Imagine you have INR 15,000 credited into your bank account in the beginning of every month, irrespective of your job status, merely on the basis that you, are a citizen of the country.
What do you do? Or possibly or more importance, what don’t you do? How would this sense of economic safety and freedom effect your decision, for now and the future? Is that an ideal place you would want to live in?
This concept is primarily based on what is called as universal basic income (UBI). It is a concept wherein the citizens of a country or the world divided into specific geographical segments are provided with equivalent amount of money.
To give you a little background, the idea of universal basic income is currently promoted by the “Basic Income Earth Network” (BEIN), which involves a group of activists who are interested in the idea of universal basic income and promote and fosters the need to widen the ambit of population who are mindful of the same.
It is important to understand that the concept of UBI requires periodic payment of cash amount to individuals without means- test or work requirement. This means that irrespective of whether one is born in a family with different caste, of whether one is educated, his ability to do work, they shall be compensated with a similar amount. An ideal UBI system, periodic payments are made to all individuals and the tax system ensures that funds are returned to the system from those with higher incomes. Usually, the system is gauged for subsistence- to ensure there is enough for an individual to take care of his basic necessities, but not enough for his frills.
Pros and Cons-
The idea of a universal basic income generally has a visceral reaction among people. On one and, there are people who understand that fixing a basic level of income ensures income to the poorest of the poor and is only humane. While the others think such payments are monstrous, a sheer waste of unearned income.
Pros-
- The prominent and most evident benefit of Universal Basic Income (UBI) is the reduction in poverty. In a poverty struck country like India, UBI seems to be a rational system to eradicate or reduce to an extent, the sufferings of the poor and to increase the sense of equality in the country.In a place where the whole survival of the human race below the poverty is peril, UBI seems to be an ideal system.
- Thomas More introduced the concept of universal basic income in his book Utopia, in 1516. Since then, there have been many proponents who have included- Abraham Lincoln, Franklin Roosevelt, Martin Luther King Jr.,Mark Zuckerberg, among many others.
Recently, UBI is booming up as it is proposed to be a way to support workforce that will be displaced due to automation. One too many people believe that robots and AI-enhanced software may replace most human labor in a not-too-distant future scenario sometimes called the robot economy.
- UBI increases entrepreneurshipin the sense that it provides for basic needs in the early lean days of a start-up and acts as a safety net if the business fails. It also increases the number of consumers because everyone has more disposable income.
- A truly free labor market- There is a large chunk of unhappy labor force in the world which increases the loss of productivity. To elucidate, let us take a Nation A, which has 100 citizens and only 80 jobs. UBI alters the reality wherein people can refuse the jobs that aren’t engaging them, which opens up jobs for those who are actually interested in these jobs. Now let’s say only 50 people take up the jobs. This will increase the bargaining power, wherein the employer might say, decrease the number of hours or paid more money.
Cons-
- We live in a world which needs to be constantly growing using the best ability of humans which is unevenly spread amongst the entire human race. Not everyone can become an entrepreneur or an artist. Our economies require policemen, nurses, waiters, cooks, electricians, plumbers. Some people do these jobs out of passion and some to pay the bills. UBI would send a wrong message-reducing the incentive to work.
- It is a general human tendency to expect a reward in case a risk is taken. That is how successful businesses are made. However, introduction of UBI, while promoting initiation of business, will reduce the incentive at a later stage. It does not help with wage stagnation.
- It requires administration of income to go on another level to be able to keep up with the level of circulation of money and ensure equal distribution of money
Current Examples
Currently, UBI is being experimented in different continents- being a contrast of a very wealthy is much less wealthy country in order to enable the economists to defend their experiments and support them to replicate each other’s findings and systems.
There are a couple of prominent ongoing experiments-
- GiveDirectly- GiveDirectly is a U.S. non-profit organization that has established the world’s largest UBI experiment in Kenya. . The project is so large both because GiveDirectly has raised a lot of money and because Kenya has such deep poverty. Some villages will receive a UBI of as little as US$0.50 per day. Others will receive $1 or more. This project promises to provide insights on how UBI will effect lesser developed countries
- The Stockton Economic Empowerment Demonstration” (SEED)- The state of California has secured funding from private non-profits to launch a small-scale UBI project with about 100 participants receiving $500 a month for approximately 18 months.
There are various other experiments being held at Scotland, Spain, Korea and Iceland.
Way Forward
What we have now seen is only the tip of the ice berg. UBI takes in a lot of effort to bring people under the financial system and provide massively for the government administration.Social safety nets need to be improved, and it is hard to strike the right balance between assistance and incentives, to combine strong incentives to work with the assurance that if you lose your job you will still be ok.
Humans need security to thrive, and basic income is a secure economic base – the new foundation on which to transform the precarious present, and build a more solid and safe future. However, there exists a lot of loopholes which thrash the possibility of widespread implementation of UBI.
In my opinion, there needs to be established, a system of differentiating based on work and innovation apart from UBI. To allow for luxury for those to strive but at the same time have a system of taxes to not to increase inequality. They are all just choices to be made by a country. And at any point for implementation, we can choose to make new ones.
Author
Smrithi
Smrithi is a senior audit analyst and has been associated with KVA for over 2 years. She’s gained significant exposure in the areas of regulatory, advisory and assurance services during her stint working across complex business models in conjunction with various laws.
