What is Basic Income?
Greetings, friends! Consider this- How would you feel if I tell you that the government, without any conditions, would give you 1000 rs for free ? And not just once. The government will give you 1000 rs for free every month And not just you, every citizen of the country would get 1000 rs for free every month How would this make you feel? You might think that this is sheer madness. This is not possible And that I am joking But this is an economic policy which is being seriously considered in many countries in the world today Infact,
it is also being implemented in many places across the world today This economic policy is called Universal Basic Income Universal- that is, for all Basic Income- that is, a basic level income being given to every one for free, let us find out how a basic universal income works What are its benefits and drawbacks? What will be the consequences if it is implemented? And is it even possible to implement it? Come, let us find out…
Why Basic Income?
First of all, the most important question- What is the point of Universal basic income? What was the need for the government to distribute money for free to everyone? Is money now growing on trees that the government is doing this? What is the reason behind this UBI? One of the most important reason is.the job losses that are happening and will happen due to automation and AI Experts believe that there will be so many job losses that not everyone will be able to secure a job in the future And the people would not be able to bear their expenses in the absence of a job So it is necessary to give them some money for free to help them afford a basic standard of living.
So that they are able to afford food and a house and live a good life without a job Let me give you some examples of job losses due to automation Today, self check out counters have been installed in the supermarkets of many developed countries Normally, a person sits at the counter in supermarkets and scans the barcodes of your items And then you pay your bill and leave But self checkout counters have been installed in many countries You can scan the barcodes on your own and leave. So, there would be no use of those employees Similarly, self checkout screens have been installed in McDonald’s in many countries where you order and your food arrives. No body would stand there and take your order So,
that job stands lost too Robot vacuums have also been released recently (Earlier) you employed someone at your house for cleaning. That employment might no longer be needed after some years Self driving cars are also being manufactured today Tesla has already become self driven to quite a large extent If such cars are manufactured, then there would be no need for taxi drivers So you will notice that in every sector, in some way or the other, there will be job losses on different levels as and when technology and automation advance And this would be observed in almost every sector and that too, very rapidly in the coming future So Universal Basic Income is being talked about to compensate for all of this But talking about very recent events, ever since the corona virus crisis has unfolded, there have been so many job losses already ans so many businesses have floundered That the idea of UBI is being considered almost in a fast forward manner For instance, Spain has declared that it has already started the implementation of a UBI scheme under which 462 Euros will be given to every citizen, every month Basic minimum earnings for everybody so that there is nobody that is having to sleep on the street So guaranteed basic income or universal basic income? 100 percent… I think that’s really important There are people in this country who would call that a nanny state, you know? And some people will call it that but I think that it will come about one day and I think that… Out of necessity?
Out of necessity A lot of famous people and entrepreneurs of this world have promoted the idea of UBI For example, you just heard Richard Branson. Similarly, Elon Musk also believes that Universal Basic Income is inevitable. It has to be enforced one day or another There will be fewer and fewer jobs that a robot cannot do better And I think ultimately we will have to have some kind of universal basic income I don’t think we’re gonna have a choice Universal Basic income?
Universal Basic income. I think its going to be necessary There was a presidential candidate named Andrew Yang in the recently conducted primary elections in the US His entire political campaign was based on Universal Basic Income He promised a sum of 1000 dollars per month to every American citizen if he became the President.
