The economic shocks caused by the COVID-19 pandemic has reignited discussions about greater economic security and social safety nets. One such program that has been in the spotlight is the universal basic income, which provides unconditional cash assistance regardless of income or employment status. Has the time come for universal basic income, or is it a one-time wonder?

A Policy Well Overdue

By Jaymee Palma Assistant Editor

Imagine a world where poverty is no longer a problem, where everyone has enough financial resources to afford food and housing. A world where Article 24 of the Universal Declaration on Human Rights is finally fulfilled: Everyone has the right to a standard of living adequate for the health and living of themselves and their family. Although it sounds like an impossible utopia, there is already a concept that aims to achieve just that: universal basic income (UBI).

Truly universal basic income programs are rare. Iran started monthly cash transfers equivalent to roughly 1.5 USD extra income per person per day, and it remains as the only country to offer such a government program. Most countries have at some point launched small scale experiments of giving basic income to a select group of people, and many still retain conditional cash transfer programs based on income. Studies have shown that experiments with small-scale UBI tend to empower people and give them enough breathing room to invest in themselves and their interests. The most recent two-year study in Finland, which paid a monthly income of 560 EUR (roughly 615 USD) to 2,000 randomly selected unemployed people, concluded that these people were generally more satisfied with their lives — experiencing less mental strain and having the economic freedom to say no to low-paying or exploitative jobs. It also gave people the chance to pursue their dreams and to undertake more voluntary work, such as informal care for family and neighbors. Limited UBI programs can clearly provide a better life for individuals — imagine how much a truly universal one could do for society. It has the potential to lift people out of poverty and to sustainably close the income inequality gap. 

If all these positive effects have already been proven, why does only one country in the world have UBI? There are various — often politically fueled — reasons as to why it hasn’t become a reality yet. The main oppositions to UBI are on the grounds of individual incentive and economic feasibility.

People are generally reluctant to give “handouts” to the poor and unemployed, fearing that this would give them less incentive to work. The people in power equate UBI to a society where an overworked minority supports a lazy majority. In most countries, this has led to a patchwork of safety net programs, where bureaucracy controls who receives assistance, how much, or even where they can spend it. However, this sentiment has proven to be false. In a village in Kenya, the majority of recipients of a 22 USD monthly income used the money to start businesses, repair homes and roads, and invest in education. Experiments that gave spending money to homeless people in London revealed that they prioritized their basic needs instead of buying drugs or alcohol. It turns out that giving the money to the people in need is much more effective than state-controlled spending plans, as it eliminates the need for mountains of paperwork and gives people economic freedom and security on their own terms. Unsurprisingly, poverty is not created by reckless spending or laziness — the people simply don’t have any resources to pull themselves up. Providing financial security is a sustainable way of giving them a way out of a vicious cycle. 

Making the program truly universal entails giving money to everyone, including the middle-class and rich people. At first glance, this seems counterintuitive; why would we need to give money to people who already have enough? But welfare programs that apply to everyone can potentially gain more support — programs that directly benefit oneself are more acceptable to people. In Alaska, a permanent fund is paid out to all eligible citizens, and support for the program is unanimous. It also simplifies the bureaucracy surrounding the decisions of who receives the income. Even now, as the pandemic necessitates cash assistance to people under lockdown, there are controversies about eligibility issues and payments being redirected to corrupt officials. The economic security offered by UBI changes the power balance between employers and employees as well. It gives people the option of quitting toxic and underpaid jobs and seeking better opportunities for themselves. It may also spur more volunteerism and philanthropy, as people have enough breathing room to think about more meaningful activities. 

The biggest case against UBI is its economic feasibility. It is unclear how countries — especially developing countries with large populations — can afford such a program. It certainly would be a sizable and complicated investment; the tax system has to be restructured and funding from other programs has to be diverted in order to finance UBI schemes. However, having multiple social security programs that are not designed to alleviate inequality is more expensive than having a broader scheme that benefits everyone. It certainly would be cheaper to provide UBI than to rely on temporary bailouts during financial crises. And in the long-term, it may even improve economies, as people have the means to become more productive.

Ultimately, UBI is a program that is founded on trust and appeals to the better nature of humanity. It can only be effective if people continue to be motivated to work and contribute to society even with guaranteed income — a fact that multiple studies have already established. Traditional policies cannot hope to sustain people in times of crisis. This is precisely why steps toward launching a full-scale, fully functional UBI program are well overdue. UBI prepares us for the economic shocks that will assuredly continue to devastate countries well after we overcome this pandemic. It also has the potential to improve lives in the long run. It is hard to change the cutthroat society that expects everyone to “earn” the right to live, but now more than ever, we must take bold steps to address the problems inherent in our social systems.


Not an Oasis, but a Mirage

By Juhoon Lee Senior Staff Reporter

Once a far-fetched promise of a few “radical” politicians, UBI has become a more familiar concept in many countries around the world as COVID-19 takes its toll on the global economy. Due to the stagnation of  economies from extensive lockdowns — leading to citizens losing jobs and businesses losing sales — several governments have created or are considering temporary UBI programs, including Korea, US, Canada, India, and Japan. As people enjoy the oasis of such stimulus packages during these hard times, it’s easy to be lulled into an agreeable stance on the policy as a whole; however, UBI is a larval policy still in much need of careful research on its impact and effectiveness before we can even ponder the possibility of its adoption.

Some of the existing cases of UBI implemented in the real world were admittedly rather successful — the most famous case being unconditional cash transfers in Kenyan and Ugandan villages under the poverty line. However, these isolated cases are unrealistic to apply on a larger scale, in which the scope of economic activities far exceed day-to-day interactions. An issue brief from the United Nations Development Programme covering UBI findings in China stated that “China’s subsistence allowance policies remain more economically efficient” than UBI policies. It recommended local, small-scale operations and pilots, but discouraged national-scale UBI.

The non-uniformity and complexity of economic networks in different regions call into question whether a nation-wide, unconditional basic income would really be more beneficial rather than more harmful than traditional welfare programs that target the vulnerable groups of society. The extra funds required to iron out the details of welfare distribution do not outweigh the astronomical increase in the budget that a UBI program would require. For countries with extensive welfare policies in place, the implementation of UBI may actually result in less support for those with the most need, who will see their share of a strained budget decrease.     

The typical argument of UBI opposers that the low-income class will cease working thanks to their “free money” is an illogical jump. However, the problem may actually lie on the other end of the spectrum, in which those with more comfortable financial situations can pursue excessive interests. Massive conglomerates and multi-billion dollar companies can and will try to encourage irresponsible spending on high-end or non-essential products. Instances of such abuse have been seen in South Korea since the emergency disaster relief fund handouts began in May. South Korea had even set limitations on types of businesses in which the money can be used, but loopholes allowed scalpers to trick the system. Long lines formed in a major department store as people waited to buy Chanel bags after the company released clearance merchandise, and there have been reports of online Apple product purchases using the funds. While UBI will boost consumption, it may well be promoting unnecessary forms of consumption. Those clearly not in need of the funds were misdirecting the money that could have had a more significant impact for others.

UBI may have an ameliorating effect, staving off dire financial straits for individuals in times of crisis — for now. However, its extensive adoption has yet to be studied in depth, which makes the true extent of its effectiveness questionable. The opportunity cost of providing greater help to those desperate in need is still far too great to replace existing, albeit more tedious, systems. Just because it’s an equal system, doesn’t mean it’s the right system.

 

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