IDEAS home Printed from https://ideas.repec.org/a/bpj/bistud/v12y2017i2p13n4.html
   My bibliography  Save this article

The Cost of Basic Income: Back-of-the-Envelope Calculations

Author

Listed:
  • Widerquist Karl

    (Georgetown University School of Foreign Service in Qatar, Doha, Qatar)

Abstract

This article shows how the cost of Universal Basic Income (UBI) is often misunderstood and greatly exaggerated. It then presents simple, “back-of-the-envelope” estimates of the net cost of a UBI set at about the official poverty line: $12,000 per adult and $6,000 per child with a 50 % “marginal tax rate.” These back-of-the-envelope calculations present a greatly simplified UBI scheme meant not as a practical proposal but as a method to obtain a ballpark estimate of the cost of UBI in isolation. Even with simplifying assumptions, these figures are several times more accurate than many common but exaggerated estimates. Key findings of this study include the following. The net cost — the real cost — of this UBI scheme is $539 billion per year: about one-sixth its often-mentioned but not-very-meaningful gross cost of about $3.415 trillion. The net cost of this UBI scheme is less than 25 % of the cost of current U.S. entitlement spending, less than 15 % of overall federal spending, and about 2.95 % of Gross Domestic Product (GDP). The average net beneficiary is a family of about two people making about $27,000 per year in market income. The family’s net benefit from the UBI would be nearly $9,000, raising their income to almost $36,000.