The ones in support of UBI argue that if it is enacted, it would encourage equality in the nation and society Poverty would be eradicated because everyone would be given enough money to bear his own expenses and be able to afford a decent standard of living So nobody would remain poor any longer Another advantage is that the ones employed in jobs that pay paltry salaries and those who are compelled to go to their jobs only to bear their expenses,
they need not do such jobs anymore They can quit these jobs because they would already be provided with a basic income They can then pursue their hobbies They can look for jobs that they are actually passionate about So if you notice, the overall happiness of the society would increase because of this And it would also spur innovation because in general, the residents of a country would be working for something that they are passionate about There would be a positive increase in all three- Productivity, innovation and happiness I’m saying “would be” because all of this is an assumption It has not been tested on a large scale anywhere So these are positive assumptions that might happen because of it Third- The families would get more time to spend with one another If someone wants to work part time and does not want to remain employed full time,
then that’s also a choice It would no longer be a compulsion to remain employed full time And if somebody wants to go back to school or enroll in a university for a course, then there would be time for that too There would be no need to join a job right at the start which happens quite frequently with the lower section of the society They are forced into child labour in order to bear their expenses The fourth advantage is that since it is a universal scheme, that is, it applies to everyone,
without any conditions and without any paperwork It would diminish (the need for) bureaucracy The government can save money in administrative costs The government would not need to keep a check on whether someone is misusing the scheme or whether someone is not following it correctly or not or if the money is being siphoned off elsewhere where it should not go. All of it would not happen In the normal unemployment benefits or other welfare schemes of the government it is extremely difficult to regulate to make sure that the money reaches the right destination
Let us now move to the negative points What are the arguments of those who are against the Universal Basic income? The first argument is quite obvious- which might have come to your mind as well when I had said in the beginning of the article that everyone would get money for free If everyone would get money for free, then the people would become lazy Nobody would want to work And if no one would want to work, how would the society and the nation progress? Everyone would become lazy and take free money to run their lives This is the negative argument You will notice that this too, is an assumption On the positive side,
The assumption was that the people would feel more motivated to pursue their hobbies and passion Similarly, the negative side is arguing that the people would become lazy I will tell you later in this article which one out of the two, has a higher chance of happening where I will talk about experiments What was the actual reaction of the people when a real life test was conducted on it? The second negative point is that if everyone is distributed free money then this would result in an inflation in the economy.
The value of money would depreciate How would that happen? Consider that you’re giving everyone money for free So the people would want to spend money on different things And if they want to spread on different things then the demand of those things would increase And the producers of these goods and services would want to produce more But if the supply chain does not allow the production of more items then they would raise the cost of their goods They would see that the demand of the things have risen so much in the economy, then they think about raising money and making more profit And if the prices rise, then those things would become un-affordable again.
So the value of the basic income would fall So the value of money would depreciate and the situation would remain as it was The money with the people does not have enough value to buy things So, then, basic income would no longer remain basic This too, is an assumption How inflation works is a very complex topic If you want, I can post an article on what are the reasons behind inflation The third reason is that the people might become over dependent on this money Think about it: If Universal Basic income is being enacted in a country for a period of 10 years The people would become so used to the free money that comes from the government that if that money stops coming in for whatsoever reason then the society and economy would crash completely Because the people are not self sustained on their own.
The people do not know how to bear their expenses without that money So the entire economy would crash completely Fourthly, it is argued that this will pose a disadvantage for the poor people Consider it- a man from the poor class, middle class and rich class All three of them are given the same amount of money in the name of basic income It can provide a decent living standard for the very poor to help him bear his expenses For the middle class people, this would be some extra money that they can spend on further luxuries And for the rich class, the money from the basic income is actually useless For them, the amount is so less that it is of no use to them So, there is a disadvantage for the person belonging to the very poor category- taking this basic income as compared to the middle class and rich class So, in some sense, inequality is increasing because of it instead of decreasing And the fifth point- the most important one- the money that is being spent by the government on UBI to give money to the people Where will this money come from?
It would be extremely costly for the government to give so much money to everyone And the second thing is that the government would have to compromise If the government was spending money on constructing better schools and hospitals, Now the government would have to divert money on order to give money to the people for free which, arguably, is not the correct utilization of money It would be better to use that money to improve public services Here I’d like you to weigh in- You have heard both the positive and the negative points Which do you think is stronger- The positive side or the negative side regarding this Universal Basic Income? Write down in the comments below,
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Real Life Experiments of UBI.
What have been their results? Was the positive side stronger or the negative side stronger? The first experiment is from FInalnd which was the first European country to test Universal Basic Income In the period between January 2017 and December 2018 the Government of Finland chose 2000 unemployed Finnish people and they were given 560 Euros per month, without any condition An analysis is still ongoing and the results of this study have still not arrived.
They’d be here by the end of this year But preliminary results have revealed that in general, in the people who were given this basic income, improvements in health conditions and their happiness levels were observed but if we talk about the employment level, there was no improvement there That is, it did not so happen that the unemployed people began getting more job opportunities A second example is that of Ontario, Canada, where 4000 people were randomly selected between the ages of 18-64 and a basic income was provided to them This experiment began in 2017 and it was supposed to go on for three years But the government changes in July 2018 and the new government decided not to waste money on this It was a waste of money according to them and so they stopped the experiment in the middle.
