Universal Basic Income: The ‘free money’ idea

With its own pros and cons, the free money idea is here to stay in the long run. The debates are going to go longer and harder. You will hear more and more about it in the times to come, as AI and Robotics replace more humans.... Read on.

What is Universal Basic Income (UBI)?

Universal basic income (UBI) is a model for providing all citizens of a country or any specific geographic area with a definite sum of money, regardless of their income, resources, employment status or any criteria for that matter. 

Purpose of UBI

The purpose of the UBI is to prevent or reduce poverty and increase equality among citizens. Thus it ensures security and dignity for all individuals.

Rationale Behind UBI

The essential rationale behind basic income is the idea that all citizens are entitled to a livable income, whether or not they contribute to production, and despite the particular circumstances into which they are born and brought up.

Need for UBI

Recently, UBI has been in the news as one way proposed to support a workforce displaced by automation. Musk, Zuckerberg and many others believe that robots and AI-enhanced software may replace most human labor in a not-too-distant future scenario sometimes called the robot economy.

Five Key Traits of UBI

BIEN ( Basic Income Earth Network) lists the following five defining characteristics of basic income:

1. Periodic

The money is distributed in regular payments at a defined freuqency - monthly or fortnightly in most cases.

2. Cash payment

The money is always to be distributed as funds rather than, for example, vouchers for goods or services.

3. Individual

Each citizen (or adult citizen) receives the payment, rather than each household.

4. Universal

All citizens of a region or a country (wherever UBI is implemented) receive the payment irrespective of any criteria.

5. Unconditional

Recipients are not required to demonstrate any need or willingness to work.

How much is the amount?

The amount is gauged for subsistence - should be enough to take care of the individual’s basic needs but not enough to provide a lot of frills.

Proponents of UBI

Thomas More introduced the concept of guaranteed income in his 1516 book, Utopia. Since then, proponents have included Thomas Jefferson, Thomas Paine, Abraham Lincoln, Bertrand Russell, Franklin Roosevelt, Pete Drucker, Margaret Mead, Milton Friedman, John Kenneth Galbraith, Martin Luther King Jr., Marshall McLuhan, Elon Musk, Sam Altman, Chris Hughes and Mark Zuckerberg – among many others.

UBI in India

Sikkim will soon become the first state in India to roll out Universal Basic Income. Sikkim’s ruling party, the Sikkim Democratic Front (SDF), which has decided to include UBI in its manifesto ahead of the Assembly elections later this year and aims to implement the scheme by 2022, has already started the process to introduce the unconditional direct cash transfers.

What UBI means to the government?

There would be drastic changes in the way government spends its revenue generated from taxation and other sources. Currently, the government spends its revenue on various services as well as on subsidies. UBI would mean that government may move away from service delivery and empower its citizens to access services through cash transfer. Of course, there are various political constraints at play here.

Implementation Ease

UBI is easy to implement. Because of its universal character, there is no need to identify the beneficiaries. Thus it excludes errors in identifying the intended beneficiaries – which is a common problem in targeted welfare schemes. More so, with Adhaar and other logistics in place, direct cash transfer to a persons bank account is already in place in a country like India.

Are there other income models as well?

Yes, there are many more income models. UBI is one example of a guaranteed income model. The main alternative model is a guaranteed minimum income (GMI) system, sometimes called a basic income guarantee (BIG), which involves varying needs-based supplements designed to ensure that all citizens have enough to live on. In that system, only low-income individuals receive payments - unlike UBI where everyone recieves the same payment.

What Critics Say

Critics of guaranteed income argue that it would be too expensive to implement such a model. Also, this model would lead to free money for all and would create a disincentive to work.

There is no guarantee that the additional income will be spent on education, health etc. there are chances that the money will be spent on ‘temptation goods’ such as alcohol, tobacco, drugs etc.

It is also likely to fuel inflation, since certain sections of labour will not be available for the kind of work they were doing at the same price. 

What Proponents Say

However, the debate goes on. 

Proponents believe that it could be cheaper in the long run, considering the spiraling effects of poverty. 

Also it would eventually promote creativity and entrepreneurship among those freed from the struggle to survive.

Summary

Having myself been entangled in a mindless Rat Race for nearly two decades, I never realised my own full potential and the extent to which I can impact the world around me - until I experienced Financial Freedom. With financial freedom, came its most important bi-product - the freedom to think. I never designed my life until I got financially free. Till then, I was just being driven. 
If this could happen to people like you and me, then imagine the sort of constraints playing in the mind of a person who is struggling to survive on a daily basis. Every single day, they go out thinking how they are going to feed themselves and their families today. Can they think big? Can they think different? Can they think of crafting their life? I do not think so. 
But once they are free of their daily struggle, their mind can also open up to unlimited possibilities - thus creating a better place for all us to survive and thrive. This would help the bottom most layer to choose the kind of work they want to do, rather than forcing them to do unproductive work to meet just their daily needs.

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The debate is on. And everyone has the right to their opinion. But the debate is not going to settle down soon !

Regards

Manoj Arora

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