For a TLDR - just read section 2 and section 3
Section 1 - the welfare trap
Most states pay the long-term unemployed some kind of income AKA the dole. It's supposed to be just enough to survive. If you don't pay them it, you end up with high rates of sickness, malnutrition, etc which the state then has to deal with - so in the end it's much less expensive to pay the dole than not to.
(There are other subsidies like housing and disability benefit, and like state pensions for the old and child benefit for the young. But for now assume they remain unchanged. Only the dole for working-age adults will be transformed in the following sections.)
When the unemployed get jobs, they stop receiving the dole. So when someone unemployed takes a job, he gains new income but he loses one important source of income.
In ROI the minimum wage is 400euro/week and the dole is 200euro/week. So if you go off the dole and get a job you gain 400 but you lose 200, so effectively, your new income is being taxed at 50%.
If you can only get a part time job, you gain 200 and you lose 200, so you are working for nothing. On zero hours contracts the situation is even worse.
Then... you need to pay for childcare, transport, lunches... and you don't have time to do the valuable things you spent your time on before - charity work or helping your neighbours, you don't have time to fix your washing machine and have to hire someone to do it, etc.
The above is a strong financial incentive to stay on the dole.
Most people want to get jobs, just for self-respect or other social reasons. There are also many people who don't want to work, and maybe have good or bad reasons for that. Either way, right now people are incentivised to not work. They are punished for getting jobs (by being pushed into financial precarity) and rewarded for staying on the dole.
This is called the "welfare trap" - people literally cannot afford to get a job. This is the problem that UBI fixes.
Section 2 - UBI and workers
The solution is to just pay everybody the dole. For example here is how it applies to workers:
The guy who gets a part time job on 200euro still receives his 200euro dole. The guy who makes 2000euro a week (100,000/year) still gets paid an extra 200euro.
But there's a catch of course. The income tax rates go up too - that's how the whole scheme is paid for.
Imagine everybody pays an extra 20% tax with no income threshold:
guy on the dole still gets 200euro
if he gets a part time job his income is 200+200*0.80=360
he gets a full time job it is 200+400*0.80=520euro
The guy getting 100,000/year - his net income changes by 200-400 - so he loses 200/week. But I'll come back to him - he might not see that as a bad thing.
Section 3 - UBI and other examples
[some of this section is just my personal opinion]
So the dole is no longer conditional - on visiting on office every week, writing a certain number of job applications per week, the duration of unemployment, being "available for work" or anything else. This is many consequences but here are some big ones:
students - now they also get paid this "just enough to survive" cheque every week. No more need to also hold down a job, get into debt, or be malnourished for four years.
housewives - they have their own independent income. In some situations this could be important for them.
The self-employed, artists, the between-jobs, etc - they have a safety net of 200euro per week. It's expected that more people will become artists under UBI - more art will be created, because people will be more willing to take career breaks and see what happens, and struggling artists will be able to persist longer. People will have more fruitful careers because they can afford to spend time looking for the right new job.
Dole office workers. The dole offices can transform into job centres. They already pretend to have this function, but with UBI that will be their sole function.
abused workers - now that people are guaranteed a living income if they resign from a job, they will be more willing to bargain for fair work conditions, report employers breaking the law, etc. For example many people will quit amazon warehouses, and amazon will have to improve working conditions or else face a huge problem.
immigrants - this is a special case. You might want to avoid incentivising immigration by, for example, excluding from UBI new immigrants who are not employed, for some time period. It's similar to what is done now with the dole. More on this later.
Fairness
So as seen above UBI can be an incentive to quit a job, as well as an incentive to quit the dole. But in both cases, it is a good thing. This is not just blind luck or cherry-picked examples. It really has no bad side-effects.
This is because now there are two different systems (income tax and benefits) and there's a distinct barrier moving from each side to the other. UBI just fills in the pitfalls in the existing tax system - it only improves the situation for everyone.
An analogy is stamp duty. It creates a barrier to moving house, so it's more difficult to up-size when you're young, and it's also more difficult to down-size when you're old. Lots of people stay in houses much too big or too small just because of the expense of moving. It's a barrier to changing your living condition - in either direction - when you need to. And it's bad for the individual and also for society. There would be only good results if stamp duty were removed, and replaced by a fair tax (eg a property tax or land tax) to raise the same income for the government.
UBI is like removing the barrier. The tax system is now dysfunctional, and UBI is just mending the bad part.
Families
The guy above who earns 2000/week and is now losing 200 of that. His money is subsidising non-earners - students, housewives, artists...
He probably has enough money now but once he starts a family and has children, he'll be a lot poorer. Child-benefit will provide support just as today. But he'll be glad then that when his adult children start college, or unpaid internships, each of them will be getting this income.
So UBI is costing him money now, but it will pay back in the future, when he has a dependent family who needs it.
The old and young
In general society comprises children, the working age, and pensioners.
