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Universal Basic Income: A Path Breaking Idea

Mar 3, 2017 13:18 IST

UBI in IndiaThe Historical Traces of this idea

The concept of a Universal Basic Income is not new. One of the earliest known ideas on an unconditional universal basic income for all adults irrespective of other income sources came from Thomas More. After this, the idea of universal basic income was explored by many other Philosophers. Thomas Paine, one of the United State’s founding fathers, advocated that every person had basic right to an equal basic funding because “the earth, in its natural, uncultivated state was... the common property of the human race”.
Centuries later, British Philosopher Bertrand Russell discussed the idea of a Universal Basic Income for all sufficient for necessities in his book Road to Freedom.  Russell wrote that “Even on finishing education, no one should be compelled to work, and those who choose not to work should receive a bare livelihood and be left completely free”.
This year’s Economic Survey of India has reflected that Mahatma Ghandhi envisaged a similar idea to Universal basic income.
Besides these, many other philosophers explored variants of the idea of basic income, not necessarily always drawing inspiration from or building upon previous work.

Examples

In recent years, after the rise of anti-globalist populism, many advanced countries are contemplating that whether they should start mailing cheques to the unemployed.  The best example of it is Finland. The Finland government would provide tax -free income of €560 to two thousand randomly selected unemployed for two years. These people will continue getting payments even when they try out odd jobs. If this pilot is successful, then the program could be extended to all adult Finns.
In India, two pilot projects were conducted as an experiment for income grants in 2011. First was launched in Madhya Pradesh, funded by UNICEF and coordinated by the Self-Employed Women’s Association, to study the effectiveness of income grants.
Another pilot project was conducted in eight villages, wherein every man, woman and child was provided with a monthly payment of Rs200 for each adult and Rs100 for each child initially. Afterwards, these payments were increased to Rs300 and Rs150, respectively.
The two experiments on UBI in India showed that it does not necessarily make people lazy and unwilling to work. The people who were allocated with money, continued doing the work which they were doing before the money allocation.

Why Universal Basic Income is a path-breaking idea?

1. Philosophical Acceptance of the Idea

The Philosophical Case for Universal Basic Income is a compelling and radical paradigm shift in thinking about both social justice and a productive economy. It could be analogous to say that the idea of UBI is to the twenty first century what civil and political rights were to the twentieth. The premise of this idea is that it is a need of a just society to guarantee to each individual a minimum income which they can rely upon, and which also provides the basic material foundation for a life with adequate access to basic goods and a life of dignity. So it can be said that a universal basic income is, like many rights, universal and unconditional. Nearly every theory of justice, from Thomas Paine to John Rawls, has argued that a society that faults to guarantee a decent minimum income to all citizens will fault the test of justice. It should be apparent to anyone that no society can be stable or just if it does not give all members of the society a decent basic income.
 A Universal Basic Income promotes many of the basic values of a society which respects all individuals as free and equal. It promotes liberty because it is anti-paternalistic, opens up the possibility of flexibility in labor markets. It promotes equality by reducing poverty. It promotes efficiency by reducing waste in government transfers. And it could, under some circumstances, even promote greater productivity. The idea of Universal Basic Income has been accepted by thinkers of the left and of the right.

2. Poverty Reduction

If the financial system of a country is well-functioning then a Universal Basic Income may obviously be the fastest way of poverty reduction. In countries like India, where the numbers of poor people is so high, a universal basic income becomes more feasible.

3. Provides Agency to all

It seems very apparent that the poor in India have been treated as objects of government policy. Even India’s current welfare system which is well intentioned inflicts an indignity upon the poor by assuming that they cannot take economic decisions relevant to their lives. But an unconditional cash transfer will enable them to be treated as agents. By taking the individual as the unit of beneficiary, UBI enhances agency, especially of women within households.

4. Practicality of the idea

The idea of a UBI is practically useful. There are various types of circumstances which keep Individuals trapped in poverty. The risks and the shocks faced by the poor also vary.  It is very difficult for the state to determine how priorities are to be set and which risks should be mitigated.  The idea of a UBI liberates citizens from paternalistic and clientelistic relationships with the state.

5. Employment

The employment has been uncertain in almost all the country in recent years. UBI acknowledges that it is more urgent for State to guarantee a minimum living standard in an era of uncertain employment generation. UBI also has potential to open up new possibilities for labor markets.
 It creates an environment by allowing for individuals to have calibrated or partial engagements with the labor market without fear of losing benefits. The UBI allows for more non-exploitative bargaining since individuals will have a basic income to survive and they can no longer be forced to accept any working conditions.

6. Administrative Efficiency

In India, the idea of UBI has been very pertinent and enhanced because of the weakness of existing welfare schemes which are hampered with leakages and misallocation. When the trinity of Jan-Dhan, Aadhaar and Mobile (JAM) is fully achieved the time would be appropriate for a mode of delivery that is administratively more efficient.
But, there should be some care while making the administrative argument. This is because Aadhar is designed to solve the identification problem and, it cannot, on its own, solve the targeting problem.

Challenges for Universal Basic Income in India

1. Targeting Challenge
 It is assumed that the amount of money being spent on several types of subsidies is justified. The only issue which is doubtful is of targeting, which can be addressed by the transfer of basic income to every citizen. But this would be very challenging. The 2003 National Institute of Public Finance and Policy study revealed that total Centre and state government subsidies amount to about 14% of GDP. For UBI, the idea should be to reduce expenditure on non-merit subsidies and use the savings to boost capital spending on issues which are very urgent for the people.

2. Challenges in Rolling Back Subsidies
It is assumed that the non-merit subsidies can be rolled back smoothly. It will not be easy for the government to roll back subsidies such as fertilizer, food, electricity, fuel, and water. In fact, It would be difficult to arrive at the amount that will need to be transferred under UBI if subsidies are rolled back.  In this context, it is proper to recall the political backlash when the Tendulkar committee showed a poverty ratio of 21.9% for the year 2011-12. The government found itself compelled to constitute another committee under C. Rangarjan which gave a higher poverty ratio.

3. Challenges in Fiscal Feasibility for UBI
 It is believed that reduction in revenue forgone can augment resources for UBI. Again, this puts some challenges in front of the government.  Basically, the revenue forgone is a reflection of problems in our tax administration for which urgent reforms are needed.
Apart from fiscal feasibility, there are other issues that put challenges in the implementation of UBI. It is very complex to justify that why the government should be transferring cash to the middle class and the rich.

4. Consequences
The government also needs to be careful about some unintended but probably inevitable consequences. For example, the impacts of UBI combined with programs like the Mahatma Gandhi National Rural Employment Guarantee Act on the labor market would be very difficult to handle. And, it will also cause problems to India’s case as a low-cost manufacturing destination.

Conclusion

The discussion over the idea of universal basic incomes is likely to evolve in future. There is probability that developed world would grapple with the possibility of robots taking over jobs.
And, the developing world would be wondering that how it can alleviate poverty while facing a resource crunch. This will give birth to the urgency of Universal Basic Income with more intensity.
Apart from it, there should be no illusion about the difficulties in the political-economy process for implementing UBI. One thing going in the favor of UBI is that it attracts support from people in different parts of the political spectrum, which would someday result in a winning coalition.

Is this article important for exams ? Yes22 People Agreed

DISCLAIMER: JPL and its affiliates shall have no liability for any views, thoughts and comments expressed on this article.

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