The concept of universal basic income is often used by governments around the world as an economic tool to achieve political goals. The utility of this concept has been widely debated in the field of economics. While economic liberals maintain that a minimum income scheme will dilute competition and increase complacency among the workforce, those who believe in government intervention in the economy maintain that a minimum income policy will reduce poverty and improve the standard of living of the general public. In order to be unambiguous, the difference between a minimum wage and income has to be clarified. A wage is paid at regular intervals i.e. daily or weekly; it is also the compensation for labour and may not include any other benefits. However, an income is an all-inclusive term used to refer to wages and benefits that the employee is paid. The article will concentrate on the concept of a universal basic income scheme and the concept of the minimum wage will be analysed where relevant. In the succeeding paragraphs, the article will provide insights into the benefits and disadvantages of implementing a universal basic income. It will introduce the current situation in India with respect to the concept of universal basic income. The universal basic income standards around the world will also be reviewed.
A basic income is a payment of cash to all individuals in a nation by various levels of the government– central, state or local, without requiring the recipients to meet any other criteria such as a means test or employment test. The purpose of a basic income is to eliminate abject poverty where all individuals in a nation are able to afford the basic necessities to sustain life – food, housing and healthcare. A basic income is a minimum threshold of cash that is disbursed to all individuals, it is not a pension given to people who are unemployed or retired. Therefore, even a person who holds a job will be entitled to a basic income. Because the income is ‘universal’, it will be accessible to all individuals from all economic sections of the society. However, its utility as a source of funds will be fully experienced mostly by the economically weaker sections because they may not have access to any other source of income. The income is given to individuals as opposed to households. However, some distinction may be made based on the age of the recipient – for instance, the income may be disbursed only to individuals over the age of 18 and so on. The minimum wage, on the other hand, is the basic wage (compensation) that must be paid to all workers/employees for the work that they perform, as prescribed by the law. The minimum wage depends entirely on the labour rendered by the worker. If the worker fails to work, then he/she will not have access to a minimum wage but may have access to a minimum income if the government has implemented the policy of universal basic income.
The concept of universal basic income is controversial because there are arguments both in favour and against its utility. The economists and politicians who promote this concept believe that such an income will help in the sustenance of the individual and will prevent individuals from living in inhuman and wretched conditions. The basic income is calculated according to prevailing economic conditions and cost of living should be able to provide a comfortable means for the recipient to obtain food, shelter and healthcare. The supporters also contend that a basic income would promote the overall standard of living of the country. It may also act as financial security that would give recipients some degree of moral confidence. The disbursal of a basic income would also limit the number of people who would potentially become a public charge (required to be fully taken care of by the state). Those who oppose the concept of a universal basic income believe that it creates a ‘welfare trap’, where recipients of the income will become forever dependent on the state, which will, in turn, trap them in a cycle of poverty. Moreover, the disbursal of basic income to all individuals, including those who are employed or productive, will reduce the national income as a whole because the policy will be a drain on the public exchequer. Those who endorse free market and market capitalism state that a basic income policy will hamper the competition in the market by setting a minimum benchmark income which may be received despite not being employed.
Many nations around the world, including India, have established basic income policies. However, most of such policies are not universal; they are usually targeted to specific individuals – residents of a state, agriculturists, senior citizens etc. The Permanent Fund of Alaska in the state of Alaska, United States, provides a basic income funded from oil and gas revenues to residents of the state. Norway and Singapore have established similar systems where the Government Pension Fund of Norway and the Central Provident of Singapore act as funds to support pensions or basic income schemes of the respective governments. The proposals of basic income schemes in other countries such as the UK, Canada and Germany are yet to come to fruition, while proposals in Switzerland were vetoed in 2016, going to show that implementation is not always straight-forward. In India, different states have implemented or have proposed to implement basic income schemes. In Telangana, the Rythu Bandhu (literally, farmers’ friend) scheme provides close to 6 million families 4000 rupees per acre twice a year (for the Rabi and Kharif harvests). The amount is paid directly to the beneficiaries through cheques. This scheme would cost the state exchequer around 12,000 crore rupees in the financial year 2018-19. Rahul Gandhi, President of the Indian National Congress, has proposed a nation-wide minimum income to the poor if his party forms the government after the next general elections scheduled for April-May 2019. This scheme does not yet define ‘poor’ and if implemented, it is expected to cost the exchequer around 3-4% of the national GDP. For the scheme to be apolitical and functional, it should be implemented by a council of experts who understand the economic costs of such schemes. There also needs to be a clear definition of the terms of eligibility (income levels, age etc.). The challenges that the government may face in implementing basic income schemes on a pan-India level may be documentation of personal information of all recipients, which may cause privacy concerns, as was seen in the Aadhaar case. Central disbursal of funds to the beneficiary would be a logistical nightmare. The states may wish to tweak the provisions to suit their needs, which in turn may cause political disagreements.
The basic income schemes, universal or not, have not been widely implemented around the world at the national level. There are, however, many programmes that have been implemented at the sub-national and local levels and those that target particular sections of people, as illustrated above. The reason for the disinclination towards such schemes seems to be the estimated burden on the public exchequer that the governments are unwilling to bear. Moreover, implementing a basic income scheme, without thorough analysis, would be an impulsive decision where politicians promise a quick remedy to deep-rooted socio-economic problems. In a country like India, it would be wise for the states to determine their needs and implement policies based on such needs. A full-blown scheme at the national level may have to face challenges related to logistics and implementation, as illustrated in the preceding paragraph.
Johri A. (2019, February 3). Why everybody loves Universal Basic Income. The Indian Express. Retrieved from https://indianexpress.com/article/india/universal-basic-income-scheme-farmers-budget-2019-rahul-gandhi-5566350/
Kaur C. (2019, January 30). Rahul Gandhi’s mega poll promise: Minimum income for poor. The Economic Times. Retrieved from https://timesofindia.indiatimes.com/india/rahuls-mega-poll-promise-minimum-income-for-poor/articleshow/67732462.cms
Wijnen P. (2018, May 6). Universal Basic Income Experiments Across The World. Norway Today. Retrieved from http://norwaytoday.info/finance/universal-basic-income-experiments-across-world/
Image credit: Universal Basic Income
Subscribe to our weekly newsletters.
Get all our posts, blogs and video content via e-mail.