Study: Recipients of universal basic income work fewer hours, are less productive

A recent study by the National Bureau of Economic Research reveals that recipients of universal basic income, or UBI, tend to work fewer hours and show decreased productivity. Titled “The Employment Effects of a Guaranteed Income: Experimental Evidence From Two U.S. States,” the study examines the potential impacts of UBI on employment, income levels, health, and overall well-being.

UBI is a policy proposal that provides all citizens with a regular, unconditional sum of money from the government. This concept has sparked significant debate, with proponents arguing it could alleviate poverty and opponents cautioning against its potential negative effects on work incentives.

The study is the largest unconditional cash transfer program evaluated through a randomized controlled trial in the US., focusing primarily on lower-income individuals. Participants were between the ages of 21 and 40, with household incomes not exceeding 300% of the federal poverty level in 2019. Most participants earned below 200% of the federal poverty level.

The experiment involved 1,000 low-income individuals receiving $1,000 per month unconditionally for three years. A control group of 2,000 participants received just $50 per month. The average household income of participants in 2019 was around $29,900, making the transfers a significant 40% boost in household income.

The study’s findings indicate a reduction in labor market participation among UBI recipients. Specifically:

• Labor market participation decreased by 2.0 percentage points.
• Participants worked 1.3 to 1.4 fewer hours per week.
• The partners of participants also reduced their working hours by a similar amount.

Additionally, individual income, excluding the transfers, fell by about $1,500 per year relative to the control group. The length of unemployment spells increased by an average of 1.1 months among those in the treatment group compared to the control group.

Despite detailed inquiries into job quality and amenities, the study found no significant improvements in employment quality or human capital investments. Although younger participants showed a tendency to pursue more formal education, the overall results suggest a moderate reduction in labor supply without other offsetting productive activities.

“The results of this study should surprise no one,” said Brian Balfour, senior vice president of research with the John Locke Foundation. “When you pay people not to work, people will choose less work. The decrease in productivity resulting from nonwork lends itself to economic stagnation which makes everyone worse off.”

Balfour added, “Interestingly, the City of Durham recently completed a small-scale pilot UBI program, as part of a broader national effort of pilot programs across the country. The unsurprising results of this study, however, should give pause to any further UBI experiments. Government welfare programs have proven to be ineffective at reducing poverty, and if anything have worsened poverty by creating dependency, welfare traps, and playing an outsized role in breaking up traditional family units.”

The study did highlight a potential positive outcome if individuals were motivated to find higher-quality or better-fitting jobs, reduce employment barriers, support entrepreneurship, or engage in productive non-work activities like caregiving as a result of the payments. But the data showed that participants placed the highest value on leisure time, being it was the main activity that increased due to the transfers.

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