Suggested Citation

  • Widerquist Karl, 2017. "The Cost of Basic Income: Back-of-the-Envelope Calculations," Basic Income Studies, De Gruyter, vol. 12(2), pages 1-13, December.
    • Handle: RePEc:bpj:bistud:v:12:y:2017:i:2:p:13:n:4
    DOI: 10.1515/bis-2017-0016
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/bis-2017-0016
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/bis-2017-0016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Congressional Budget Office, 2016. "The Distribution of Household Income and Federal Taxes, 2013," Reports 51361, Congressional Budget Office.
    2. Evelyn L. Forget, 2011. "The Town with No Poverty: The Health Effects of a Canadian Guaranteed Annual Income Field Experiment," Canadian Public Policy, University of Toronto Press, vol. 37(3), pages 283-305, September.
    3. Richard Pereira, 2017. "The Cost of Universal Basic Income: Public Savings and Programme Redundancy Exceed Cost," Exploring the Basic Income Guarantee, in: Richard Pereira (ed.), Financing Basic Income, chapter 2, pages 9-45, Palgrave Macmillan.
    4. repec:cbo:report:513612 is not listed on IDEAS
    5. repec:cbo:report:513613 is not listed on IDEAS
    6. L. Randall Wray, 1998. "Understanding Modern Money," Books, Edward Elgar Publishing, number 1668.
    7. repec:cbo:report:513611 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gan Wee Chung, 2019. "How Much Does Basic Income Cost? Modelling Basic Income as Universal Life Annuity," Basic Income Studies, De Gruyter, vol. 14(2), pages 1-10, December.
    2. André Cieplinski & Simone D'Alessandro & Chandni Dwarkasing & Pietro Guarnieri, 2022. "Narrowing women’s time and income gaps: an assessment of the synergies between working time reduction and universal income schemes," Working Papers 250, Department of Economics, SOAS University of London, UK, revised Apr 2022.
    3. Malmaeus Mikael & Alfredsson Eva & Birnbaum Simon, 2020. "Basic Income and Social Sustainability in Post-Growth Economies," Basic Income Studies, De Gruyter, vol. 15(1), pages 1-27, June.
    4. Dogan, Berna & Tekgüç, Hasan & Yeldan, A. Erinç, 2022. "Towards A Green Income Support Policy: Investigating Social and Fiscal Alternatives for Turkey," Conference papers 333496, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. E. Klein & E. Fouksman, 2022. "Reparations as a Rightful Share: From Universalism to Redress in Distributive Justice," Development and Change, International Institute of Social Studies, vol. 53(1), pages 31-57, January.
    6. Fouksman, E. & Klein, E., 2019. "Radical transformation or technological intervention? Two paths for universal basic income," World Development, Elsevier, vol. 122(C), pages 492-500.
    7. Cieplinski, André & D'Alessandro, Simone & Dwarkasing, Chandni & Guarnieri, Pietro, 2023. "Narrowing women’s time and income gaps: An assessment of the synergies between working time reduction and universal income schemes," World Development, Elsevier, vol. 167(C).
    8. David Colander, 2019. "How Much will a Universal Basic Income Plan Cost?," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 45(2), pages 321-326, April.
    9. Ghatak, Maitreesh & Jaravel, Xavier, 2020. "Is funding a large universal basic income feasible? A quantitative analysis of UBI with endogenous labour supply," LSE Research Online Documents on Economics 108533, London School of Economics and Political Science, LSE Library.
    10. Riedl Drew, 2020. "Financing Universal Basic Income: Eliminating Poverty and Bolstering the Middle Class While Addressing Inequality, Economic Rents, and Climate Change," Basic Income Studies, De Gruyter, vol. 15(2), pages 1-34, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Josh Ryan-Collins, 2015. "Is Monetary Financing Inflationary? A Case Study of the Canadian Economy, 1935-75," Economics Working Paper Archive wp_848, Levy Economics Institute.
    2. L. Randall Wray, 2011. "Waiting for the Next Crash: The Minskyan Lessons We Failed to Learn," Economics Public Policy Brief Archive ppb_120, Levy Economics Institute.
    3. Levasseur Karine & Paterson Stephanie & Carvalho Moreira Nathalia, 2018. "Conditional and Unconditional Cash Transfers: Implications for Gender," Basic Income Studies, De Gruyter, vol. 13(1), pages 1-9, June.
    4. Brett Fiebiger & Scott Fullwiler & Stephanie Kelton & L. Randall Wray, 2012. "Modern Monetary Theory: A Debate," Working Papers wp279, Political Economy Research Institute, University of Massachusetts at Amherst.
    5. L. Randall Wray, 2013. "The Euro Crisis and the Job Guarantee: A Proposal for Ireland," Palgrave Macmillan Books, in: Michael J. Murray & Mathew Forstater (ed.), The Job Guarantee, chapter 7, pages 161-177, Palgrave Macmillan.
    6. Pedro Gete & Franco Zecchetto, 2018. "Distributional Implications of Government Guarantees in Mortgage Markets," Review of Financial Studies, Society for Financial Studies, vol. 31(3), pages 1064-1097.
    7. Julie Anne Cronin & Don Fullerton & Steven Sexton, 2019. "Vertical and Horizontal Redistributions from a Carbon Tax and Rebate," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(S1), pages 169-208.
    8. Stephanie Bell, 1999. "Functional Finance: What, Why, and How?," Economics Working Paper Archive wp_287, Levy Economics Institute.
    9. L. Randall Wray, 2012. "Keynes after 75 Years: Rethinking Money as a Public Monopoly," Chapters, in: Thomas Cate (ed.), Keynes’s General Theory, chapter 15, Edward Elgar Publishing.
    10. Pavlina R. Tcherneva, 2012. "Beyond Full Employment: The Employer of Last Resort as an Institution for Change," Economics Working Paper Archive wp_732, Levy Economics Institute.
    11. Pavlina R. Tcherneva, 2008. "The Return of Fiscal Policy: Can the New Developments in the New Economic Consensus Be Reconciled with the Post-Keynesian View?," Economics Working Paper Archive wp_539, Levy Economics Institute.
    12. Sebastian Rios & Samantha B Meyer & John Hirdes & Susan Elliott & Christopher M Perlman, 2021. "The development and validation of a marginalization index for inpatient psychiatry," International Journal of Social Psychiatry, , vol. 67(4), pages 324-334, June.
    13. Phil Armstrong, 2020. "Can Heterodox Economics Make a Difference?," Books, Edward Elgar Publishing, number 19964.
    14. Tanweer Akram & Syed Al-Helal Uddin, 2021. "An empirical analysis of long-term Brazilian interest rates," PLOS ONE, Public Library of Science, vol. 16(9), pages 1-20, September.
    15. Feinberg Robert M. & Kuehn Daniel, 2018. "Guaranteed Nonlabor Income and Labor Supply: The Effect of the Alaska Permanent Fund Dividend," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-13, July.
    16. Muriel Pucci & Bruno Tinel, 2010. "Réductions d'impôts et dette publique : un lien à ne pas occulter," Documents de travail du Centre d'Economie de la Sorbonne 10085, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    17. Yeva Nersisyan & Flavia Dantas, 2017. "Rethinking liquidity creation: Banks, shadow banks and the elasticity of finance," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 40(3), pages 279-299, July.
    18. Eladio Febrero & Maria-Angeles Cadarso, 2006. "Pay-As-You-Go versus funded systems. Some critical considerations," Review of Political Economy, Taylor & Francis Journals, vol. 18(3), pages 335-357.
    19. James B. Bullard & Riccardo DiCecio, 2019. "Optimal Monetary Policy for the Masses," Working Papers 2019-009, Federal Reserve Bank of St. Louis, revised 25 Jul 2023.
    20. Scott T. Fullwiler, 2005. "Paying Interest on Reserve Balances: It’s More Significant than You Think," Journal of Economic Issues, Taylor & Francis Journals, vol. 39(2), pages 543-550, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bistud:v:12:y:2017:i:2:p:13:n:4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.