Journal Article

Means-Tested Transfers, Asset Limits, and Universal Basic Income

Abstract: Asset limits in means-tested transfers can allow for the distribution of scarce aid to families most in need but may offer a disincentive to beneficiaries to build savings necessary to weather economic shocks. In this Economic Commentary, we examine the net worth of transfer recipients along the income distribution and review the economic literature on the matter with a discussion of universal basic income (UBI) as a policy alternative. Using the 2018 Survey of Income and Program Participation, we document that recipients have a smaller average net worth than nonrecipients at every quintile of the income distribution. We also find that participants at the very bottom of the income distribution are in asset poverty, with an average level of assets surrounding testing thresholds. Recent research suggests that the elimination of testing limits, such as in policies similar to a UBI, could present a welfare-improving alternative to the current system, though not without large economic trade-offs.

Keywords: universal basic income; social security; ubi;

https://doi.org/10.26509/frbc-ec-202210

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Economic Commentary

Publication Date: 2022-08-15

Volume: 2022

Issue: 10

Pages: 8