Universal Basic Income: Why it is a good idea? What are the associated challenges and way forward

 Universal Basic Income: Definition. Why it is a good idea? What are the associated challenges and way forward

In order to counter the increasing economic disparities and ensure sustainable future for all, the concept of Universal Basic Income was introduced, which is seen as an effective option as Universal basic income promises unconditional guaranteed cash transfer to all it’s beneficiaries. 

What is Universal Basic Income?

Universal Basic Income (UBI) is a social welfare concept in which all citizens or residents of a country receive a regular, unconditional sum of money from the government, regardless of any other income they might have. UBI is distributed at regular intervals, such as monthly or annually, ensuring a consistent income stream for individuals.

The primary goals of UBI include poverty alleviation, reduction of income inequality, and providing individuals with financial security. Proponents argue that it can create a safety net for unpredictable economic conditions and empower individuals to make choices regarding work, education, and personal development.

Why Universal Basic Income is a good idea?

1) Reduce Poverty and Inequality

UBI provides a guaranteed income to all citizens, effectively reducing poverty by ensuring that everyone has a basic financial foundation to meet their essential needs. It promotes economic equality by ensuring that everyone, regardless of their socio-economic background, receives the same basic income. By ensuring that everyone has a basic income, UBI promotes social cohesion and reduces economic disparities within communities, fostering a sense of shared prosperity.

2) Boost Economic Growth

Universal Basic Income (UBI) has the potential to stimulate economic growth by providing a guaranteed income to all citizens, which enhances consumer spending power. This increased demand for goods and services can boost production and business activities, leading to economic expansion. Moreover, UBI can act as a social safety net, mitigating the impact of economic uncertainties and downturns on individuals and families. This, in turn, fosters a more confident and stable workforce, encouraging entrepreneurship and risk-taking.

3) Promote Entrepreneurship

With a guaranteed income, individuals may feel more secure in taking risks and pursuing entrepreneurial ventures or creative pursuits, fostering innovation and economic growth. UBI supports innovation by affording individuals the financial security to pursue creative endeavours, education, or entrepreneurial ventures without the immediate pressure for survival.

4) Empower Vulnerable Sections

Individuals receive a regular and predictable income, providing financial stability. This security can empower people to make decisions based on their long-term well-being rather than immediate financial concerns. UBI can also contribute to improved well-being of vulnerable sections by alleviating financial pressures on individuals and families, as financial stress is a significant contributor to mental and physical health issues.

5) Promote Gender Parity

UBI can serve as a catalyst for promoting gender parity by addressing economic disparities and empowering women in various ways. It recognizes and compensates for unpaid care work, a responsibility disproportionately shouldered by women and acknowledges the crucial role of caregiving. It provides financial autonomy, particularly in situations where women may have limited access to traditional income sources. This financial security can empower women to make choices aligned with their aspirations, including pursuing education, entrepreneurship, or community initiatives.

Why Universal Basic Income is a bad idea?

a) Increase Government Burden

The commitment to providing a regular, unconditional income to all citizens, regardless of their economic status, requires substantial funding. The sheer scale of such a program raises concerns about the strain it could place on government budgets. Funding a UBI would necessitate identifying new revenue streams or reallocating existing funds from other critical areas, potentially leading to increased taxes, which can be politically challenging. As governments grapple with various competing priorities, including healthcare, education, and infrastructure, the introduction of UBI introduces the dilemma of balancing financial sustainability with the societal benefits it aims to provide.

b) Inflation

The implementation of a Universal Basic Income (UBI) has the potential to contribute to inflationary pressures within an economy. The injection of a substantial amount of additional money into the hands of all citizens could lead to an increase in aggregate demand for goods and services. Inflationary concerns arise when this surge in demand is not met with a corresponding increase in the production of goods and services. Thus it could potentially erode the purchasing power of the basic income over time

c) Less Labour Productivity

The unconditional nature of UBI, providing a regular income irrespective of employment status, might lead some individuals to opt out of the workforce, and could reduce the immediate necessity for individuals to seek employment, particularly for lower-wage jobs. Availability of easy money could potentially lead to reduced productivity and economic output. Thus there is a worry that a guaranteed income might create dependency on government assistance, reducing individuals’ motivation to seek self-sufficiency through work or other means.

d) Unsustainable Investments

The regular and unconditional income provided by UBI might create a false sense of financial security for individuals, leading to increased consumer spending. In response to this heightened demand, businesses may expand rapidly without ensuring the sustainability of their operations. The influx of funds into the economy could lead to speculative bubbles in certain sectors, driven by short-term gains rather than long-term viability. Without careful consideration of the environmental and social impacts of investments, there is a risk that UBI could inadvertently support activities that compromise long-term economic, social, and environmental sustainability.

e) Lack of Targeted Support

While Universal Basic Income (UBI) aims to provide a financial safety net for all citizens, it has the potential to lead to a lack of tailored support for individuals with specific needs. The universality of UBI may not adequately address the nuanced requirements of vulnerable populations. Individuals with disabilities, high medical expenses, or unique socio-economic challenges often need targeted support that goes beyond a standard income. A uniform UBI may overlook the differentiated needs of certain groups, potentially exacerbating existing inequalities.

Way Forward

I. Universal Basic Services – Promoting Universal Basic Services (UBS) like healthcare, education, and housing over Universal Basic Income (UBI) carries several advantages that address specific societal needs more directly. Unlike UBI, UBS focuses on ensuring access to essential services for all citizens. This targeted approach can have a more immediate and discernible impact on improving overall well-being.

II. Conditional Cash Transfer – Instead of unconditional universal basic income, focus can be given to conditional cash transfer to encourage specific behaviours such as sending children to school, seeking healthcare, or participating in skill-building programs. This creates incentives for positive behaviours and investments in human capital, address poverty directly and contribute to sustainable development goals.

III. Public Awareness and Education - Focus should be given to conduct extensive public awareness campaigns to inform citizens about the purpose, benefits, and implications of UBI. Address misconceptions and build public support for the program.

IV. Gradual Implementation - Consider a phased approach for implementation, starting with specific demographics or regions. Establish mechanisms for regular impact assessments that can help gauge the effectiveness of UBI. Gradual expansion allows for adjustments based on real-world outcomes and allow for necessary adjustments.

The primary goals of UBI include poverty alleviation, reduction of income inequality, and providing individuals with financial security. However successful implementation of UBI is a complex undertaking that requires a balanced, evidence-based, and adaptive approach. By carefully navigating these steps, policymakers can work toward harnessing the potential benefits of UBI while addressing associated challenges and can ensure that people use the money responsibly.