We’ve been talking about universal basic income (UBI) literally for ages. The philosopher Sir Thomas More snuck the idea into his Utopia released in 1516). And utopia is mostly what UBI has been since then.
While dozens of pilots have been conducted and some had encouraging results, we’re far from concluding it’s the right path forward. Will it encourage entrepreneurship and creativity and boost mental health? Will it help those in need to provide for their children and build a better future? Or should we be worried about legions of people who won’t work at all and unsustainable governmental finances? These questions still fuel a heated debate where UBI emerges as a theoretical solution for the AI-powered future.
Unsurprisingly, governments weren’t rushing to donate free money to people so that they don’t need to work. But then the pandemic came, and people couldn’t work even if they wanted to. Suddenly, free money was routinely handed out to the masses to prevent a catastrophe.
Universal basic income in the post-covid world
More than 70 percent of people throughout the European Union are in favor of UBI after Covid-19. That’s a pretty staggering number. Given the situation, some governments have decided to give it a shot. Wales will test out a model where adults receive a sum covering the basic cost of living regardless of their financial situation. The officials are approaching the pilot carefully, and they want to confirm whether universal basic income can truly deliver on its potential to tackle inequality and the post-covid damaging economic insecurity.
Across the ocean, guaranteed income has become a reality in multiple US cities. While it’s not the same as UBI – only a chosen group of people receives a modest amount – it’s still a game-changer. California has dedicated $35 million so that local governments across the country can launch their own pilots. Vox observed that guaranteed income is transforming from charity fueled by Silicon Valley billionaires to a state-funded policy. That’s important because the state is moving on from mere experiments to long-term solutions that could exist within the tax system.
The safety net
When Alan Yang ran for president, his take on UBI called “Freedom Dividend” was one of the pillars of his campaign. Yang is a former tech executive who knows that Artificial Intelligence will impact the job market. He’s also been suggesting that having a financial “safety net” would encourage starting entrepreneurs who fear the consequences of failure.
Sharon Poczter, Chair of the Strategy and Entrepreneurship Department at Yeshiva University in NYC, argued that his plan would inevitably fail. The proposed amount of $1,000 per month isn’t really a safety net, to begin with. After all, it’s much less than a bare minimum to live in the US. And, as Poczter says, even if UBI encourages entrepreneurs to go for it, it’s possible that the money would help businesses stay afloat even if they shouldn’t. So what professor suggested are short-term entrepreneurship funds instead.
One Oakland company took that idea and made it even better. Runway offers guaranteed income for black entrepreneurs, which is a chance to narrow the wealth gap.
Empowering underrepresented founders
A founder who isn’t a white man has slimmer chances of landing VC money. In 2020, Black and Latinx founders received just 2.6% of VC funding. But it’s not just that: young entrepreneurs often get their start thanks to a financial injection of their family. That’s not something hopeful startups from, let’s say, Black families can rely on. And if they do transform their idea into a business, they may not find the safety net to fall back on within their families.
Runway, led by social entrepreneur and financial activist Jessica Norwood, tackles this problem by supplying the “Friends & Family” style capital for BIPOC businesses. The money comes with no strings attached (except the need to pay a 4% interest rate), with an added bonus of a community, advice, and coaching.
“The history of capitalism has been predatory and violent for Black people, so we want to make sure that doesn’t happen with us. Capital needs to move, but it has to be the right kind of capital with the right kind of money. It can’t be episodic, and it has to be deeply, deeply generous,” Norwood explained for Bloomberg CityLab.
Could generosity be the keyword governments worldwide are looking for on their quest to kick-start the “new” economy? After covid, universal basic income is no longer just a theoretical utopia. It may come in various shapes and sizes, but it’s definitely here, and it’s demanding attention.