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