August 28, 2018

US startup funder to finance universal basic income study

US startup funder to finance universal basic income study

Y Combinator, a US-based group that provides seed funding for startups, plans to give cash payments to 3,000 participants in a test to determine, in part, whether receiving regular unconditional payments offsets fears about traditional jobs being eliminated by technology.

The University of Michigan’s Survey Research Center will help to manage the study, called “Making Ends Meet,” which Y Combinator hopes to start in early to mid-2019. One thousand people will receive $1,000 per month and a control group of 2,000 people will get $50 per month. Some participants will receive monthly payments for three years and others for five years.

Y Combinator first announced plans for a universal basic income (UBI) study in 2016 in a blog post by Sam Altman, President of YC Group. Confident that some form of UBI will be implemented on a national scale in the future, Altman was interested in finding out what happens when people receive enough money to live on with no strings attached: “Do people sit around and play video games, or do they create new things? Are people happy and fulfilled? Do people, without the fear of not being able to eat, accomplish far more and benefit society far more? And do recipients, on the whole, create more economic value than they receive?” 

YC Research, Y Combinator’s research arm, estimates it will need $60 million for the study, 75% of which will cover the monthly payments to participants. It is seeking funding from individuals, national foundations, and local philanthropic groups. The study won’t begin until funding is secured.

In his IZA World of Labor article investigating whether UBI is a viable alternative to other social welfare measuresUgo Colombino says that “[UBI] appears to be an especially sound approach for redistributing the gains from automation and globalization, by building an efficient and transparent buffer against global volatility and systemic risks, generating positive incentives, and avoiding recurrent risks of falling into poverty.”

He warns, however, of the potential costs of such a policy and the distortions that might be introduced by raising taxes to cover those costs. He recommends investigating alternatives to progressive income taxation, such as a flat tax, wealth tax, consumption taxes, or environmental taxes. 

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