Written by Jackson Irby
Imagine a world where you and everyone you know receive a guaranteed monthly payment from the government, no strings attached. As automation and artificial intelligence reshape the workforce, Universal Basic Income (UBI) is gaining attention as a legitimate policy option. Once considered a fringe utopian concept, it is now being explored by economists, technologists, and lawmakers looking for solutions to a rapidly changing labour market. One report, for example, estimates that automation could displace up to 800 million jobs globally by 2030 (McKinsey Global Institute, 2017). But what exactly is UBI, and why is it gaining traction now? This article examines what UBI is, why it is relevant today, insights from real-world trials, and the potential benefits, criticisms, and implementation challenges it presents.
Defining UBI
UBI is a public policy proposal in which the government provides all citizens with regular, unconditional cash payments – typically monthly – to cover basic living expenses, regardless of income, employment status, or need.
UBI differs from traditional welfare systems in two key ways: it is universal and unconditional. While conventional programs often impose eligibility requirements, reducing benefits as income increases, UBI provides the same support to everyone, regardless of circumstances. Some argue this is more efficient than existing welfare programs, as it potentially encourages income-generating activities instead of penalizing them (Encyclopedia Britannica, 2025). By separating basic survival from the need to work, UBI gives individuals the freedom to pursue education, start businesses, care for family members, or transition between jobs without the fear of falling into poverty.
AI, Inequality, and UBI
As artificial intelligence (AI) and automation reshape labour markets, they not only displace traditional jobs but also intensify economic inequality. According to the OECD, approximately 27% of jobs across its member countries are at high risk of automation due to advancements in AI (OECD, 2023). In response, UBI has emerged as a potential policy solution to mitigate socio-economic fallout. Many employers, particularly in tech-driven industries, are actively reducing headcounts as automation increasingly substitutes human labour. According to a McKinsey report, 50% of all work activities are automatable (McKinsey & Company, 2023). Additionally, AI has slowed wage growth in affected sectors by an estimated 0.7 percentage points annually (Barclays Private Bank, 2024). Low-skill, repetitive jobs are the most at risk. Workers in sectors like manufacturing, retail, and administrative support are overrepresented by marginalized groups, such as low-income individuals, women, and ethnic minority groups. As AI encroaches upon even non-routine tasks, workers in middle-income roles are also facing wage stagnation and diminished job security (OECD, 2023). This widening divide between high-wage, high-skill jobs and low-wage, low-skill positions is a key driver of rising inequality, which UBI seeks to address by providing economic security for all, regardless of job type or social background.
UBI offers a potential solution by providing a financial safety net that helps individuals adjust to these changes without the stigma or bureaucratic barriers often associated with public assistance (World Economic Forum, 2018). This universality makes UBI particularly valuable for workers who face job displacement or wage stagnation due to automation, and especially important in an economy marked by rising inequality. In India, similar programs have not only supported economic stability but also empowered women by enhancing personal agency and overall quality of life (Standing et al., 2017). By providing a guaranteed income, UBI can offer a measure of security to workers in low-wage, at-risk sectors, ensuring they are not left behind as AI continues to reshape the labor market.
However, implementing UBI at scale presents substantial challenges. In the U.S., implementing a nationwide UBI of $12,000 USD per capita would cost around $3 trillion USD annually, approximately 75% of the current federal budget (Faricy, 2019). This raises concerns about funding, potential tax hikes, or cuts to existing public services. Critics also argue that unconditional payments could reduce work incentives. For example, Finland’s 2017–2018 UBI trial improved well-being but did not result in a significant increase in employment (KELA, 2020). Furthermore, a universal approach may fail to address the specific needs of certain groups, such as those requiring disability or housing support. Additionally, UBI could widen inequality, as wealthier individuals may invest their payments while those with lower incomes use them for survival, potentially widening disparities, especially if inflation reduces their value.
Why UBI Matters in New Zealand
UBI is gaining traction in New Zealand amid rising living costs, widening inequality, and increasing automation in the workforce. In response, the Green Party proposed an income guarantee in 2023. They suggested a baseline of $385 per week to cover essential living expenses (RNZ, 2023). However, critics warn that such a program may require significant tax increases or reductions in other social services (AUT, n.d.). Political opposition, notably from the ACT Party, points to concerns over budget sustainability and reduced work incentives. Public opinion is similarly divided: a 2021 AUT survey found 49% of New Zealanders support some form of UBI, while 37% remain opposed or unsure, reflecting an ongoing national debate over its fairness and feasibility (AUT, 2021).
New Zealand’s current welfare system often relies heavily on means testing and high abatement rates, the rate at which benefits are reduced as a person’s income increases, which can disincentivize work. In an era of climate and economic shocks, UBI could strengthen national resilience by providing quick and scalable support during emergencies, something New Zealand experienced during the COVID-19 pandemic (NZ Treasury, 2020).
Despite its promise, UBI in New Zealand faces many of the same obstacles seen globally. Funding remains a core challenge, and the debate continues over whether a universal approach is the most efficient or equitable. Some fear it could erode targeted support for the most vulnerable or disincentivize labor force participation. Others argue New Zealand is well-suited to pilot a hybrid model, one which maintains the inclusiveness of UBI while addressing fiscal and social concerns by integrating with existing welfare structures. The current coalition government tends to stand strongly opposed to such large-scale reforms, and the likelihood of UBI being implemented in the near future remains slim.
Lessons from UBI Trials
Over the past decade, several trials have tested UBI’s promises, offering insights into its potential impact.
- In Finland (2017–2018), 2,000 unemployed adults received €560 per month with no work requirements. While employment rates did not increase significantly, participants reported lower stress, reduced depression, and a greater sense of autonomy (Kangas et al., 2020).
- In rural Kenya, the NGO GiveDirectly conducted a long-term experiment, providing villagers with either monthly payments, short-term transfers, or one-time lump sums. Recipients used the funds for essentials like food and housing, and some invested in small businesses and agriculture (Haushofer et al., 2023). Still, questions remain about the long-term economic viability of such programs without continued external funding.
- In Stockton, California (2019–2020), 125 low-income residents received $500 USD per month. After one year, participants were more likely to hold full-time jobs and reported better mental health and sleep quality (West et al., 2021). However, critics argue that the small sample size and philanthropic funding make the results difficult to scale or generalize (Tanner, 2020).
- In Gyeonggi Province, South Korea, young adults received roughly 250,000 won (around $300 NZD) quarterly, which they had to spend locally. Local businesses saw increased revenue, and recipients expressed greater motivation to study and work (Gyeonggi Research Institute, 2020). Yet, the restrictions on spending and the low amount of support limit its classification as a true UBI model.
- A 2011–2012 pilot in rural India distributed monthly payments to about 6,000 villagers, yielding improvements in nutrition, school attendance, and women’s empowerment (Standing et al., 2017).
These experiments suggest that unconditional payments do not discourage work. While employment gains were modest in some cases, mental health and well-being improvements were consistent, indicating that UBI can offer individuals the breathing room to plan, learn, and adapt to shifting labor demands.
Summary
As automation and AI continue to reshape economies, UBI is being increasingly explored as a solution. Early pilot programs show that UBI can reduce stress, improve mental health, and offer people more freedom to make choices about work, education, and caregiving. While significant challenges like funding and integration with existing welfare systems remain, ideas such as technology taxes are being considered as potential solutions.
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