Universal Basic Income with Time-Decaying Currency: Structural Effects on Essential Labor and Long-Term Formation

TL;DR

This paper explores how a digital time-decaying currency used as universal basic income affects labor participation and social reproduction, revealing critical thresholds that influence long-term human capital development.

Contribution

It introduces a dual-currency model with agent-based simulations to analyze structural effects of time-decaying UBI on essential labor and long-term social outcomes.

Findings

Acceptance ratio of the decaying currency is critical for system stability.

Essential labor can persist without collapse under certain conditions.

High acceptance ratios lead to delayed labor participation and weakened human capital formation.

Abstract

Time-decaying currencies have long been discussed in economic theory as a means to discourage hoarding and promote circulation. However, their modern digital implementation as a universal basic income (UBI) mechanism raises unresolved structural questions regarding labor participation and long-term social reproduction. In this study, we analyze a dual-currency model in which a time-decaying currency is distributed exclusively as UBI, while labor income and savings are denominated in a standard currency. Through agent-based simulations, we identify the acceptance ratio of the time-decaying currency for necessities as a critical design parameter. Our results show that essential labor does not necessarily collapse under such a system. Nevertheless, beyond a threshold acceptance ratio, delayed labor participation and weakened human capital formation emerge even in the absence of material deprivation. These findings suggest that time-decaying currency can stabilize short-term living conditions while distorting long-term formation incentives, depending on system design.