When I listen to the economists across the world chanting the mantra, ‘Universal Basic Income (UBI)’, I am reminded of the Chinese proverb- Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime. But if fish is not available in the river it will be a futile exercise. Nowadays when employment has been taken by cutting edge technologies, giving a man Basic Income (BI) is the only viable alternative.
The world is fast moving so are the technologies that are used like Artificial Intelligence (AI) and Robotics which is making man power redundant. The inability to tackle unemployment has in the last decade or so, became a major reason for UBI being mooted throughout the world, particularly in European countries by a growing number of economists and politicians.
Basic income (BI) is inevitable to tackle two evils namely poverty and unemployment. Even though the basic intention of the UBI is the same throughout the world, the proposals from different countries differ along lines of source of funding and the size of transfers already executed.
Finnish experiments with Basic income started in 2016, when KELA, the Finnish social security agency proposed a UBI package of €800 a month unconditionally to 2000 selected persons in random. The working age citizens between the age group of 25 and 58 were targeted, unfortunately it failed to secure the funding to extend its program.
The program if extended to the whole country would have exceeded the Finnish government’s total revenue. Fortunately the program was not aborted.
It was decided to kick start the program with a new trimmed package of €560 per month which will be provided from 1 January 2017 until 31 December 2018. The lower BI €560 is not adequate enough to live in Finland. Basic things like hiring an apartment will cost more than the BI.
So the experiments are not applied in the case of unemployed, who are resuscitated by a higher level of government support- at least €32.4 a day for the first 400 days after losing a job. Only the working poor would benefit significantly from this exercise.
The objective of this exercise to find out answers to the twin problems of low employment rate and complex system of housing, child care and other benefits. The solutions expected – the lump sum payments should create incentives for the unemployed citizens to seek employment and the complex system can be replaced.
How far the low UBI payments will allow the country to embrace the solutions is debatable. Simillar experiments have been conducted by other countries like USA and Iran with even lower BI packages.
USA’s Alaska Permanent Fund is a state-owned investment fund established using oil revenues. Since 1982, it has paid out an annual dividend to every individual in Alaska. When oil prices were very high in 2015, the dividend was a whopping $2,072 per person. By 2017 the payment had whittled down to $1100 and can further dip to $800.
Research studies done by two Economists, Jones and Marinescu on the impact of Alaska’s BI on employment, came to a conclusion that a universal and unconditional cash transfer does not significantly reduce aggregate employment.
Another experiment was conducted by Iran in 2011. The monthly transfer amounted to 29% of median household income, or about $1.50 extra per head of household, per day.
Based on the Iran experiment a study was done by two economists Djavad Salehi-Isfahani and Mohammad H. Mostafavi-Dehzooei, the paper finds that individuals who receive cash transfers didn’t quit their jobs nor did they decrease their working hours. It was startling to observe that some individuals even extended their working hours.
Both studies are likely to buttress and provide an iota of positivity to the ongoing Finnish experiments though the amount of BI is lower.
These studies have spurred the city of Stockton In California to experiment with guaranteed basic income (GBI) to its poorest residents $500 a month with no strings attached. It is the right place to start where 1 in 4 people live below the poverty line. This might the first experiment with GBI in USA.
Stockton Mayor Michael Tubbs says, “It doesn’t cost tax payers anything. It’s paid from $1.2 million in philanthropic funding. So the idea is that in the next couple of years, we’ll have some data that will tell us whether this is a solution that is viable or not.”
Support for the UBI is gaining momentum across the world. New basic income pilots have been announced in Canada, Finland, and the Netherlands. There have been several attempts from countries as varied as India, Switzerland, France, New Zealand, Namibia, Scotland, and Germany. Even an underdeveloped country like Kenya had dared to start a 12 year experiment with UBI, transferring $22 a month to support the family.
It is worth pursuing UBI if it accelerates the productive or creative endeavours of citizens.
Rajesh.T.V. is a Business and Economic Journalist. He can be reached at [email protected]