- Universal Basic Income is recurring cash payments to participants, with no strings attached.
- Traditional welfare limits spending to specific categories, such as health care or groceries.
- Basic income policy can supplement welfare but is unlikely to replace the existing safety net.
As America’s cities aim to alleviate poverty, universal basic income has been proposed by local leaders as a supplement to existing welfare.
With a housing affordability crisis and high health care costs, more Americans are relying on government assistance than in previous decades. Government transfers of funds from safety nets like the Supplemental Nutrition Assistance Program and Medicaid accounted for about 18% of total personal income in the US in 2022, an increase of 9 percentage points from 1970, the equivalent of $3.8 trillion for an economy economic. Innovation Group analysis of Bureau of Economic Analysis and Census data between 1969 and 2022.
Cashless Giving has been piloted in over 100 areas, including Los Angeles, Atlanta and Chicago, as a supplement to existing assistance programs. It offers participants money to spend on whatever they choose, rather than being limited to a specific category, as with SNAP and Medicaid.
Some economic security advocates have told Business Insider that repeated cash payments give families a financial incentive to pay bills and do sustainable work, and tech leaders like Tesla CEO Elon Musk and OpenAI CEO Sam Altman have suggested that basic income may become necessary as artificial intelligence disrupts the job market .
With Republicans determined to retain a majority in Congress and President-elect Donald Trump poised to return to the White House for his second term, the nation’s budget and policy priorities for welfare programs can change, shaping how benefits are funded and who qualifies.
BI looked at the differences between basic income and welfare, and what it means for future benefit programs.
How does UBI differ from welfare?
The U.S. welfare system — also known as the social safety net — consists of a series of federally funded programs that help lower-income people afford the essentials. This includes SNAP for food, Medicaid for health care, housing vouchers, Social Security and various programs for families with young children.
Primarily, welfare is part of the federal budget, although most states also have localized programs. Recipients must have household incomes near the federal poverty line and are limited in where they can spend the benefit money. SNAP, for example, covers most foods at the grocery store, but it can’t be used to buy personal hygiene items like toothpaste or soap.
Basic income, in contrast, is a set of recurring cash payments that can be spent however participants choose. There are two main types of basic income: universal basic income and guaranteed basic income. UBI programs provide payments to all members of a population, regardless of income, and do not have an end date. GBI programs provide payments to a specific population group—such as people experiencing homelessness, single parents, or low-income artists—for a specified period of time, usually one to five years. Most basic income pilots in the US have been short-term GBI, not UBI. Other countries have also run GBI pilots.
Can UBI replace welfare?
Basic income is unlikely to replace the existing safety net due to funding and political challenges.
The US GBI pilots are funded through a combination of government funding and philanthropy. However, most of those programs are limited to a few hundred people for a given period, meaning they cost funders several million dollars.
Maintaining UBI across the country would require more substantial funding through a value-added tax, a progressive wealth-based tax system, or a resource tax such as a carbon tax. The Alaska Permanent Fund, for example, provides residents with an annual stipend drawn from the state’s oil revenue.
True UBI has not been implemented in the US, but some politicians have introduced basic income policies. During his 2020 Democratic primary campaign, former presidential candidate Andrew Yang proposed a “Freedom Dividend,” which would give $1,000 a month to every American over the age of 18. The 2020 Census found that there were approximately 258 million Americans over the age of 18. , which would make the total gross cost of that plan more than $3 trillion annually. Yang suggested that the dividend be financed through a retail value-added tax.
By comparison, the Social Security Administration reported in 2024 that benefits cost $1.5 trillion annually. Average monthly payments were $1,788 in November and are funded mostly by payroll taxes. Seventy-two million older adults and people with disabilities currently receive benefits.
Any federal changes to the social security net would also need congressional approval. Many Republican leaders have opposed the implementation of a continuous basic income, arguing that it is not financially sustainable and gives people “free money.”
“We were never set up for the federal government to provide a salary,” BI previously told Rep. John Gillette of the Arizona House of Representatives.
Is UBI a better alternative to welfare?
In most of America’s basic income pilots, cash assistance is seen as a supplement to welfare programs, not a replacement. GBI pilot managers often consult with participants to make sure their basic income will not disqualify them from means-tested programs like SNAP or Medicaid.
Basic income participants told BI that the money helps them afford essentials that may not be covered by traditional safety nets: such as a new crib for their child, school supplies for their child, childcare child friendly and car repairs.
“Anyone who’s had a baby knows that’s not like a luxury income,” a young mother in Michigan who makes $500 a month told BI. “It’s just helping us in our time of need.”
Some Republicans and economists have argued against basic income, calling it a “welfare trap” and an “unconstitutional” use of public money. This has led states such as Iowa and Arizona to introduce basic income bans and lawsuits against GBI programs in Missouri and Texas.
Research from recent GBI pilots suggests that basic income can help reduce rates of domestic violence, help participants find higher-paying jobs, and increase housing and food security. Some financial security advocates also say that basic income can boost local economies by making it easier for people with lower incomes to hold steady jobs and buy consumer goods.
“We’re allowing people to stabilize and then plan for the future,” Sukhi Samra, executive director of Mayors for Guaranteed Income, a national advocacy network, told BI earlier.
To be sure, most basic income research is based on short-term evidence. The long-term financial impact of basic income on participants remains unclear, and some participants struggle to afford the essentials after their programs end.
Traditional safety net programs typically do not have an end date, and participants can continue to receive benefits as long as their family income meets eligibility thresholds.
