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Universal Basic Income

Poverty is one of the basic hindrances that countries try to eradicate. Poverty has always existed and unfortunately, is going to persist longer. During the pandemic in India, about 230 million people stooped below the minimum wage threshold. Similar conditions were observed in other countries as well. Some experts reacted to this situation by suggesting the implementation of Universal Basic Income (UBI), making it imperative to understand what UBI is.

What is UBI? What is its use?

At the surface, UBI is a regular cash payment made by the government to the people without any conditions. Howard Reed and Stewart Lansley define UBI as a “tax-free, unconditional and non-contributory income given to every individual as a part of their right, irrespective of how much they earn”.

One of the reasons why UBI is supported is because it lays a foundation for equal opportunity. It provides this because the unconditional transfer of money allows everyone to fulfil their basic needs. It primarily aims for people to have the same starting point, although existing wealth may play an important role.

UBI also enables a free labour market and increases productivity. A significant number of people engage in work they don’t wish to do because they have to fulfil basic necessities. Since UBI is income for basic needs, workers have a choice between sticking to their current job and leaving it.Workers gain autonomy in deciding where and how they wish to be employed. The non-binding labour market leads to more productivity as people are engaged in the work they wish to do.

The primary expectation from UBI is the reduction of poverty. The income from UBI gives an incentive to work more and allows them to earn more. The Dauphin UBI experiment revealed how it allowed people to invest in human capital, get better jobs and ultimately rise above poverty. Many organisations suggested that UBI could also act as an incentive to consume more and help the economy in recovering from the recession due to COVID 19.

How can UBI be implemented?

Implementation can be made along the lines of

  1. Medium of Transfer: The ideal way for money transfer would be direct flow via bank accounts. Thus, good infrastructure becomes a prerequisite.

  2. Existing Schemes: There are differing opinions about it, however, countries like India lack the infrastructure to implement UBI of any sort.

  3. Selection of Beneficiaries: Four methods have been suggested for selection, namely; self-targeting, individual targeting, categorical targeting and community-based targeting.

Based on the experiences of UBI implementation of Finland, Kenya (ongoing), Dauphin, Ontario and Madhya Pradesh, it seems a feasible policy. However, its cost-related criticisms make the ongoing critical research on it increasingly significant.

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