But there were some observations of experts on the basis of the part of the experiment that was conducted Their observations was that there was considerable improvement in the healthcare cost of people The government saved money in healthcare because of this and the people were feeling healthier, in general A similar story happened in India The SDF Party in Sikkim said in January 2019 that they would make Sikkim the first state in India to give Universal Basic Income to its people This was their election promise for May 2019 But they lost the elections in May, 2019 and another party formed the government there So this could not become possible You could also say that Rahul Gandhi’s NYAY scheme, in some sense, was akin to a basic income Albeit it was not universal and there were some conditions attached with it that only the poorest 20% of the people in India would be given a basic income
This was the idea of Rahul Gandhi Although, selectively giving money to some people would have created new problems because one huge advantage of it being universal was that it would reduce bureaucratic oversight and corruption But if you selectively choose people to hand out income, for example, the 20% most poor, then this would be a huge disadvantage for the ones who come under 21% poor category What was proposed by Sikkim’s SDF party was actually, genuinely universal that every one would be its recipient Reverting to already conducted experiments, there is an experiment that was conducted in India too in Madhya Pradesh in 2010 Around 20 villages were chosen or testing Basic Income out of which 8 villages were given basic income and the rest of the 12 villages were kept separate and used as a control group to observe the differences in the case of an income being given and an income not being given What’s surprising is that this was one of the first experiments of basic income where the results were extremely positive Results showed that the villagers spent more on their food and healthcare The performance of the children in school improved by 68% in the villages that were given basic income The children spent more time in schools,
the savings of the families tripled The new businesses that were started in the village doubled The sanitation of the village improved Nutrition improved as well Poverty declined, Healthcare improved, schooling improved Its a miracle- so many positive effects were seen And the first negative theory that I told you about in the article earlier that the people would become lazy if they got the money This theory is disproved at least in the case of this experiment The people did not become lazy and spent the money for their self improvement Sanitation, healthcare, schooling and business ideas- all improved Similar results were seen in Uganda where 535 people were selected randomly a 382 dollar grant was given to them and it was observed that job opportunities increased, the people started their own businesses and there was a positive improvement overall.
Where will Money Come From?
A very important question is what would it cost the government to roll out a scheme like this? and where would this money come from? Calculating in a simplistic manner, then we can see how much the government will spend per person and then multiply that with the country’s population For example, in the case of USA, the population of USA is around 330 million and we assume that 300 million out of them are adults and the government is going to spend 10,000 dollars per year per person So 10,000 dollars multiplied by 300 million.
The figure is calculated at 3 trillion dollars This could be the cost that the government would have to pay annually for a scheme of Universal basic income which is a huge figure The size of the entire economy of USA is 21 trillion dollars But at the same time, this is a very simplistic manner of calculation A lot of experts believe that in reality, the cost of it would be much lower than this figure because other things are not being taken into account during this calculation For example, the rich people would take the UBI but they would return that UBI through taxes The same would happen in the case of upper middle class and middle class So the people who would actually benefit from the UBI would be the poor people For example,
the economist Karl Widerquist has said that if the UBI is rolled out in a manner in which every American adult would be given 12,000 dollars per year then according to him, its cost would be a mere 539 billion dollars per year that is, only 3% of the GDP as compared to the 3 trillion dollars that we arrived at by simplistic calculations Even then, where would the 500 billion dollars come from? People like Andrew Yang argue that wealth taxes would be imposed to tax the rich more Or a lot of welfare schemes could be done away with. Money could be diverted from elsewhere by the government and used here At present, several such experiments are being carried out during this time in many countries UK, Germany, France, Kenya, Netherlands, Finland, Sweden, Canada, USA Experiments regarding the universal basic income is ongoing in all of these countries on different scales to see how positive or how negative it will be If you ask for my opinion, I would not say much at this point of time because not many experiments have been conducted regarding this I feel that we should wait for a few more years and observe the results of these experiments on whether it creates a positive or negative effect in the society.