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How Does Basic Income Disincentivize Work?

Updated : August 4th, 2020

How Does Basic Income Disincentivize Work

When it comes to Universal Basic Income, it’s not a new idea that has been floated by the government. It’s a concept that has brought about a lot of discussions and gained traction in the media and Congress.

How it works is that a basic income or basic living stipend is provided to citizens as a cash payment using taxpayer money. This is unconditional and this means that there is no test when it is being implemented at a local or national level.

There has been a debate on the impact of technology on employment. The concept of universal basic income poses as a support system against automation. The overwhelming response to the debate would be the impact on jobs and the way in which this income would help the millions that are out of work.

Talking about the need for universal basic income, Karl Widerquist, associate professor said, “This was not just for the people at the bottom but also for the average worker.” As an advocate for UBI, he further added, “We should remove the judgment and paternalism that pervade the world’s existing social welfare systems.” This would then pave the way for governments to pay a basic income.

Chris Hughes, Facebook Co-founder also argued that workers in the US could receive a basic income of $500 per month. This could be done if Congress removed President Donald Trump’s tax reform. He stated on national television that less than one-third of Americans have benefited from the 2017 Tax and Jobs Act.

He also argued about how people cannot adapt because of the lack of bandwidth that is needed to do so. This would require a lot of time and resources to build on new skills and technical developments. Hughes also believes this is why the poorer people do not capitalize on educational opportunities when they are free.

While the incomes of people have been plateaued, the cost of living, housing, education, and health care have increased drastically. He feels strongly that a basic income would re-balance the economy and create economic growth.

Recently, US Senator Kamala Harris, D-California recently introduced Lift the Middle-Class Act. This would provide a monthly payment of $500 per month to low-income families. This would be paid for by removed the Trump tax cuts. Basic income payments are made in cash and paid to individuals and works as an obligatory fee.

There were recent efforts by a privately funded 18-month pilot program which was launched to distribute basic income in Stockton, California. Similarly, Chicago’s Mayor Rahm Emanuel has created a task force to study basic income.

So What is Basic Income?

Basic Income is a fixed sum which is paid to the public from taxes. Based on the inability to tackle unemployment with conventional means in the last decade there is a major reason that this idea should be taken seriously. Here social and economic policy should not be separated. Basic income would help both poverty relief and improve employment.

Does Basic Income Discourage Work?

The Heritage Foundation found that this was a failed experiment when it was conducted in six states from 1968 to 1980. A negative income tax would guarantee a minimum income to a specific group of people. One goal is to determine if this assistance would increase employment and the quality of life metrics. This format involves reducing benefits as earnings increase. This outcome created the opposite of the intended effect.

The Alaska Permanent Fund Dividend program has been in place for the last 25 years with money distributed from the oil reserve royalties earned in the state. The unconditional cash payments amount to $2,000 for every resident of Alaska.

You could notice a difference in different sectors. For example, in sectors where goods and services produced could be traded outside Alaska, part-time employment was down. This appeared to be more than an offset by increases in part-time employment in the non-tradable sectors of the Alaskan economy.

Time will tell us whether these findings are lessons from the Alaskan experiment. But it needs to be reviewed about the transferability of the findings from a very unique stat to other parts of the world. However, researchers express that more research is needed to analyze the impact of Universal Basic Income.

Vijay Menon, a research assistant at Heritage Foundation, expressed that negative income tax reduced the desired hours of work by 9% by husbands, 20% for wives and 25% of percent for single female heads of families. Single men that were not heads of families that received the stipend worked less by 43%.

Recipients who experienced unemployment during the experiment were unemployed for longer periods of time than unemployed non-participants. It was found that for every $1,000 in additional benefits recipients received, there was an average reduction of $660 in earned income. In other words, $3,000 worth of government benefits was needed to increase the net income by $1,000.

The results suggest that receiving unconditional aid and not the phase-out of benefits causes reduced work effort. This means that creating policies that discourage work is not good for America.

According to a 2016 General Social Survey, 70% of Americans love working even if they didn’t need the money. This would suggest that policies should be framed to reward work rather than replace it.

The Heritage Foundation suggests that an alternative to basic income is to expand the earned income tax credit. While the former would reduce work and increase dependency, the second option would bring in a sense of dignity and self-sufficiency.

UBI Pilot in Oakland

Y Combinator had run a UBI pilot in Oakland, California in 2016-17 and awarded participants with an unconditional monthly income of $2,000 each. These experiments were also done in Brazil, Finland, Italy, and the Netherlands.

The idea behind an unconditional cash transfer is not something new. This was advocated by Thomas Paine in the 1700s and more recently in post-war Britain by Juliet Rhy-Williams.

At FileUnemployment.org, we help in giving you the right information to help you get your due of benefits from the government. To realize this, you can check the Base Period Calculator, Benefits Calculator, and Eligibility Calculator. This will help you determine the base period to calculate benefits, the amount of benefits that you should get and finally whether you are eligible for benefits.

What do you feel about Universal Basic Income? Do Americans need it? Let us know in the comment section below.

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  1. I had trouble getting my proof of self-employment to upload in secure file exchange and finally got it submitted by 12:06 am , 6 minutes late. What are the possibilities that they will deny it? I have received unemployment from March 2020 to some of Jan and some in Feb 2021. Most of Dec, Jan, Feb, March, & april were stopped for this proof of employment.
    Also, I see proof of Income as a 2nd issue but it is always on there. That was not on my TO DO list.
    I feel for u all on ID.ME…

    Anyone trying to reach UI, call their number, press 2 or 3 (questions abt filing a claim?) and then wait thru the message. At the end of it, u will be connected to a live person! I promise.. don’t push another button.. I’ve done it 4 times and it never failed.

