Universal Basic Income or Universal High Income?

An article to better inform the debate about the amount of UBI

"The very positive scenario of AI is actually in a lot of ways, the description of heaven, in that really nobody would need to work. I wouldn't even call it universal basic income. I would say it's probably universal high income." - Elon Musk at AI Safety Roundtable, September 18, 2023

"We won't have universal basic income. We'll have universal high income." - Elon Musk at AI Safety Summit, November 2, 2023

"There will be universal high income, not basic, in a positive AI future." - Elon Musk on X, December 25, 2023

"There will be universal high income (not basic)." - Elon Musk on X, May 29, 2024

Because Elon Musk has decided to start talking about a concept he refers to as "universal high income" as being different and seemingly better than universal basic income, I feel the need to set the record straight here.

Simply put, universal high income is a universal basic income that is high enough to be considered "high." Universal basic income is not a low universal income.

As defined by the Basic Income Earth Network, the international organization founded in 1986 to foster informed discussion around the world about the topic of basic income, the current definition of basic income is "a periodic cash payment unconditionally delivered to all on an individual basis, without means test or work requirement."

Since first discovering the concept of basic income in 2013, otherwise known as unconditional basic income or universal basic income or just UBI, I've attended my share of BIEN conferences, and I can assure you that the wording of the definition is very carefully crafted, with a lot of thought behind it, and a lot of debate about how to potentially improve it. For example, uniformity has been suggested as a sixth defining characteristic.

The fact that the definition of UBI in no way mentions an amount is very purposeful, and it's not something that everyone within the UBI community agrees on, because most of us do want the amount to at least be high enough to lift everyone out of poverty. But the fact remains, a UBI considered to be "too low" like say $100/mo in the US, would still meet the definition of UBI as long as it was cash (instead of vouchers or benefits-in-kind) provided unconditionally, universally, individually, and periodically.

So why do I find it so important to inform everyone of this in response to Elon Musk deciding to contrast universal high income and universal basic income? It's because I believe Elon is responding to the misinformation that his loyal fans appear to be simmering in. There is a fear that UBI is a trap, that it's meant to be low and stay there, permanently ensnaring us all in poverty as our jobs are automated away, condemning most of us to live with only say $1,300 a month and leaving us unable to earn any income because jobs no longer exist.

Elon is in the business of automating jobs away. He wants to create millions of Optimus robots to replace human labor. He wants to create cars and trucks that replace human drivers. He doesn't want people to fear all of that automation he intends to sell though. He also has expressed repeatedly that he doesn't see UBI as being something to do now, but instead only something to do after a lot of jobs have been automated. Given those beliefs, and the fears of his potential customers, it makes sense to talk about UBI as needing to be very high. It has to be if there's no more jobs, right?

Believing that UBI needs to be high fosters a poor understanding of how UBI works, which is what I want to try and correct here.

UBI is a floor. It's a foundation. All income is earned on top of it. If your income right now is $50,000 a year, then a $15,000 UBI would mean your income before taxes getting bumped up to $65,000 a year. If you're married without kids, and your household income is $50,000, then a $15,000 UBI would mean your income before taxes would get bumped up to $80,000. If you're married with two kids and the child component of UBI is $5,000, then a $15,000 UBI for a $50,000 household would mean a $40,000 bump from $50,000 to $90,000.

A $15,000 UBI for adults with a $5,000 UBI for kids would virtually abolish poverty in the US immediately, as currently defined here in 2024. No robots needed. We could do that right now. We could do it instead of a bunch of welfare programs. We could do it instead of a bunch of tax subsidies. We could raise taxes on those benefiting the most from the technology that has been eroding wages for decades now, including Elon Musk and other billionaires and their corporations.

That's why Elon is talking about universal high income. "UHI" is something we can't do right now. It's something we can do in the future. Don't tax him more now. We can figure out all this stuff later only after there's massive unemployment. Then we can talk UBI, and don't worry, because it will be super high. It will be say six figures? That's high, right? Or maybe $250,000 is high? It doesn't matter. We can worry about that stuff later. That's where that logic leads.

But we can't worry about this stuff later. This stuff is what we need to be making happen right now because people are already being impacted by AI and robots. UBI is something we should have gotten going decades ago back in the 1970s before computerization took off and before automation and offshoring blew away a ton of jobs and killed wage growth, and before $50 trillion in new economic wealth was diverted mostly into the hands of the top 1% of Americans.

UBI should be seen as an inherited technological dividend that is due right now, not who knows how many years from now when "enough" jobs have been blown away and displaced enough workers to cause a panic and violence in the streets.

What if we had started with a tiny UBI in the 1970s and it had grown slowly with productivity? According to a study done by the RAND Corporation, that UBI dividend would have been $1,144 a month in 2020. That would be additional to everyone's current income, before taxes. That could exist right now instead of the massive and ever-increasing inequality that exists in its place.

It's also important to understand that between right now and some unknown future date where technology has increased unemployment in a way considered finally sufficient for UBI to be implemented by those like Elon, the impact will continue being what it's always been. Inequality will rise. People like Elon will get much richer. For those who lose their jobs, they'll find new ones. Some will find jobs that pay more, but many - potentially most - will find jobs that pay less.

