Universal basic income

Fuga Nomura

Basic income policy is a proposed government-guaranteed payment that each citizen receives Its purpose is to ensure all people have the means to purchase necessities and improve their quality of life by reducing their financial stress (Erik Olin Wright, 14 Feb, 2017). There are many countries that have used Universal Basic Income (UBI) including countries such as the United States, Brazil, India and many more, therefore showing that universal income is an important policy in a way of ensuring economic stability. Nevertheless, due to the fact that only around 7 countries have used or tried basic income, it shows that the policy has many drawbacks

Figure 1: Correlation between poverty and UBI

To begin with, one of the advantages of using universal basic income is that it reduces the poverty rate of the country. As the country provides money for the people to survive, the poverty level in the country will decrease. which is shown in Figure 1.After the worldwide imposition of UBI, the overall Poverty Rate decreased while the Fiscal Cost has increased.This means that it would help towards reducing the amount of poverty leading to some extent economic growth.

Furthermore, some argue that UBI could fight income inequality. The safety net UBI provides could help people increase the amount of money a person or an organisation achieves. For example, they could pursue a college degree so that they can augment their future earnings. (ProCon.org)

As the degree of income inequality and poverty are one of major components in determining economic wellbeing, UBI is necessary in terms of keeping the economy healthy and functioning. towards the economy due to the fact that when people are poor, they lack the money to sustain the necessary economic activities, such as basic health care, education, food and other basic needs. This results in a low level towards the human capital, consequently leading to low productivity and output which is a major influencing component of high incidence towards income inequality, therefore creating a poverty trap. (Livingston, 25 July, 2022)

Although UBI has benefits in reducing poverty, a major problem for this policy is that it is very costly. For instance if the country uses the policy of UBI in order for a country to provide money for everyone in the country to pay for their basic needs they will need to pay for half of their federal budget

All of this revenue is derived from the tax that residents are required to pay for the country's internal operations, such as new infrastructure, public health, education, and security. Looking at all the payments that the government has to pay, allocating half of the federal budget to UBI does not appear to be an efficient use of the tax revenue. (ProCon.org, 25 Feb 2021)

Another problem about the UBI is that it reduces the initiative to work. Economists and other critics have argued that they encourage laziness. If the government gives money to people not contributing to employment, due to low investment in capital it will lead to economic stagnation (ProCon.org, 25 Feb, 2021) The influence that economic stagnation gives to the country and their economy is flat job growth, no rise in wages, and an absence of stock market highs This indicates the great impact that economic stagnation has on the overall economic stability of the country. (ProCon.org, 25 Feb 2021)

Overall, despite several benefits that the UBI can bring, the UBI is not the most efficient way to ensure the basic needs of the people living in the country. A less extreme policy such as child tax credit or negative income tax has a better chance of passage These policies would provide the same benefits as UBI, such as reduced poverty, but at a significantly more reasonable cost.

Bibliography

Erik Olin Wright. “Can the Universal Basic Income Solve Global Inequalities? | UNESCO Inclusive Policy Lab.” Unesco org, 14 Feb 2017, en unesco org/inclusivepolicylab/news/can-universal-basic-income-solve-globalinequalities.

Livingston, Amy “Pros and Cons of Universal Basic Income (UBI).” Money Crashers, 26 July 2022, www.moneycrashers.com/pros-and-cons-universal-basic-income/.

ProCon org “Universal Basic Income - Top 3 Pros and Cons.” ProCon org, 25 Feb 2021, www.procon.org/headlines/universal-basic-income-top-3-pros-and-cons/.