Introduction to Universal Basic Income

Provided a basic income to every person to take care of his basic needs is the main concept behind the universal basic income. This scheme is worth considering due to the promising possibilities opened up by the "Jan dhan - Aadhar - Mobile" infrastructure "JAM trinity".

However though this idea shall appeal to all political classes, there could be some implementation hurdles that need to be sorted out.

Features of the UBI are:

1.Universality

2.Unconditionality

3;Agency - supporting the recipients choice and not dictating him.

The time has come to think of UBI as a basic right of a person just like he has other inalienable rights by virtue of being a citizen.

Every person has the right to lead a life of dignity and respect and also get access to basic goods. This can be made possible with UBI.

Why Universal Basic Income ?

Social Justice:

Any society that doesn't give its members a stable minimum income. Those who receive an income become the stakeholders of the society and so it is only essential that to make a society just and stable we have to guarantee the members of it social justice.

UBI could lead to better productivity by reducing wastage of government schemes. It could enable reduction of poverty. It can lead to a social security for people and thus the labor market could open up leading.

It can also promote entrepreneurship as people might prefer taking risks when their basic needs are assured. The working conditions shall also improve as workers shall no longer be forced to work under exploitative conditions for their needs.

It also creates equality amongst the citizens.

Anti Paternalistic:

The state has made the poor dependent on it for basic needs. The government gives them food and other subsidies as it feels they cannot be trusted to make decisions of choice on their own.

UBI shall change this and the poor shall be free to choose the needs that they want to fulfill from their basic income.

Free State to focus on other Public Goods:

The leakage and corruption riddled system of public welfare shall become more efficient. The wasteful expenditure shall be curtailed. Once the state is free from its obligations to provide basic needs such as food , shelter etc by providing cash transfers, it can focus on improving its service in other areas. Currently 950 Centrally sponsored schemes and sub schemes are in implementation which have cost of 5% of the GDP.

The poor now with basic income shall get access to credit and so this shall promote financial inclusion.

Inclusion errors better than exclusion errors:

The problem with targeting subsidies is the identification of the beneficiaries. The government has to come up with criteria based on income and calories and then the census is conducted. This poverty line is used for targeting but even such an exercise is full of problems as the people are often left out, or rich manipulate information to get in.

To prevent this states like Tamil Nadu and Chattisgarh prefer universal access to schemes. This leads to better delivery and reduces leakages. This also ensures that all the needy are included even though a few rich to take benefits.

Misallocation in the current schemes:

The existing schemes like the Food security and the NREGA have a problem that the poorest regions of the country are often the ones that get inadequate resource allocation.

This is due to the problem of poor state capacity in execution of such schemes. A UBI shall resolve these issues as the cash transfer to account need not depend on the state apparatus to implement.

Case Against Universal Basic Income

Some would argue that when their basic needs are fulfilled the workers would not be interested in work. They would prefer leisure.

This argument assumes that workers work only for fulfilling their basic needs. The level of UBI is too low to ensure that the workers would be preferring leisure to employment due to it.

The same argument was made to fight wage rise by employers saying that this would encourage leisurely behavior amongst the workers.

The UBI income may be controlled by men who shall decide the spending of it. This was not possible in other social welfare schemes. Spending on temptation goods like liquor, paan and other intoxicants might increase.

If the UBI becomes a failure the political cost of exit shall be too high for such a large scheme to close down.

Unlike food subsidies that are not subject to market fluctuations, cash transfer might fluctuate due to the impact of factors like inflation etc that might reduce the purchasing power of the individual. A basic income of Rs. 1000 per month might be sufficient in this month but not in the next month due to rising prices. But a kilo of rice given in any month shall be enough for the person.

The rich shall also get access to UBI and so more inclusion errors i.e. including wrong beneficiaries for whom the income is not meant.

Such a scheme shall put pressure on the banking systems ability to cope. Currently the country has large unbanked areas and the link from account to home which is the last link of the cash transfer cycle is the weakest.

Removal of fertilizer and food subsidies and also NREGA shall increase the cost of food and fertilizers also the rural wages shall drop and this means an increase in UBI.

The importance of Aadhar in identification and authentication must be carefully done as the failure rate of authentication is high in some states like Rajasthan [37%]. The other reason is the government hasn't devised a program to allow disability hit people with no hands to have Aadhar cards and so such at risk groups are excuded.

Preventing Universal Basic Income to the Rich

Name and Shame:

Publish a list of beneficiaries who are rich and yet taking advantage of this.

Make it mandatory for self certification:

Those who want to be beneficiaries shall need to self certify their credentials and since the benefit to time spent in doing this is low. the rich might opt out of this scheme.

Opt out scheme:

Give a chance to voluntarily opt out of the scheme for the people. Also those who wish to take advantage of the scheme should have bank balance below a threshold and no luxury goods like cars, TV's etc. and so rich can be excluded.

Chapter Review

Q1:UBI is for

  • poor
  • poorest of the poor
  • botton 40% of society
  • everyone


Q2: %of GDP spent on central schemes is

  • 10
  • 15
  • 5
  • 8


Q3:Measures suggested to exclude rich from UBI include

  • opt out facility
  • self certifying everytime
  • name and shame beneficiaries
  • all


Q4:UBI if replaces welfare schemes then

  • cost of food shall rise
  • better targeting of beneficiaries
  • banks shall open branches in rural areas too
  • all


Q5: Highest subsidy goes too

  • food'<'fertilizer'<'fuel
  • fuel'<'fertilizer<'<'food
  • fuel'>'fertilizer'>'food
  • none