UBI:Destiny knows No Favorites

What is it?

Can you imagine a setting in which everyone was guaranteed a minimum income no matter what age, economic status, location, or household size of the person is? According to the Basic Income Earth Network, a universal basic income is a “periodic fixed cash payment unconditionally delivered directly to all on an individual basis, regardless of their socio-economic identity whether he or she wishes to engage in paid employment, or is rich or poor to cover basic living expenses”

Universal basic income is being implemented on an experimental basis in countries like Canada and Finland. Even India is looking into implementing a uniform allowance for every citizen. From the government side, this would mean herculean shift in the way it spends the revenue that it receives through taxation. At present, the money that the government earns through taxation and other revenue sources are used to fund the various services as well as the welfare subsidies.  A universal income would mean the government changing its approach from service delivery to simply providing people with financial support to acquire those services.

Relevance in India

Over the last week, Several newspapers have reported that the Prime Minister Narendra Modi-led government could lay the foundations for a universal basic income in India this year. In October 2016, Chief Economic Advisor Arvind Subramanian certified that the idea of providing a regular allowance from the state to all citizens irrespective of their job status would gain entry in the Economic Survey, which is tabled in Parliament ahead of the Budget.

Universal Basic Income (UBI) by its very name ought to be universal which must help to put an end to leakages and wrong targeting. Our current social sector schemes like MGNREGA, Food Security Act, Mid Day Meal scheme, Public Distribution System (PDS), fertilizer subsidies suffer from outflows and identifying legal recipients. Since UBI is universal, both these problems are solved and the corresponding sum is directly transferred to the accounts of the dependent. There are different schemes in the country with similar objectives which can be replaced. The basic Indian welfare system is a system whereby the government purchases crops from farmers, stores them, moves them around, and then issues them as a ration to poor families.

The discharge in this system is enormous, both from corruption and from simple bureaucratic inactivity. It is comparatively easier to move money around and let people then buy from the more efficient private markets. No one is really very surprised that the poorest people in India are those who find it hardest to gain access to things from the government. One of the pre-requisites for UBI to be successful is a functional Jan Dhan, Aadhaar and Mobile system that ensures cash transfers directly to the accounts of beneficiaries. Thus one of the challenges and area of concern in implementing UBI is that 350 million people in India do not possess even a phone. Economic expediency is a cutting question for any government program, which is particularly relevant in the developing world, where universal basic income (UBI) has been suggested as a development tool.

Proposed Benefits

  • Poverty alleviation: With an UBI of 4500 rupees per annum, the Economic Survey 2016–17 estimates that the poverty levels could be reduced to 1.24%
  • Elimination of numerous subsidies: Numerous subsidies, central schemes and state schemes can be cut down and improve the administrative efficiency
  • Social Justice: Ensuring minimum income fulfills the requirement of the welfare state mentioned in the directive principles of the constitution. Basic income will resolve the issues of rising wealth inequality and economic stagnation as working for a living will be insufficient to create a decent standard of living for the vast majority of people.
  • Expansion of banking sector: Banking sector will have to expand to meet the huge demand for its services, thereby creating jobs and ensuring financial literacy of the masses
  • Equal Pay: The UBI won’t fix things completely, but it will take women and minorities a long way towards achieving equal pay to men.
  • Entrepreneurship, life-long learning, creative work and civic engagement will be encouraged

Challenge –

Some experts suggest thatUniversal Basic Income (UBI) is not very meaningful in Indian economy. Indian Government faces complications in differentiating the poor from the non-poor. Though, the Tendulkar Committee has recognized an income of Rs. 1090/Month to achieve the level of poverty at 2015–16 prices, it still is not a onetime solution for the government to provide certain sum of money. There are  other considerations to keep in mind inspite of the economic independence it gives to the beneficiaries. The total cost of providing this income would take 12.5% of the GDP which again is unrealizable for a revenue deficit country like India. Quantification and Qualification of UBI makes it boisterous for the government to understand the procedure of identification and allocation of resources.

Cons of UBI

  • It will reduce the supply of labor because people won’t do unattractive but necessary jobs
  • If production will not match then it will cause inflation.
  • It can make people lethargic and can reduce productivity and it might breed dependency.
  • People can get attracted to drugs and other intoxicants because nobody value free money.
  • Geographical cost differences are not included in this concept.

