Universal Basic Income (UBI)


  • Universal Basic Income (UBI), also known as basic income guarantee or universal demogrant, is a welfare measure implemented by the government in which every citizen is entitled to a certain minimum sum of money as income irrespective the person’s socioeconomic status or livelihood skills. The three basic features of UBI are universality, unconditionality, and agency.

Why is UBI needed?

  • The most important reason behind the idea of UBI is that it canensure social justice. The hallmark of a just society is to ensure for all its citizens a decent minimum level of income. By doing so, every member of the society is given a stake in its sustenance. A UBI based society treats all its citizens as free and equal individuals.
  • In the presence of a well-functioning financial system which is accessible by all the citizens, UBI can become the single most important tool forpoverty reduction. It can reduce the levels of absolute poverty at a much faster pace than any other welfare/poverty alleviation scheme.
  • The current model of welfare state treats its citizens as objects of government policy. It presumes that the poor cannot take economic decisions which are relevant to their lives. Through unconditional transfers, UBI gives the poor the agency to take their own decisions. UBI is premised on the fact that the circumstances of poverty are different for different individuals meaning that the risks and shocks they may face also vary. Hence the state may not be the best agent to determine the priorities of different individuals.
  • Unlike many other welfare schemes which are targeted towards the household, the UBI takes into account the agency of the individual, especially of women within the households and can, therefore, be a step to ensure gender justice.
  • In the present era of uncertain employment conditions, UBI acts as a support system to the individuals by providing them with a greater bargaining power. With an assured minimum income, individuals cannot be forced to work under exploitative conditions just to meet survival needs. Hence, UBI can pave the way for quality employment.
  • Owing to the weaknesses in our existing welfare schemes, misallocation of resources, leakages, and exclusion of the poor often takes place. When the JAM (Jan Dhan – Aadhaar – Mobile) Trinity is fully in place, it becomes easy to adopt a system (such as UBI) which hasgreater administrative efficiency. Though UBI cannot be a substitute for building state capacity to deliver essential public goods and services, it can ensure that the welfare schemes of the state are more efficient so that the state can focus on the provision of other essential public goods.
  • Apart from these, UBI also has psychological benefits for individuals by eliminating the pressures of finding a basic living on a daily basis, and by acting as a safety net in case of health, income, and other shocks. The drive towards UBI can increase financial inclusion

Objections to UBI

  • UBI can reduce the incentive to work, which can, in turn, reduce the productivity of workers. Such a consequence can be disastrous for economic growth. However, such fears appear to be exaggerated since in most cases the basic income is going to be pegged at minimal levels only which is unlikely to reduce the incentive to work. It also amounts to a diminution of human dignity by assuming that the only motivation to work is the necessity of survival, without which people lack any interest in work.
  • UBI raises the moral question ofwhether income should be detached from employment. This can be answered by citing the privileges enjoyed by the rich in terms of inheritance of wealth. That is, if the rich can be allowed to earn large incomes without any work, there can be nothing wrong if the state provides a certain basic income.
  • Another concern raised by UBI opponents is thelack of reciprocity or the unconditional nature of transfers i.e., should the individuals be paid a minimum income irrespective of their contribution to the economy. The idea of reciprocity overlooks certain kinds of contribution by the individuals which are not counted in national income such as the domestic work done by women. UBI can be seen as a recognition by the state of such contributions.
  • Other than these, objections to UBI include an increase inconspicuous spending (especially by male members for wasteful purposes), the cost associated with exit (once introduced, it may not be easy to wind up in future), exposing the poor to market risks (price fluctuations of essential commodities) among others.
  • UBI has to be universal to eliminate exclusion errors i.e., genuine beneficiaries being left out, due to deficiencies in beneficiary identification.
  • According to the Economic Survey 2016-17, the cost of implementing UBI is around 4.9 % of GDP with around Rs. 7620 per capita per annum. All the existing centrally sponsored schemes and central sector schemes together account for around 5.2 % of GDP. However, this is under the presumption of defacto targeting of around 75 % of the total population. It recommended that there must be gradualism in implementing UBI. It must first be introduced for vulnerable groups such as SCs, STs, women etc. before scaling it up for all the sections.
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