Trap of universal basic income

November 13, 2025

Over the past few days there has been a growing interest around the idea of universal basic income (UBI). Lately, at least in the West, a lot of people on X (twitter) seem to like the idea. The idea is being flirted with by several political leaders and influential people in general. Elon Musk, Sam Altman, Jack Dorsey and Marc Benioff are among the many vocal supporters of universal basic income. There have been numerous studies by economists and pilots to understand the economic impact.

The reason for writing this essay is not to talk about the economic implications of UBI or how it will be funded but to hypothesise about the consequences based on the incentives of the players involved in this reform.

I think of it as a three-player system: business, government, and society. Over the years, we've seen that society is unable to coordinate in the same way that businesses and government can. I feel the reason for this is that the motivations for every person or family unit are extremely varied. There does not seem to be a clear singular goal for a society. On the other hand, businesses and government have a clear mandate to maximise profits and consolidate power barring a few exceptions. And in a capitalistic regime, consolidating power and maximizing profits go hand in hand. I have written about this in detail in another essay titled "Elite Capture". [1] But broadly speaking, capitalism leads to concentration of wealth with businesses, and it is then utilised to lobby the government. Lobbying allows the political parties to fund their election campaigns and remain in power while businesses receive special treatment from the ruling government disregarding societal interests. [2]

This matters even more with UBI. For years the labour constraint on growth has been one of the few levers society has in its favour. Businesses and government alike try to shape the opinion of the society to benefit themselves. There have been enough examples of polarisation, exploiting insecurities, targeting vulnerable populations and the list goes on.

The typical argument peddled by the influential tech leaders is that once AI enabled automation is prevalent in the industry, there will be no need for any of us to do work. Our lives won't revolve around our jobs, and we'll be free to pursue hobbies such as writing poetry or painting. It's an interesting shift in narrative coming from people who spent decades preaching hustle culture because it benefited them greatly in the past. If you step back, you notice that stories like this often serve the interests of those telling them. I would like to run through a chain of thought to show what could be the real motivator for pushing for UBI.

With the rise of AI, a lot of jobs will be automated away, and there will be a wave of layoffs. That alone could turn the majority against capitalism. To make those layoffs acceptable, the government will have to cushion the blow with UBI. So, you'll start seeing a rosy picture of UBI in the media, much of it sponsored by people who benefit from automation.

The government will support it too. If they control the source of income, they control compliance. And once society no longer plays a meaningful role in the economy, why would groups whose goal is to maximize profit and consolidate power care about its rights? Simply stated, introduction of UBI could potentially remove any remaining accountability on businesses and governments and reduce whatever bargaining power society has left.

None of this is inevitable. It only sounds dystopian because of the incentives we have now: a system where power concentrates upward and labour constraint is going away. If those incentives changed, the outcome could change with them. But as things stand, UBI feels like a way to increase the dependency of the society on the governments and businesses.