Universal Basic Income (UBI), or the idea that every citizen can get unconditional government funding to sustain basic living standards, has been quite popular. The idea has been in place since ancient times. After the severe economic hardship caused by the COVID-19 pandemic, fresh demand for UBI or at least a system partially fulfilling UBI facilities is gaining popularity worldwide.
The idea of Universal Basic Income (UBI)
The idea of UBI calls for a government-provided payment to all adults unconditionally of their work status, health, wealth, etc. The income is to cover citizens’ most basic needs. UBI has supporters in both leftist and rightist political spectrums. Left-leaning politicians call for UBI to fight poverty and increase living standards. Right-wingers choose to avoid the bureaucratic hassle of the social safety net. They expect the direct fund will have more benefits. Social welfare states are often criticised based on their services and facilities. Direct providing may reduce government costs on administrative burdens. It can be partial or overall, depending on the money provided.
Many heavyweights have supported UBI. Bertrand Russell, Milton Friedman, Elon Musk, and many developed world leaders have openly endorsed UBI ideas. 10% of the world’s wealthiest people own 85% of the wealth. Profit made by Amazon, Walmart or Facebook offset most world economies by a large margin. For example, online retailer Amazon alone has a market capitalisation of 1.6 trillion USD, a number larger than 92% of countries worldwide, increasing calls for more tax over tech and business giants to provide UBI. Some proponents consider UBI as the moral right of the people as this, at least in theory, provides dignity and a stable platform for development.
Some Organization of Economic Co-operation and Development (OECD) countries have tried tax competition to ensure increased revenues. Among the richest, Warren Buffet and Bill Gates support more tax to reduce mind-boggling income disparity. Credit Suisse’s 2018 report on Global Wealth indicates 10% of the world’s top wealthiest persons own approximately 85% of global wealth. According to these estimates, by properly taxing the top 1000 corporations, everyone in the world can be paid a modest income.
Pandemic and UBI
The pandemic exposed extreme vulnerabilities and inequalities plaguing developed and developing world economies. At least 1.3 billion informal workers found themselves jobless in Asia alone. To put it differently, two-thirds of Asia’s huge workforce was forced to stop working by the lockdown. Another considerable portion of the formal workforce was sacked. The yearlong turbulence caused a massive stir in the world economy. Almost all the major ones, except China, went into contraction. In India alone, at least 100 million people were dislocated, and photos of their toll created a viral outcry. Countries provided various stimulus packages and increased social safety net programs to tackle the situation. However, this created a massive financial burden to the already struggling economies. On the other hand, experts warn this monetary injection to be essential for robust growth.
UBI Pilot Projects
Two methods of UBI have been tried. The first method invovled negative taxation, where workers below a certain income level get cash cut from the higher level earners. The second was to provide money to all the citizens.
The only example of a country-wide UBI can be found in Iran. The Islamic Republic, since 2011, has handed out a sizable sum of money to every citizen. It made up about 29% of median household income in that period. The program still runs today. The Iranian government is trying to reform its economy and heavily subsidises the energy and food sector. It is one of the highest per capita energy users globally, thanks to its abundant oil and gas reserves. Providing a basic income is a way to cut pressure on subsidised products.
Several countries have existing UBI systems, where the state provides money unconditionally. One stunning example is the State of Alska in the USA. The Alaskan government, since the 1970s, has provided a stipend to permanent residents by employing negative taxation. In 2019, the amount stood at 1200 USD annually. India, Finland, Germany, Canada have conducted short-scale short time UBI systems in the past. Presently Kenya runs partial UBI in some of her rural areas. Brazil’s much-praised Bolsa Familia program also handed out money to the poor, provided they fulfilled some conditions. Almost all the partial UBI programs, in the long run, showed somewhat positive performance. In the 1970s, the USA and Canada provided fixed sums to disabled and older citizens. The Canadian government recently provided CAD 2000 for four months due to COVID-19 related difficulties. In Switzerland, a public referendum was held in 2016 on the issue of UBI. More than 70% of Swiss citizens rejected it.
Pros and Cons
By providing a guaranteed income, proponents say, the government can reduce crime, poverty and encourage people to invest more in the economy and personal development. Experts have noted providing unconditional cash stimulates the economic livelihood of the recipient neighbourhood. In the era of short-term contracts and freelancing, UBI offers financial security for the jobless and incentivises them to work more by providing a basic safety net. In the coming days, increased usage of automation is expected to slash labour forces. The aging population in the developed world means that a larger and more significant part of the population will live under pensions in the future. It will cause massive pressure on the developed economy. Some figures point out by 2050, at least 400 trillion USD will be needed globally to ensure pensions. UBI can relieve governments of the tremendous toll.
Providing an income for women and other unemployed people can ensure increased access to decision-making, health, and food resources. Rewarding for household duties will incentivise household income and standard of life as showcased in UNICEF’s and SEWA Bharat’s UBI project in India.
Some proponents considerUBI as the moral right of the people asthis, at least in theory, provides dignityand a stable platform for development.Some Organization of EconomicCo-operation and Development (OECD)countries have tried tax competition toensure increased revenues.
However, not all hold a positive view of UBI. For one, UBI experiments conducted in the USA, Switzerland, and Finland found that people tend to work fewer hours if they are receiving funds. Many economists believe UBI will lead to sluggish growth and an overall slump in economic activities. Providing cash to every person is also a costly plan. For example, 1000 USD for every citizen will cost the USA about 20% of its GDP and close to 80% of Tax revenue. About one-eighth of 2.4 trillion USD is gobbled up by the US social security plans. Proponents demand UBI be imposed without reducing the benefits of social security plans. Thus, implementing UBI is economically unrealistic, according to some experts.
The Canadian government recently provided CAD 2000 for four months due to COVID-19 related difficulties. In Switzerland, a public referendum was held in 2016 on the issue of UBI. More than 70% of Swiss citizens rejected it.
Another debated problem of UBI is its oversimplification. An income for everybody means low-wage workers will receive lower payments. Also, UBI can undermine existing social programs targeting particularly poorer populations. Specific reasons behind poverty can’t be dealt with by UBI properly. Drug addiction, poor health practices, or lack of relevant skills can not be solved by just handing out money. Critics also point out automation didn’t cut jobs but entirely changed the nature and scope. Instead of supporting a jobless population, government policy to train or enable the needy may provide better results.
While the debate goes on, the case for providing a better social safety net in the form of UBI or some other method is more vital than ever in present times. It will be interesting to see government policies in the coming years. Pandemic-induced hardships and disparity will undoubtedly determine the future of UBI.
