation is ethically justifiable. The question is whether it is ethical to use those taxes that are levied for a UBI.

At this juncture, we are really asking What are the valid uses of tax money? Now, if we agree that funding roads, police, public education, etc., are valid, then programs which service everyone are a valid and ethical use of tax revenues, provided they do not drive taxes too high. The question then becomes merely Is a UBI a social program that will prove highly beneficial to a lot of people in society, without raising taxes to an unreasonable level? (which will, of course, also depend upon what we consider unreasonable taxation, etc.).

We can certainly debate the benefits of a UBI vs. the costs. Perhaps the benefits would not justify the degree to which taxes would need to be raised. But this is an empirical question about the efficacy of the program, not a profound moral objection to the concept of UBI itself.

Practical Benefits

For a good discussions of the benefits of a UBI, and of the empirical research that has been done, I highly recommend starting with Scott Santens. Here, I’d like to consider just two benefits that a UBI might bring to society as a whole: the bargaining power it could give to workers, and the stimulation of small businesses.

With the rise of automation, our societies have seen a change in the economics of labor. The supply of jobs has dwindled, while the demand for them has remained the same. Or, to put it another way, the supply of workers has remained the same, while the demand for workers has gone down. As a consequence, wages have stagnated. Many people have been forced into the gig economy, for lack of long-term jobs with security. And, perhaps most importantly, workers have lost bargaining power: the ability to negotiate for better working conditions and pay. This is because, by the laws of supply and demand, the increase in the ratio of the labor supply to the labor demand means that the suppliers of labor no longer have a good that is worth as much. More concretely, if a worker demands better wages or conditions, there will be another worker who can easily be hired in her place.

A UBI would not fix this problem in and of itself. But it would allow workers to say no to jobs which they felt did not pay enough, or whose conditions were too poor to be worthwhile. By lowering the need for everyone to have a job, a UBI would help balance the supply and demand problem. The consequence would be an increase in worker bargaining power. How much power this would grant workers would depend on many factors, including the exact implementation of the UBI. But it would almost certainly give workers more bargaining power, and this would benefit all workers. The need for this kind of fix will only become more pressing as automation replaces more and more jobs.

As to stimulating small businesses, thanks to a UBI (together, perhaps, with universal tax-funded healthcare), people would be able to take lower-paying jobs that they found interesting and enjoyable, rather than being forced to try for higher-paying positions that they disliked. This would allow smaller companies, which cannot afford to pay as much, to still attract workers. It might even mean that the minimum wage, which is intended to ensure that anyone who works makes enough money to live, could be lowered or abolished, which would also encourage small businesses. In addition, the fact that fewer people would be living in extreme poverty, since the UBI would supply a decent social safety net, would encourage more people to engage in entrepreneurship. Scott Santens has discussed the findings on this aspect of UBI in more detail.

There are many other benefits to a UBI, e.g. a reduction in stress which would translate to higher average health throughout society. But I wished to focus purely on objections based on the ideas that a UBI would result in the same problems as communism has, and that it would be unethical. UBI has little to do with communism, either economically or psychologically, and, ethically, it is not appreciably different from any other social program, such as public police, public education or public healthcare.

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15 comments

  1. Yang calls UBI “human-centered capitalism” for a reason. Capitalism works well as an overall system, and UBI is not meant to replace it as Blake explains, but the many corrupt ways money is funneled within the capitalist system – such as over-salaried people that do virtually useless work (see Bullshit Jobs by David Graber) and under-salaried people who do work with great social utility (artists and teachers, for example) – is one of the primary issues UBI aims to correct. “Social utility” cannot be simply defined by supply and demand; to define it, we need to look at the cultural assumptions of western society. We frame the climb up the corporate ladder as the cultural ideal, and many believe that to be the case because it’s the clearest ladder to see. There are so many other ladders to be climbed up, however – creative, spiritual, social, etc. – which are often not only difficult to climb but often difficult to even see for those who are trapped in the cycle of capitalist stagnancy. Daniel Kahneman and his colleagues made it very clear that the less money you make, the worse your levels of wellbeing will be (once you get under $75,000/year, wellbeing begins to decline). It’s grandiose to assume that UBI will make people more productive, but it’s be naive to assume that UBI won’t open the doors to many new possibilities for people. Once low-income people no longer have to worry about what they need (e.g. food and housing), they can have more mental energy to put toward achieving what they want (e.g. creative, spiritual, and social fulfillment).