Child benefit is just a UBI for children. It is a 35euro/week payment to support each child, regardless of income. There is no need to change it.
Pensioners already have a somewhat fair system. If it needs reform, that's work for a different day. You can replace the state pension with UBI for the old, but that would be an optional second step.
The demand now is explicitly UBI for the working-age only.
The welfare system
All of this happens naturally. You get all these good effects, all across society ... not by creating a complex legal and institutional framework to consider each point and make it happen ... but by removing one.
You get rid of the whole dole/benefits institution, you create one universal tax levy and one universal payment. And you get this whole societal transformation for free.
This is why UBI proponents, some of them sound a bit naive, like they believe in an impossible dream, like "lets just stop fighting and we can have world peace" types. But it the maths and the sociology are both sound. It's just a very good idea - so good it's hard to believe until you look closely.
Proponents also mostly think the payment should be much higher than the dole is now, to have the effect of shifting income from the rich to the poor. But really that's a separate issue. You can do that just as easily today but shifting around the tax burdens, without introducing a UBI at all.
Practicalities
It would not be such a good idea to, in one day, change society so broadly. So there is a way to do it gradually and cautiously, in stages.
Again, there are options:
UBI is just a recalculation of everyone's tax bills and dole payments. For most people their total income will stay about the same. So you can have a transistion period where the money to be taken is a weighted average of the old and new calculations. For example:
Each year the dole drops by 50euro, and UBI increases (from 0) by 50euro. The new flat tax goes up (from 0) by 5% each year. After 4 years you have UBI. But at any point you can pause the rates, if there a bigger economic shock than expected.
It could be done by region. UBI could be first implemented by a small regional government or council, then copied in others. But it might be difficult to regulate migration, of the region doesn't have borders WRT tax/benefits. So the scheme could create its own incentives for large numbers of people to migrate into/out of the region. This alone could make it fail.
You can introduce full UBI for everyone on his 18th birthday. It will be complicated to avoid a drop in the state's tax-income but it can be managed.
You can introduce it by sector. Start with the least controversial and most beneficial. You can stop at any point. Step 1, extend the dole to all workers - this is the only important step. Step 2, to all students. If the benefits are great, you can keep going... Step 3 - all housewifes/husbands, etc. What about the artist/self-employed/etc group? Even immigrants?
This way UBI doesn't have to be truly universal, so you can keep the benefits, and keep any unforseen problems under control.
Inflation
It will definitely cause inflation. The first consequence of destitute people becoming not-destitute is inflation.
People who now are struggling to survive (many students for example) will be able to afford proper food, clothes, haircuts, etc. This creates a demand and thus allows businesses to increase prices. It causes the local economy to grow - more hairdressers, clothes shops and cafes will open.
Employment rates
It can be argued that UBI either increases or decreases total employment rates. In fact there have been many global trials showing both results. Generally they have not been properly implemented though, so it's hard to extrapolate the results to real UBI as described here.
People stuck in the welfare trap will be free to get jobs. But in general there is a shortage of jobs and a large surplus of job-seekers (although in highly-skilled jobs it's often the reverse). So this alone won't increase employment rates. Under UBI, everyone has an incentive to get a job, but nobody will be forced by regulation to fill in futile applications each week, or accept job offers they are not suitable for. All of the people who are not really available or motivated to work will stop applying. So life will become much easier for both employers and serious job applicants - both will immediately see greater prosperity. But this won't be measurable in the employment rate.
students, entrepeneurs, charity volunteers, many of the groups in section 3 - many will quit their day-jobs. This might cause wage-inflation in casual labour. Or maybe the people from the welfare-trap will immediately take all of these jobs.
It's hard to predict. I think it's safe to say that the overall employment will not change much, but the employment landscape will change for the better.
Redistribution
In the example above, dole-earners and high-earners both pay about the same tax as before. The high earner pays slightly more - an extra 20% on top of hig already high rate - but he gets it back indirectly if he has dependents like adult children. But very low earners are getting much higher income than before. There are three ways to deal with this:
Do nothing - UBI has a slight wealth-redistributive effect
Lower the minimum wage to 200euro/week. This acts like a subsidy for employers. They save 50% on their payroll - it can an incentive to hire more.
Add a 50% tax on the first 200euro/week earnings. So the state gets some extra income.
Options 2 and 3 mean that every type of worker has about the same income as before. But we have still achieved the goal of removing the welfare trap.
It sounds unfair that low-earners must pay 50% tax - much more than high earners - but this is what they do today. Today, there is a hidden 50% tax on low earners. It is created by the interface between the welfare/tax systems. UBI (with option 3) just makes this obvious.
Real welfare trap examples
Of course legislators have thought about the welfare trap before and tried to fix it. So you can see in the wild Frankensteins with many smaller traps 1, or where your income stays flat no matter how much you work (like in ROI or 2) which is effectively a 100% tax on the lowest earners.
[rapturous applause]
