What is Universal Basic Income?
A Universal Basic Income (UBI) is a divisive measure that entails a guaranteed minimum income for each citizen by a government. It is also known as a citizenâs income, or simply basic income. A government would entitle each citizen to an income, minimum enough to cover the basic cost of living, whether they are employed or not.
The idea was proposed to address the jobs lost due to technological advancements and automation; however, in time of the COVID-19 pandemic and subsequent job losses in the millions, the strategy has been gaining steam as an alternate measure to the financial packages earmarked for mitigating the economic and social impact. Moreover, it is proposed as a better alternative to the welfare system and its many failures, such as the infamous âPoverty Trapâ.
Funding
A social policy of this magnitude requires significant funding; different approaches have been proposed to cover the cost of UBI.
For one, scrapping and completely eliminating the welfare system already in place would free up $1 trillion to be directed towards funding UBI in the United States. Additionally, in a world where income and social inequality is on the rise and the gap between rich and poor continue to widen, the prospects of taxing the rich â1%â of society seems reasonable enough to redistribute the funds by providing basic income for everyone, and tackling inequality by narrowing the gap between the rich and the poor and maintaining social cohesion.
Yanis Varoufakis, a Greek economist and former finance minister of Greece, has proposed the idea of a âUniversal Basic Dividendâ, directing a percentage of all shares from all companies to a public equity trust and distributing the dividends equally for all members of society as producers of âsocial capitalâ.
How does it help the people?
- Social Safety Net: Income to lean back on in times of crisis or job loss
- More time to find better jobs: Allow people to dedicate more time to search for jobs they enjoy doing.
- Care for a relative in need: Take time off from work to care for a sick relative or babysit without losing income.
- Pursue education: Opportunity to pursue or continue further education.
- Less stress: Fear of being financially insecure mitigated.
- Increased Productivity: Lower stress and continued education increases productivity and valuable skills respectively.
How does it help the socio – economics?
Pros
- Increase in skilled workers: Due to the opportunity to return to education.
- Minimizes bureaucracy and cost: Due to eliminating the rather bloated welfare system.
- Stabilize population growth: Financial security to start a family.
- Stabilize the economy during recessionary periods.
- Reduces inequality: Narrowing the gap between the rich and poor.
Cons
- Possible inflation: Due to an increase in demand.
- No increase in quality in life in the long run: Due to inflated prices
- Fall in labor participation: Due to disincentivizing work.
- Political division: Different ideological identifications and opposition.
- Scare away investors and corporations: Due to levying taxes on them.
Is it feasible?
The feasibility of applying a universal basic income is complex for a number of political, economic and financial reasons, depending on the variety of different countries that exist.
UBI would be more accepting in traditionally socialist countries, while opposition in capitalist or neoliberal nations would be more pronounced and difficult to apply due to lobbying by the â1%â who might be taxed.
Moreover, we have to take into account the financial and economic capabilities of different nations; countries with weak and low GDPs and a high debt burden would see it difficult to apply such a scheme.
Although small scale pilot program has been implemented regarding UBI; this scheme has yet to be applied on a wider scale. Meaning, despite the valuable data derived from the different pilot programs applied, it has never been fully tested on a whole nation; thus any discussion regarding the successful implementation of a program of this magnitude are largely theoretical.
Universal Basic Income is a highly complex and ambitious social program that has recently gained awareness as a potential solution to those affected by the job losses due to pandemic. However, it still remains a divisive program with many hurdles and unanswered questions. Nonetheless, it is an idea worth investing in.
