Why This Tech Company Is Giving 100 People Free Money

4 minute read

What happens when you give a bunch of people free money? Mountain View, Calif.-based startup accelerator Y Combinator is determined to find out.

The firm is about to give about 100 people between $1,500 and $2,000 every month to spend on whatever they please. The program, to be carried out in nearby Oakland, is meant to test a scheme called Universal Basic Income, or UBI. While it’s far from mainstream acceptance, UBI is viewed by some as a means to provide workers with economic stability as an increasing amount of the world’s labor is automated.

“I think we are moving towards a world with less job security,” says Matthew Krisiloff, who is managing Y Combinator’s UBI study. “There’s political consensus around it, and there’s relative simplicity in the sense that it’s just direct cash and you can spend it however you want.”

Here’s what you should know about UBI.

What is Universal Basic Income?

In its most pure form, a government would send all citizens a certain annual income to everyone, regardless of their salary, age or employment status, typically in installments throughout the year.

In reality, it gets a little more complicated. Sending money to every single citizen is expensive, so most UBI proposals involve some limits on who is eligible for the money — minors and the already-wealthy, for instance, might get smaller checks. Limits aside, the general point remains the same: (Almost) everyone gets a check from the government to spend without restrictions.

Why is it popular?

The basic concept has intellectual roots dating back to at least the 18th century. Some on the political left have supported UBI a tool to redistribute wealth to the poor and provide a means to improve people’s quality of life, while some on the right have seen it as a way to make the existing welfare state more efficient while promoting individual choice and reducing “welfare traps.”

Despite sporadic support on both sides of the aisle, UBI has historically remained on the policy fringes. Many worry that a basic income could reduce the incentive to work, slowing the economy. Another concern is whether providing a basic income is the best way to spend public funds that could be specifically targeted to certain groups in need, the model most welfare programs currently follow.

However, a confluence of factors have started to push basic income into the mainstream. Rising inequality and persistently slow economic growth have spawned concerns about the ability for working people to get ahead without increased assistance, for instance. Meanwhile, advances in automation and artificial intelligence have raised the prospect of a future with significantly fewer jobs for human workers. A recent Oxford University study found that as many as 47% percent of jobs are at risk of being computerized (although another study found that number may be as low as 9%).

Is anyone getting paid yet?

No nation has implemented a universal basic income, but the idea has gained traction in a few countries. Sweden recently voted down an initiative that would have implemented a relatively generous basic income for adults on top of the country’s existing social services, Britain’s labor party is considering advocating for a basic income, Finland may implement a version of UBI next year, and a city in the Netherlands is also pursuing a basic income experiment.

Y Combinator’s Krisiloff says the newfound discussion of a basic income represents a fresh attitude towards government welfare programs. “I think part of the reason it’s back in vogue is because people are more accepting of unconditional programs,” he says. “People are starting to think there are more cost effective, less paternalistic, hands-on ways to help.”

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