UNIVERSAL BASIC INCOME

A universal basic income (UBI) is a government guarantee that each citizen receives a minimum income. The intention behind the payment is to provide enough to cover the basic cost of living and provide financial security. Our government has been toying with the idea but it seems that neither the government nor the opposition have done their arithmetic right. 

The concept has regained popularity as a way to offset job losses caused by technology. By modern technology a small group of people are getting very, very wealthy while everyone else is struggling to make ends meet and UBI for the poor is generated by taxing these very rich individuals or corporations. But is money the birth right of every citizen? Should they not work for it? Do some social service – teach in government schools, clean up the roads and the beaches for instance. Capitalist countries are built on the ideological foundation that money is something we earn – UBI would completely change this. Even in communist countries no one was given money for not doing anything!

UBI is like the game of Monopoly, only a serious version of it. In the game Monopoly, everyone starts off with a little bit of money – without it, the game wouldn’t work and no one would be able to become rich or successful. UBI is like Monopoly – everyone starts off with a little bit of money, and uses it to fuel a thriving economy.

Successful implementation of UBI would mean improvements in food security, stress, mental health, physical health, housing, education, and employment but all this will come at a cost! So let us dispassionately analyze the pros and cons of UBI

Advantages:

• Poverty reduction- At a UBI of 4200 Per person annually, the poverty rate as per current definition will reduce to 1.42%. The expenditure of 4200 per person under UBI would be same as the money spent on all welfare schemes as of now
• Financial inclusion: Since all individuals will use their bank account to access the money, the inclusion of un-banked people into the banking sector will lead to financial inclusion
• Workers could afford to wait for a better job or better wages.
• People would have the freedom to return to school or stay home to care for a relative.
• Those with ill or differently abled relatives are often forced to quit their jobs and look after them full-time. UBI would allow care-workers to support themselves, encouraging care work and taking pressure off public services that provide care to the sick and elderly.
• The "poverty trap" would be removed from traditional welfare programs in developed countries.
• Women empowerment : India’s women below poverty line suffer more than men. An income in their bank account will ensure that they have a greater say in family affairs and get better nutrition.
• Those who suffer domestic abuse, mainly women, become trapped in violent situations because they don’t have the means to leave them. UBI would make leaving an abusive partner easy, and would unleash the potential of countless people trapped by domestic violence.
• Citizens could have simple, straightforward financial assistance that minimizes bureaucracy. Current welfare programs are also complicated for administrators and recipients. 
• The government would spend less to administer the program than with traditional welfare. The simplicity of the program means it would also cost governments less. Cash payments that went to everyone would eliminate costly income-verification paperwork.
• Payments would help young couples start families in countries with low birth rates.
• The payments could help stabilize the economy during recessionary periods.
• UBI would give employees bargaining power and discourage low wages. 
• Psychological benefits : UBI will unburden the poor from task of finding work for daily survival and help them to improve socio economic indicators like health, literacy and education
• UBI would bring everyone’s income above the poverty line.

Disadvantages:

• Cost to tax payer: Currently, the money spent on all centrally sponsored schemes comes up to 5.2% of the GDP. However, the cost of UBI will be higher than the amount and also, it will increase annually due to inflation. Finding the optimum level of UBI will be a major challenge.
• Inflation could be triggered because of the increase in demand for goods and services. If everyone suddenly received a basic income, most would immediately spend the extra cash, driving up demand. Retailers would order more, and manufacturers would try to produce more. But if they couldn't increase supply, they would raise prices. Higher prices would soon make the basics unaffordable to those at the bottom of the income pyramid. In the long run, a guaranteed income would not raise their standard of living and end up creating inflation. The purchasing power of the rupee reduces due to inflation. Hence, the government will have to adjust the UBI from time to time. In case the growth of the economy is not catching up with inflation, this could lead to financial disaster.
• There won't be an increased standard of living in the long run because of inflated prices.
• A reduced program with smaller payments won't make a real difference to poverty-stricken families.
• Free income may disincentivize people to get jobs, and make work seem optional. Many recipients might prefer to live on the free income rather than get a job. They would not acquire work skills or a good resume. It could prevent them from ever getting a good job in a competitive environment. 
• It could reduce an already-falling labor force participation rate. With an assured basic income, there might be drastic reduction of voluntary labor. This may also lead to rise in cost of labor, hurting India’s advantage as a country with cheap labor and thereby competitiveness with other Asian labour hubs.
• Rise in consumption of temptation goods : The universal basic income concept is useful in eliminating all subsidies including PDS. However, there is a possibility of people spending this money on temptation goods like cigarettes and alcohol instead of nutritious food
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• In the U.S. it also broke up families, since husbands and wives no longer had to remain together for financial reasons. 

Overseas experience:

In several states in the U.S. there is some sort of U.B.I. Alaska, Hawai, a few cities in California like Oakland and Stockton has this plan. Chicago, Illinois, is considering a pilot to give 1,000 families $500 a month. Canada is experimenting with a basic income program. It will give 4,000 Ontario residents living in poverty C$17,000 a year or C$24,000/couple. They can only keep half of their income from any jobs they have. Finland, Holland and even a developing country like Kenya is also experimenting with it. n 2017, Kenya announced a 12 year pilot to benefit 6,000 villagers. They will receive a $22 monthly payment on their smart phone equivalent. In 2010, the government of Iran ran a UBI trial, giving citizens transfers of 29 percent of the median income each month. Poverty and inequality were reduced, and there was no sign of large amounts of people leaving the labour market. In fact, people used it to invest in their businesses, encouraging the growth of small enterprises.

Scotland is funding research into a program that pays every citizen for life. Retirees would receive 150 pounds a week. Working adults would get 100 pounds and children under 16 would be paid 50 pounds a week. Taiwan may vote on a basic income. Younger people have left rural areas in search of decent wages. Some have even left the country to look for work. A guaranteed income might keep them from emigrating. But in 2016, Switzerland voted against universal income to act promptly against rising inflation.

Right now it seems that a payment system tied to a country’s economic output is most desirable. 10 to 12 percent of GDP can go directly to the universal income payments. The benefit is it would automatically rise with national prosperity and inflation.



Worst case scenario:

My worst fear is the misuse of UBI by the politicians. It will become a legitimate way of temptation to win votes. We are aware of the cash for votes scheme adopted by the political class of this country. If the same is done at the cost of the exchequer, it will lead to the destruction of economy as it will become a political tool to win elections.

I would not see direct income transfers as a substitute to jobs as we don’t have the capacity to pay people to do nothing. Whether you are a farmer or a poor individual, it is meant to be, as the past Governor of Reserve Bank of India says "an income support to keep the body and soul together".