Article: How can universal basic income work in large economies?

Culture

How can universal basic income work in large economies?

Some experts have labeled it as the need of the hour, while others have equated it with a communist state welfare scheme and warning that it will discourage entrepreneurial innovation among the youth.
How can universal basic income work in large economies?

The Swiss, in June 2016, voted on a very crucial referendum that asked the citizens if they’d like to have a basic income deposited into their accounts every month, irrespective of their social contribution. An overwhelming majority (77%) voted against the proposal. However, the Swiss referendum on the issue of universal basic income for all citizens has fanned a debate on the merits and demerits of the idea, and whether it would be beneficial for a large economy like China or India.

The idea of universal basic income

The idea of universal basic income stems from the fact that governments are already spending a lot of money on welfare schemes like social security and subsidies for purchases in certain segments. Instead of having to manage all of those payments individually, what if the government could just deposit a certain sum of money into every citizen’s bank account and thereby, give them direct access to that money paid off in subsidies. Under this scheme, every citizen of working age, irrespective of their contribution to society, would be eligible for the basic income package every month.

The detractors’ argument

The idea of UBI has received a lot of criticism. The first argument of the detractors is that a universal basic income will discourage people, especially the younger generation, from pursuing innovation and excellence in their work. If people are given money for not contributing to society in a fruitful manner, be it working in a factory or at a café or at a school, it will only encourage such behavior further where people will just shy away from any kind of work, and instead rely on the monthly basic income being deposited in their account.

Another argument posed by the detractors is that such a move will be a definitive signal towards the rise of the robots. It would make people complacent about their role in contributing towards a society that values their skills and would rather pass on the responsibility to technology.

Will it work for a large economy

Large economies are dependent on their abundant workforce to deliver cost effective results, whether it is in the form of innovation or GDP or in non-technical works like farming and transportation. Moreover, accounting for the large workforce would be a definite challenge that large economies like India or China would face. However, experts believe that UBI is an extremely relevant idea for a large economy like India as the government is known to falter when it comes to delivering welfare schemes for the citizens by failing to distinguish between those who truly need it and those who do not.

Having said that, the cost of providing such a scheme for every citizen, or even a section that is unemployed at the moment, would amount to nearly 12.5% of the GDP, which is equal to the annual budget of the Union Government. A scheme like this will be, therefore, unfeasible to implement.

In conclusion

Finland has introduced a basic income for its unemployed population in January 2017. Finland can experiment with the idea because of the smaller size of its workforce and a GDP that allows for such an experiment. The European Union still stands divided on the matter at the moment. Time will tell if the Finns have cracked the code to implement a universal basic income for all citizens, however, for a large economy like India or China, the idea still seems premature to be implemented.

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Topics: Culture, C-Suite

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