The findings from the largest American-controlled experiment in Universal Basic Income (UBI) reveal unsettling results that challenge the efficacy of such programs.

Universal Basic Income (UBI) has been a widely debated topic for some time. The concept is straightforward: by providing everyone with a basic income, individuals gain the resources to escape poverty traps, the freedom to pursue enriching opportunities, and the capacity to generate value in an era where technology and automation are jeopardizing traditional jobs.

Funded by the founders of ChatGPT, this experiment aimed to address potential job losses due to advancements in artificial intelligence (AI) and artificial general intelligence (AGI). Researchers randomized 1,000 low-income individuals earning less than $29,900 annually to receive $1,000 per month for three year. Participants were from urban, suburban, and rural areas in Texas and Illinois.

The study, which gathered data through detailed surveys, administrative records, and a custom mobile app, sought to understand how unconditional cash transfers affect labor market participation, quality of employment, entrepreneurial activities, and human capital investments. The findings were alarming:

1. Income Reduction: Despite receiving an additional $12,000 annually, UBI recipients saw their total individual income fall by about $1,500 per year relative to the control group, excluding the transfers. For every dollar given, total household income dropped by at least 21 cents, indicating that UBI may disincentivize additional earnings. 

Why the reduction? As people were given $1000/month they simply reduced their working hours, using the $1000 to make up the difference. Simply, participants were less motivated to make more money and work the same hours they were prior to their participation. 

2. Labor Market Participation: UBI participants experienced a 2.0 percentage point decrease in labor market participation, with a reduction of 1.3 to 1.4 hours per week in labor hours. Notably, participants’ partners also reduced their working hours by a comparable amount. 

3. Use of Time: The most significant increase in time was spent on leisure activities, followed by transportation and financial management. However, there were no improvements in the quality of employment. Despite detailed questions about work amenities, the study found no impact on job quality, confidently ruling out even minor improvements.

4. Human Capital and Entrepreneurship: There were no significant effects on investments in human capital, such as education or training, although younger participants showed a slight inclination toward pursuing formal education. Additionally, there was some increased interest in entrepreneurship among recipients.

These results present two contrasting viewpoints. UBI advocates might argue that the $1,000 per month was insufficient, suggesting that a higher amount could yield better results. 

While UBI advocates may argue for higher amounts, this approach fails to address the core issues of work disincentives, economic inefficiency, inflation, lack of guaranteed improved outcomes, and long-term dependency. A more holistic approach, combining targeted financial assistance with programs that promote employment, education, and skill development, is essential for achieving long term economic security and reducing inequality.