UNIVERSAL BASIC INCOME
Universal basic income (UBI) is a government program in which every adult citizen receives a set amount of money regularly.The general idea — that the government should give every citizen a regular infusion of free money with no strings attached — has been around since the 16th century. The goals of a basic income system are to remove poverty and replace other social programs that potentially require greater involvement.The idea of providing a basic income to all members of society goes back centuries. The 16th century English philosopher and statesman Thomas More mentions the idea in his best-known work, Utopia.Proponents also believe that a universal payment system would make it easier for people to receive assistance who are in need but have trouble qualifying for other government programs. Some Americans seeking disability insurance payments, for example, may lack access to the healthcare system, thereby hindering their ability to verify it.
However, the concept has risen to the national consciousness in recent years. Much of this renewed interest has to do with fundamental changes to the economy that threatens to leave many Americans without jobs that pay a subsistence wage.Supporters of universal basic income believe a guaranteed payment from the government can help ensure that those who are left behind by this economic transformation avoid poverty. Even if government sourced income isn’t enough to live on, it could theoretically supplement the income from the lower-wage or part-time jobs they are still able to obtain.
The Covid-19 pandemic has given the idea fresh momentum. With the crisis generating so much financial loss and uncertainty, advocates are arguing that citizens desperately need some sort of guaranteed income.
And around the world, countries are running programs to test it.
CRITICISM OF UBI
Despite its promise to remove poverty,universal basic income still faces a battle. Perhaps the most negative problem is cost. Criticism of UBI is the argument that an income stream that’s not reliant on employment would create a disincentive to work. That, too, has been a subject of debate. Yang has suggested that his plan to provide $12,000 a year wouldn’t be enough to live on. Therefore, the vast majority of adults would need to supplement the payment with other income.
Recent studies suggest only a weak link between UBI and joblessness. A 2016 analysis by researchers from MIT and Harvard, for example, found that “cash transfer” programs in the developing world had little recognizable impact on employment behavior.
However, there’s little evidence to suggest that replacing traditional welfare payments with a universal basic income would actually increase employment, as some of its proponents suggest. A recent two-year experiment in Finland where universal basic income effectively replaced unemployment benefits concluded that UBI recipients were no more likely to find new employment than the control group.
Whether that set of proposals is enough to fully offset the cost of the Freedom Dividend remains an issue, however. An analysis by the Tax Foundation concluded that Yang’s revenue-generating ideas would only cover about half its total impact on the Treasury.
The pros and cons of universal basic income
As with other policies and models, universal basic income has its advantages and disadvantages. Supporters point out that many UBI pilot programs have resulted in increased school attendance and employment, greater community health, and improved financial stability with no corresponding increase in negative traits, such as unemployment claims or alcohol abuse. Supporters also argue that UBI enables college students to receive a degree in what interests them and not just a degree that will make them money. Because payments are automatic and do not require eligibility evaluations, the government would spend less time administering welfare than it does now.
However, opponents of UBI argue that the system could not be funded on a nationwide scale without raising taxes for everyone. Additionally, because there are no requirements to receive UBI (proof of employment or willingness to find employment), people may be disincentivized to work. Free income could also trigger inflation, canceling out UBI’s stated goal of decreasing poverty and increasing the overall standard of living.
The case for India
UBI is gaining traction for several converging reasons as governments look to revamp their social safety nets. India is the most serious new aspirant and the idea has stoked a passionate debate. The figures below show that India already invests heavily in social protection programmes but the impact and outcome leave much space for improvement.
1. India spends about two percent of its GDP on core social protection and welfare schemes. This translates into an investment of Rs. 9 lakh crore in more than 10,000 schemes. This amount does not cover the high set-up costs and expenditure in maintaining an army of bureaucrats to administer them.
2. Annual budgets for some of India’s key flagship welfare schemes amount to nearly four lakh crore (Rs. 3,79,100 crore) per year. These include MGNREGS, PM Kisan Samman Nidhi Yojana (PM Kisan), and National Social Assistance Programme, among others.
3. Despite the humongous scale and noble intent of these welfare schemes, accessing them remains a challenge for beneficiaries.
Coverage of schemes varies widely in enrolment and delivery. A survey conducted by Dalberg in April 2020, covering Below Poverty Line (BPL) families across 10 states revealed the following:Coverage is not universal. The gaps in coverage varied according to the scheme: PDS (15 percent), Jan Dhan (43 percent), Social Pension (56 percent), and PM Kisan (66 percent).Delivery of benefits is low. The percentage of eligible households that received their entitlements: PDS (55 percent), Social Pension (34 percent), PM Kisan (30 percent), and Jan Dhan (28 percent).
These gaps are largely on account of eligibility challenges, lack of awareness amongst beneficiaries, and onerous administrative procedures. One of the most overlooked components of development programmes is communication. Effective programme communication ensures that beneficiaries are well aware of their entitlements, eligibility criteria, and delivery mechanisms.
