Why Universal Basic Income Is A Good Idea

The idea of Universal Basic Income is by no means a new one. It has been of deep interest to economists and sociologists alike for centuries. With the advent of the COVID-19 pandemic, the question once again has come to the fore. Let’s have a look at what Universal Basic Income is and why it would be a good idea in today’s world:

Universal Basic Income (UBI) 

As defined by the World Bank, UBI is “a transfer that is provided universally, unconditionally, and in cash”. Hence, it is a cash transfer to which there are no conditions or eligibility criteria attached. This idea seems particularly attractive to those concerned by the social divide due to economic inequalities and those who campaign for a “more just social contract between state and individual”. 

Why we need UBI 

Results of the World Economic Forum’s Global Risks Perception Survey 2020 suggest that of all the risks expected to pose a critical threat to the world in the next two years, livelihood crises are second only to infectious diseases. 55.1% of the respondents to the survey classified the livelihood crises as a clear and present danger. 

The pandemic has had a devastating impact on the livelihoods of millions across the globe and things do not look like they are going to get better anytime soon. According to The Future of Jobs Report 2020 released by the World Economic Forum (WEF), job creation is slowing down globally while the rate of job loss is going up. By 2025, automation will impact 85 million jobs across the world.

These are worrying numbers for the global workforce. A global rise in unemployment means that the need for social safety nets will be greater than ever in the coming years. UBI has the potential to be the silver bullet for this mammoth challenge. 

Capitalism’s biggest promise is that each generation will rise on the shoulders of the one before. The unequal outcomes of a global capitalist system are posing a challenge, greater than they have at any point in time in the past, to this notion. UBI, by providing the citizens enough to eat and be warm, can not only save the future of the markets but democracy also. 

No country in the world, with only a few exceptions, has a UBI in place currently, but pilot projects are running in several countries. These projects though are variants of targeted small-scale schemes as per the World Bank and are not “universal” in nature.

Responding to the Naysayers

Those who oppose the idea of UBI, raise some good questions frequently. The most important of them are the following two: 

1. How can we afford such a scheme?

2. Why would anyone work if they were given money for free?

Daniel Nettle, in his book “Hanging on to the Edges: Essays on Science, Society and the Academic Life”, makes a very convincing argument for UBI. To answer the first question, he cites the example of the UK. 

Nettle explains that there are around 41 million adults in the UK between ages 16 and 64. If the government gave 80 pounds a week to every adult, the grand sum of the expenditure would be 171 billion pounds per annum. Now, this might sound like a huge sum but the UK government expenditure of 2017 was 814 billion pounds. Giving away this amount will produce savings elsewhere so this will not be the net increase in government expenditure either. Take into consideration other factors like the losses in property crimes, the impact of revised tax rates, and the savings from other welfare plans and this proposal will not sound as outlandish in economic terms.  

Will UBI disincentivize work? The evidence suggests otherwise. In 2020, A report by Loana Marinescu examined the impact of three different unconditional cash support schemes in the US. According to its findings, such cash support had a low to no impact on working hours in such areas. Same was the case with Iran’s unconditional transfer program. 
The most important thing to note in this regard is that there have been successful experiments of UBI like schemes on a smaller scale around the world. The most significant examples in this regard are Kenya and Iran. Kenya, in particular, is a big success story where GiveDirectly, a charity, has been distributing cash since 2016. An evaluation of the program has found that the cash payments “have stimulated the economy and benefited not only the recipients themselves but also people in nearby villages.”

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