Prospect theory

Prospect theory suggested that individuals are inclined to be loss averse; specifically, they consider the displeasure of losses to be more pronounced than the pleasure of equal gains. Consequently, decision makers may even forsake the opportunity of possible gains if pursuing them entails some potential for losses compared with their current position (Holmes et al., Reference Holmes, Bromiley, Devers, Holcomb and McGuire2011; Kahneman & Tversky, Reference Kahneman and Tversky1979; Zhang et al., Reference Zhang, Bartol, Smith, Pfarrer and Khanin2008). Namely, this theory indicates that individuals just do not like to lose (Holmes et al., Reference Holmes, Bromiley, Devers, Holcomb and McGuire2011) and their apprehension about losses relative to their existing wealth will affect their decision making (Zhang et al., Reference Zhang, Bartol, Smith, Pfarrer and Khanin2008). Startups are known to have a high failure rate (Shane, Reference Shane2008), and the entrepreneurial career is filled with risks and uncertainties because being an entrepreneur may put one’s financial status, well-being, and career prospects at risk (Brockhaus, Reference Brockhaus1980).

Taken altogether, we argue that whether the basic income will motivate individuals to engage in entrepreneurship may also depend on other factors that will influence their chance for potential losses relative to their existing wealth. Two factors that are known to influence one’s decision to engage in entrepreneurship are the employment status of individuals and the unemployment rate of a labor market (Shane, Reference Shane2008).

Employment status and unemployment rate

We proposed a two-by-two matrix to better clarify the joint effect of the basic income, employment status, and unemployment rate on entrepreneurship (see Figure 1). This matrix presents four different scenarios that show the basic income’s hypothesized level of effect on one’s likelihood to engage in entrepreneurship.

Figure 1.

The Basic Income, Employment Status, Unemployment Rate, and Their Joint Effect on Entrepreneurship

Future directions and recommendations

This commentary presents a two-by-two matrix and some testable propositions that may pave the way for future research to make theoretical and practical contributions on the topic of the basic income. I-O psychologists and entrepreneurship scholars should work together to better understand the effects of the basic income on entrepreneurial processes, and this increased understanding should help them make better policy recommendations. I-O psychologists and entrepreneurship scholars may also organize conferences, meetings, workshops, seminars, and training sessions to discuss the research opportunities and practical implications of this research. These meetings should include policy makers and primary decision makers who can develop and implement effective policies and practices to maximize the benefits and minimize the pitfalls of the basic income. I-O psychologists may serve as mentors to guide the general population regarding how to make better use of the basic income to live a worthwhile, meaningful, and productive life. We argue that accomplishing these objectives will help to address the concerns regarding the basic income as discussed in Hüffmeier and Zacher (Reference Hüffmeier and Zacher2021).

The Society for Industrial and Organizational Psychology (SIOP) can be an important venue where a majority of the above-mentioned activities can be initiated. The SIOP members may consider building task forces, tracks, professional development workshops, and/or symposiums to engage both academic researchers and practitioners in the conversation in order to develop synergistic efforts to address the topic of the basic income.