  2. Where does Modern Monetary Theory enter into this discussion? Even if UBI is a NIT, the money for the negative income tax has to come from somewhere, in addition to the obligations that government already has saddled itself with. The problem, as I see it, with MMT and providing UBI (or NIT) is that even with all of the additional money or specie, the purchasing power remains relatively unchanged in the face of inflation. Where am I wrong?

  3. The most prominent example of UBI in the US discourse is Andrew Yang’s proposal – for $12,000 a year, which is well below the Federal Poverty Level. This iteration of UBI is nothing more than crumbs and requires no sacrifices on the part of the people with the most wealth. It is incredibly telling that the most prominent advocates of UBI in the United States are Mark Zuckerberg, Elon Musk and other incredibly wealthy individuals. Would they be willing to live on $12,000 a year? Yang is identified as an “entrepreneur” and “venture capitalist.” I believe that says it all.

    Without a expansion of the public sector that includes free-at-point-of-use health care, free/low cost higher education, et cetera, UBI is simply a method of wealthy elites throwing crumbs to the masses while they continue to accumulate wealth from other people’s labor.

  4. The UBI is basically Communism, said almost no one ever.
    The UBI is a terrible idea, that won’t work for any number of economic, practical and political reasons said virtually everyone who’s taken their blinkers off and looked at with an open mind.
    Congratulations on slaying the strawman, but it’s basically irrelevant to the real debate around the worth of UBI as a policy.

  5. The problem with UBI is not that it is “Communism 2.0: This time it will work”, the problem is that it based on ignorance, naivety, and wishful thinking. The issue UBI is intended to solve, robots taking all the jobs, is speculation not fact. It may happen but then again it may not. Even granting that it might happen, UBI is yet another grossly naive solution. It shows no understanding of cause and effect in complex, dynamic systems. It uses the same treat-the-symptom, folk logic that argues “College is too expensive, therefore make it free.” Forget any serious root cause analysis. Forget second-order effects. Forget asking “why?” and thinking through alternatives.

    UBI’s proponents fail to realistically describe how UBI would play out. We know that it would become deeply politicized and subject to political posturing and manipulation. One major sob story in the press and there would be a call to raise the UBI amount to a “living wage”, one big crime and the opposite side will call for a crackdown and more control. An entirely predictable dynamic, remember the old adage “he who pays the piper calls the tune”. Congratulations on bringing the Eloi to life.

    Or maybe not Eloi so much as A Clockwork Orange. Give masses of young men no motivation and no prospects, a life of boredom ahead of them and what do you expect them to do? Write poetry? Play video games all day? Think again. They will inject excitement and purpose into their lives through danger and violence, probably by forming gangs and fighting others. See for example, all of human history (and pre-history).

    If we learn anything from the 20th century, it is that radical social policy schemes, no matter how well-intentioned, are dangerous and counter-productive. This is not a call to inaction but rather a call for humility and skepticism, so that in trying to fix one problem we don’t cause even worse problems.

  6. But it is based on income, correct? If I get taxed an additional $20K at my income level to receive my $12K from the government, I’m essentially down $8K unless I reduce my income.

  7. “…thanks to a UBI … people would be able to take lower-paying jobs…” Does that mean we would also eliminate the minimum wage? Would people be allowed to work for $1 an hour?

    1. Try it somewhere else. It will be the death of democracy as voters discover they can vote themselves funds from the public treasury.

      That’s the problem with all these nice-sounding hard left ideas. When Leftists talk about implementing them, they are never talking about themselves.

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      1. It has been tried, successfully, for the last 37 years, in Alaska. Last time I checked that wasn’t a “Leftist” state, it been republican for most of the last 20.
        The base premise of UBI is a right-wing economic idea.

        1. It has been tried in Findland, Netherlands and Italy in the last 4 years, read about it.
          And the result? Utter failure, it turns out it happens exactly what you would think it would happen: Disincentives work instead of incentivizing it; produces inflation and taxes soar. Seems these messiahs in ties really underestimate people’s ability to prefer a free government pay (no matter how small) than to get a job and risk losing that free pay.
          https://www.livemint.com/

  8. I have to assume you’ve looked at Yang’s proposed UBI. At $12K a year there is not much incentive not to work, not like there would be at $120K. Twelve thousand is still far below poverty. I also like it that everyone gets the same amount, it’s not based on income. Once things are based on income the people who are able to make campaign contributions won’t support it.

    There will never be a way to make up for the theft of productivity gains over the last 4 decades, the loss of income and especially time, can never be repaid. Blue collar has been screwed and that horse left the barn long ago. What UBI does is to set us on a better path. Even though wages have been depressed for my generation, one hopes that those who come after can do better.

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