The best available evidence about the potential effects of these programs comes from the federal government’s “negative income tax” experiment.
The experiment, which ran from 1968 to 1980, consisted of four random, controlled trials across six states designed to test the negative income tax. Similar to the universal basic income, a negative income tax guarantees a minimum income, which phases out as earnings increase.
“The experiment’s planners hoped that providing a minimum income would encourage work. But the results showed the opposite.
. . . As Murray recounted, the experiment’s planners hoped that providing a minimum income would encourage work. But their worst fears were realized when the results showed the opposite.
Evaluations of the experiment found that the negative income tax reduced “desired hours of work by 9 percent for husbands, by 20 percent for wives, and by 25 percent for single female heads of families.”
For single males who were not heads of households throughout the experiment, the reduction in hours worked per week was a staggering 43 percent.
If recipients lost their jobs during the experiment, they experienced significantly longer spells of unemployment compared with non-recipients—more than two months longer for husbands, almost a year longer for wives, and longer still for single mothers.
“Murray concluded that the effect of the negative income tax on reducing work was “unambiguous and strong.”
For every $1,000 in additional benefits, there was an average reduction of $660 in earned income, meaning that $3,000 in government benefits were required to increase net income by $1,000.
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