 

Cases of Universal Basic Income Implementation

In recent years, the Great Recession has aggravated the consequences of young people’s weak position on the labour market in terms of joblessness and the quality of work. Recent European-funded research has shown that policy responses towards young people have been erratic, and even inarticulate at times which illustrates the importance of ongoing dependence on reducing employment protection and limiting income protection. A congress met in 1986 to form Basic Income European Network (BIEN) to work on the idea of Basic income. In the more than 20 years since its foundation, the world has changed significantly.

  • Switzerland

Switzerland has an unemployment rate of around 3.5 percent, less than half the average in the European Union. The country voted on a referendum to provide a basic income to all Swiss citizens which would amount to 2,500 Swiss francs ($2,550) a month for adults and around $625 a month for kids. There was little support among Swiss politicians for the idea and not a single parliamentary party came out in favour, but the proposal gathered more than 100,000 signatures and was therefore put to the vote under the Swiss popular initiative system. But about 77 percent of voters rejected this plan. Critics of the measure said that disconnecting the link between work done and money earned would have been bad for society.

It was said that the proposal would derail an economic model that, far from showing signs of near-collapse, has allowed the country to remain among those with the highest living standards in the world, even with a growing and aging population. Other reasons cited for this rejection was that with open borders, it was not at all feasible for Switzerland, because with a high living standard and the offer of a Swiss amount of money to every individual there, billions of people would try to move into the country.

  • Finland

On January 1, 2017, Finland began a pilot programme aimed at understanding the effects of a basic income. The government decided that it would pay €560 a month for two years to 2,000 unemployed persons, and continue to provide the income even if they find employment. The intent is to turn the two-year trial into a national plan if it proves successful.

  • United States

In the United States, the idea of a guaranteed income has gained some traction in the run-up to the presidential election in November. It has been promoted by some Democrats who are demanding more social justice, but it also has some right-wing advocates who see it as a better alternative to government welfare programs.

  • Alaska

Anyone legally residing in the State of Alaska for more than 6 months receives a basic income which is a dividend that corresponds to part of the average performance over the previous 5 years of the permanent fund that is based on oil revenue.

  • Other Cases

In the Netherlands, Utrecht is leading a group of municipalities that are experimenting with similar pilot projects.

UBI – Tool for Empowering Women

The idea of everybody being able to bear their basic needs is popular with most reformist politicians, and there is some proof that this tool can quickly increase a country’s productivity and reduce domestic inequality. One reason that South-east Asian countries, for example, have struggled to improve gender equality is increased economic insecurity, which has widened the gender gap and isolated women from opportunities. Women are primarily seen as wives and mothers, and are stereotyped in both everyday experiences and in the religious texts of these regions

Though women feature strongly in ASEAN’s socio-cultural community line of work, there is very little awareness about the role of women in the economic or political sphere. By giving women the financial freedom to act freely, universal basic income could be a tool that ultimately makes the way for their future economic and political involvement. It would also result into better nutrition, health and general well-being for children and spreading out to their communities. Women with poorer income generally have access to very few jobs, and in some cases farming and housekeeping are their only options. Even these jobs are threatened by climate change and a growing opposition to minimise the export of foreign domestic workers. UBI can give much needed specific attention to women’s broader economic empowerment, which is vital to a developing country’s growth.

To prevent abuse of a program intended to empower women and support families, some steps should be taken such as cash transfers must be either non-transferable or transferable only to another female family member, and emphasis should be laid that only women would be able to spend the money. This is important because evidence from other countries suggests that, in some cases, men tend to waste money on alcohol, gambling and other such evils. The broad idea here is to empower participants, giving women a boost to become active members of society.

Conclusion –

The better-off class in India – businessmen, rich farmers, and the salaried class – will not easily give up on the subsidies they currently enjoy. This means we should think in terms of generating public opinion and activate social movements on a platform like UBI. In particular, as the workers in the informal sector will be the largest beneficiaries of UBI, it can provide a common bridge between them and the unionised formal sector workers to reform the labour movement.  Unions have been demanding benefits for quite a long time; their struggle will be strengthened if it now becomes part of a much larger movement for UBI. Apart from its anti-poverty potential, UBI can also be a substantial measure to improve autonomy (say, of adult women, three-quarters of whom do not earn income) and dignity by giving workers an escape ladder from socially despised occupations (scavenging, waste-carrying, prostitution, etc). One should have no illusion about the difficulties in the political process for implementing UBI. But one thing going in its favour is that it attracts support from people in different parts of wide spectrum of society, which may someday generate a winning consummation.

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