    We lost our home, my ex took my child…. (kept her after a visit and called cps facilitating drama while the cops wouldn’t give her back without paperwork locked up in the court house..shut down for covid) I raised her by myself for 12 years & now she is with a violent alcoholic and parental alienating parent .. ….my dog, my 9-year sweet little best friend, was attacked, passing away 3 days later.. all in this time frame.
    But! It will all be ok. I have faith.

    Be grateful for your life and all that is in it today. What u dwell on daily will be your strength or weakness.
    Good luck to all of u.
    And thank you, Jeff, for responding out here. It is appreciated!
    Davulia S.

  2. I filed over two months ago. I have not received any information. My status says “pending resolution”. I have no way of contacting anyone. My position was eliminated at my job and I submitted the documentations online. I dont know what else I can do.

  3. I have been apply Ohio Pua unemployment since July 5th still pending issues. Upload what they ask for when ever I call says your case is in Adjudication. Very very frustrated, financially I am broke. Health issues. Waiting a long period.Don’t know what I will do ?

    1. Nafisa,

      I can understand your situation. There will be a delay considering the number of applications that are being processed. Please continue chasing the office/check your status online at regular intervals until payments normalize.

    2. Same here since Feb 2021 turned in all the documents still pending issues 3 months now. When you call they tell you to be patient. Pulling my hair out it’s so frustrating.

  4. I was receiving PUA unemployment. they made me file for a new claim in February. Now I am in adjudication even though I gave all the same information from my previous claim. Have been adjudication since February and I call and they say they will put in a ticket to have an Adjudicator call me. Nothing. I am wondering If I can go down to to Maryland Unemployment Office and demand that someone talk with me to release my claim for payment. It’s been 56 days. I read that they have a maximum of 45 days.

    1. Luis,

      Your adjudicator may be inundated with pending cases. Please continue to follow up (if you have the contact details) or consider the option of visiting an office in the vicinity if safe and feasible.

    2. t sounds just like mine only im disqualified yet actie every till sept 4th . they haven’t asked me for anything! i file then its disqualified yet im told im ok and have nothing to do bit wait for an answer? answer to what? they switched my program and all and asked me to provide proof for a claim that wa denied al eady back in 2018! deny me once and then again perhaps? lol idk

  5. My mom had unemployment in Florida. She just recently moved temporally to California with a sister since she needs assistance, and now the website is telling her she cannot do anything because she is register in another state. Can she keep filing unemployment in Florida, even if she is living and register now in another state? how is the process to change the unemployment? I tried calling and there is no answer. Thank you!

    1. Stephanie,

      Please ask your mother to consider transferring the UI benefits from FL to CA (details will be available on either of the websites). If there are benefits weeks left in the account, she will be able to claim them.

    1. Leatha,

      UI benefits are offered to claimants who lose employment involuntarily and be able to and available for work.

  6. I lived in ga in 2019 and move to florida in 2020 and work for the xmas months in nov-dec. I was told to do a combine wage claim. my question is which state do i file the claim in?

  7. I filed for pua in Ohio back in October 2020.My claim has been in ajudacatuon since 11/1/20.So 2 to 6 weeks is a total understatement! When I call.i am told to basically hurry up and wait some more.I have recently been redetermined and my claim is allowed.but I have one pending issue.How long is too long?

    1. Nicole,

      Unfortunately, nobody has an answer. There are perhaps thousands of pending applications. Please consider the option of visiting an office in the vicinity if safe and feasible.

  8. If you claim your weeks for unemployment and for the next 2 months you still have not received your money. Where can you go in volusia county to talk with a live person

      1. HI Jeff,
        I applied back in Dec 5th, 2020 and I haven’t received any correspondence, is there a local office that I can make an appt to make certain my claim is right.

        1. Adam,

          You can consider visiting an office in the vicinity if safe and feasible (details will be available on the Unemployment Office’s website).

  9. On NYS DOL website, my claim is saying current yet the information is for my old claim with 0 days remaining despite receiving 2 weeks of payments on the new claim and I was able to certify last night. I haven’t received anything; no letters or emails.

  10. I was disqualified for UI benefits for not providing an ID and other forms of identification. How do I fix this?

        1. Gary,

          You may not be eligible since unemployment insurance is only extended to those who become unemployed due to involuntary reasons.

    1. Hi Mike, I’m in NYS and was at the end of my BYE on 3/14, I was still certifying but wasn’t getting paid. I found out I had to file a new claim because my other was exhausted. I’m still waiting on approval. Maybe you have to file a new claim. I hope this helps.

  11. They say 2-6 weeks it’s more accurate to say 2-6 months; and when you call many of them are rude and unwilling to assist!

  12. someone needs to look into Sharon L. Anton gillette, wyo. or dickinson, nd she is a fraud and has done so many fraudulent things and please look into her

    1. Annette,

      Please report it to the Fraud Division of the Unemployment Office in your state. You can report on the website.

  13. I worked part time for thee years here in florida. I’m currently not working. I’m also retired and collects social security.
    My question is
    Am I qualified to file for unemployment ?

    1. Ruby,

      To be eligible, you’re required to have sufficient hours and earnings. Please use the “Benefits Calculator” available on this website.

  14. So adjudication takes 8 to 12 weeks. Oh okay, that explains why I havent received payment since July. That surely helps just like the rest of the information that you give. And by the way. What’s the NEW reason you can’t get through to the Call Center.

    1. Maria,
      I have gotten through to the call center (live agent) every time i’ve tried calling within the last 2 weeks. The number to a live agent (follow the prompts carefully) is (667)-207-6520. i have gotten through within 10 to 15 mins with each call i had made!

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