Universal Basic Income

During one of the long metro rides to Gurgaon for my internship, I read about the Swiss vote on Unconditional Basic Income (UBI). Just saying, their amount offered for ‘no work’ to every citizen, whether employed already or unemployed, is just a little more than BCG’s package! Try converting $30,000 to INR at current rates and consider that you don’t have to ‘earn’ it. Moreover, if you are working, then this amount comes in addition to that income.

Essentially, it is income given to every citizen (including children at special rates), not households, irrespective of their employment status while replacing this with other social welfare schemes, either entirely or minimizing other welfare schemes. It is financed by profits of publicly owned enterprises and comes without involving any productive activity on behalf of citizens.

In the article, https://www.ft.com/con…/7c7ba87e-229f-11e6-9d4d-c11776a5124d , UBI is seen as a necessary implication of technological progress killing employment opportunities and the alienation of workers from their jobs, where UBI would allow for more leisure time. In his backlash at IMF economists supporting UBI, http://basicincome.org/basic-income/ , Andre Coelho succinctly concludes with threats that UBI would pose to the existence of Capitalism.

The video http://www.aljazeera.com/…/time-universal-basic-income-1606…shows a debate between a Swiss Senator and a Vox journalist based in US, bringing an element of differences in welfare schemes of the 2 countries. They convey their views on 1) Incentives to work 2) The need for safety nets based on extent of inequality 3) Changes in worker bargaining power and 4) Consequences on inflation after the introduction of UBI, 5) Inflation as a function of interest rates set by Central Banks instead of government spending through UBI.

Can we even generalise the kind of incentives UBI would generate for citizens or is Behavioural Economics at play? From a very simplistic perspective, assuming ceteris paribus, wouldn’t criminals have an incentive to continue with illegal activities which is further supplemented with this lump sum ‘social dividend’? On the other hand, given the success of PMJDY in India (although limited), cash transfers to bank accounts of beneficiaries for UBI would become free of corruption, atleast theoretically, and could be much more effective than say, food stamps.

*The post was originally published on FISCUL, LSR’s facebook page


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