Universal Basic Income (UBI): What is it and what are the effects of this welfare tool?
The universal basic income (UBI) represents a tool of the welfare state needed to distribute unconditionally to every citizen of a nation, or every resident, a periodic sum of money regardless of his monthly level of income. The idea of the basic income system is to guarantee everybody per month an amount of money above the poverty line. What can we say about this form of social security? What are the social-economic benefits and disadvantages deriving from a basic income system?
Rising inequality worldwide, the transformation of the labour market where many lifelong jobs evolve into part-time, long periods of stagnating wages, and the potentiality of labour-saving, equivalent to an increase in unemployment, coming from a push toward mechanization, are crucial factors in bringing to everyone’s eyes the possibility and the advantages that a stable income stream for every citizen could have.
This system would not give the same output for every person but would give them the same opportunity: it would allow everyone to be able to fulfil their basic human needs (the need of water, food, clothing and a shelter) and try to build upon these needs fulfilled the life they wished to have. For some people this idea might seem utopic (while dystopian for others) but attempts to implement this system for a limited period of time have been pursued to evaluate the benefits and costs of such policy tool. Several versions of this form of social security have been applied in the past in different countries. In the USA an empirical experimentation of a partial version of the UBI system has been done in the 1970s.
Another experiment was carried out in Canada where they were able to manage to completely eliminate poverty for 5 years in the city of Dauphin. Experimentation with complete UBI systems have been pursued in other countries such as Namibia, Brazil and South Africa. The results coming from the latter countries are going to be fundamental to test this system. The reason is that a basic income, which is equal or above the poverty line, might have a greater social and economic impact in developing countries where the percentage of people living below the poverty line is higher, compared to the one of the developed countries.
This year, Finland has also started a two-year government-funded experiment in the application of a universal basic income system to see if this system might be an alternative to conditional welfare. One of the main goals of the experiment is to monitor the behaviour of the people receiving the basic income. In fact, one of the critics moved against the universal basic income is that there would be a tendency of the receivers to either remain unemployed or not work as hard as they would do in the absence of the income re-distribution. What it is also supported by the Finish government is that they are going to show how the basic income actually will increase motivation of unemployed people to look for a job compared to conditional welfare. In the latter case as soon as you find a job you’ll not have anymore access to the government subsidies. If you are barely better off by working you will probably decide to remain unemployed. In the case of universal income instead this disincentive would not exist. Moreover, another important aspect that might be analysed, it is the amount of universal income that should be distributed to the people as different amounts might have different effects on the population of the country.
Another interesting part of the experiment might be to compare the costs of a universal basic income for everybody, comprehending the wealthiest, with a conditional welfare system. Firstly, the fact that the selectivity behind the conditional welfare system excludes those citizens that are at the border line of the “requirements” might be important to underline. Secondly, in itself the fact that there is a selection in terms of who gets the benefits and who doesn’t is already a huge cost in terms of time and money due to the expensive bureaucratic procedures. What will have to be seen is if the universal income in itself will be in total costlier than that amount of money spent behind the conditional welfare system. Moreover, a “safety” income even for the richest, in the case something in their lives would go terribly wrong, can be considered as a factor for which the “universality” of the income can be seen as a safety parachute.
As specified at the beginning of the article, another important reason for which maybe one day the basic universal income will be needed is related to the process of mechanization that has started in the 1990s. According to the CEO of Tesla, Elon Musk, the robots in less than 20 years will be able to replace 50% of our labour while at the same time increasing incredibly the productivity and so the world’s general wealth. The huge issue though will be that due to labour saving the unemployment rate will hike in the next two decades. In order to avoid an increase in unemployment and inequality a universal basic income will probably be needed.
New experimentation will be carried out in order to see the efficacy and efficiency of this system. We will see in the future if our nations will need and will have to use this social security tool in order to face the new challenges that this fast-evolving and globalized world will face.
WRITTEN BY DAVIDE DE PROSPERIS FOR BESA
PLEASE DIRECT ANY INQUIRY TO AS.BESA@UNIBOCCONI.IT