How high does inequality need to get before it's considered too high? If unemployment never rises to a level considered too high because people are continually able to find new jobs that pay less, then when does someone like Elon say it's time for UBI, high or not? Is there a functioning society for us to exist in where unemployment is at 5% but the majority of the population has jobs that don't sufficiently cover their costs of living or the spending needed to fuel the economy? What does that society look like?

I think that society looks exactly like ours. It's already here. We exist in that time with low unemployment and high inequality, largely generated from decades of technological advancement, industrial offshoring, and tax cuts for the rich. It's a very angry place. It's a powder keg in a forest fire.

It's because the need is immediate and overdue, that we need to do UBI RIGHT NOW, not years in the future. We can't do a high universal basic income right now, but we can do a universal basic income right now. We can end poverty right now.

Besides those with the lowest incomes, we can also help the middle class right now. We can help everyone feel more stable and secure. Because people will spend their basic income, that will create more jobs that will enable more people to find jobs. It's imperative to protect everyone right now through the transition to a more automated economy instead of waiting until the last minute, which could be too late to avoid the worst impacts, like for example the abandoning of democracy.

I've also written before about how any UBI we start right now should grow over time. It should be seen as a productivity dividend. I've suggested setting it at 25% of GDP per capita to start, as political economist and co-founder of BIEN Philippe Van Parijs first suggested in his 1995 book, Real Freedom For All. That way, as productivity grows as AI is implemented and improved, everyone's UBI grows too. It would be a true dividend from AI.

It need not only remain at 25% either. That too can grow as we see a shift in the overall ratio of human labor to machine labor. A decade from now, perhaps it makes more sense to be 30% of GDP per capita. In another decade, maybe 40%. The point is that over time, the UBI floor can grow to be an amount that most people would consider to be quite high. And if that amount worked out to be $50,000 a year per person, that would still be a universal basic income. If it were $100,000 a year per person, it would still be universal basic income.

There is a practical limit to how a UBI can be though, and it depends on the size of the economy. A UBI set at 100% of GDP per capita represents a kind of theoretical limit where all income would be the UBI and there would be zero income from any jobs or capital. Clearly, the practical limit exists below that theoretical limit.

I believe there's a sweet spot to find where the amount of UBI is high enough to lift everyone out of poverty and increase overall productivity but not so high as to start reducing productivity and shrinking what's left for other income by too great a degree. The larger the share of the economy going to UBI, the less there is for wages and everything else. I don't think we want an economy where someone without a job gets $50,000 a year and a doctor only earns an additional $30,000. The ratio matters. UBI can't take up such a large percentage of the economy that there isn't enough income to create the incentive via wages and salaries for all the work we still need and want humans to be doing.

Right now in the US, 100% of GDP per capita is about $6,900 a month. The poverty line is defined as $1,255/mo which is 18% of GDP per capita. So I think in the US, the sweet spot is more than 18%, but less than some unknown percentage we can only guess at, but perhaps is somewhere around 25%, but may be as high as around 33%.

So I propose we start anywhere we can that is at or around the poverty line or severe poverty line, and just crank it up from there to find where the unknown sweet spot resides. As technologies like AI and robots grow overall productivity, the upper bound of the sweet spot will increase. A highly automated economy should require a smaller percentage of GDP for wages, and thus the upper bound could go from say 33% of GDP per capita for UBI to 50% or beyond, depending on the degree of automation.

In such a way, yes, at some point the universal basic income would be a universal high income, but it would still by definition remain a universal basic income.

The basic in basic income just refers to its nature as a primary foundational floor. It's the income we all get by right to be spent on whatever we each consider to be most necessary, which then serves as the base for all other income to be earned as additional income for additional and less necessary purchases.

Want more content like this? Please share it and click the subscribe button. Also consider making a monthly pledge in support of all my work.

Special thanks to my monthly supporters on Patreon: Gisele Huff, Haroon Mokhtarzada, Steven Grimm, Judith Bliss, Lowell Aronoff, Katie Moussouris, David Ruark, Tricia Garrett, Zack Sargent, A.W.R., Daryl Smith, Larry Cohen, Philip Rosedale, Liya Brook, Frederick Weber, John Steinberger, Bridget I Flynn, Laurel gillespie, Dylan Hirsch-Shell, Tom Cooper, Robert Collins, Joanna Zarach, ace bailey, Daragh Ward, Andrew Yang, Peter T Knight, Michael Finney, David Ihnen, Miki Phagan, Albert Daniel Brockman, Natalie Foster, Joe Ballou, Arjun, Kara Gillies, Lyn Newman, Mark Donovan, Capitalists for Shared Income, Jason Clark, Chuck Cordes, Thomas Fitzsimmons, Mark Broadgate, Leslie Kausch, Jessica Chew, Braden Ferrin, Juro Antal, Austin Begin, Deanna McHugh, Nikolaus Rath, chris heinz, Pavel S, Zachary Weaver, Justin Seifert, Jodi Sarda, Rosa Tran, Ryan Ash-Miller, bradzone, John Sullivan, Team TJ, Yang Deng, Yan Xie, Marie janicke, engageSimply - Judy Shapiro, Tim, Warren J Polk, Jeffrey Emmett, Stephen Castro-Starkey, Kev Roberts, Nicolas Pouillard, Walter Schaerer, Loren Sickles, Eric Skiff, Thomas Welsh, Kai Wong, and Laura Ashby.