A friend asked me to do a post on Universal Basic Income, a topic that has had it’s ups and downs.
I thought I’d do an overview of UBI and basic income schemes in general and give my 2 cents on it.

At the outset, I will state that I have a strong bias against basic income schemes when they are funded by public entities, in extension the tax payer.

I’m not going to pretend that I am unbiased here, I definitely do have a bias, but, will do my best to not let it color my judgement until you choose to take my 2 cents.

Basic Income

Basic Income as a concept is incredibly old.
The concept vaguely existed for a long time until it was finally derived from the existing welfare schemes, which add conditions on top of Basic Income, replace monetary income with subsidies/goods and deliver using public entities. This form of welfare scheme goes back several thousand years, even further than the grain dole of the Roman Empire.

There’s even evidence that the first Muslim Caliph had implemented a guaranteed income scheme for the arabs muslims in his caliphate.

It has now come a full circle and we’re back to Basic Income.

The features of a basic income are quite simple, they are tax payer funded direct money transfer schemes that are paid to:

  • everyone in a country
  • as individuals
  • in specified time durations
  • without discriminating

Sounds good in theory, which is why its such a sticky idea.

The concept has ebbed and flowed over the past 500 years and we’re in the peak of the current flow.

If this basic income scheme is for every single Citizen of a country, its called a Universal Basic Income(UBI) scheme.
If there are further restrictions, e.g. religion, its called a Guarenteed Income(GI) scheme.

Fundamentally, the intent is the same, to try to replace existing welfare schemes and get people to work.

Some proponents of this, including people whose works I like reading - like Milton Friedman, have argued for a Negative Income Tax(NIT), which creates an incentive to work by supplementing pay when they fall under the tax bracket, and Hayek, who argued for it from a moralistic point of view.

Other proponents have argued that with the wage structures and cost of living we have today, a welfare scheme like the UBI would enable workers to offer their services at much lower rates than they otherwise might, as a result, getting more people to work.

Some of these ideas do sound plausible and there are better people than I do doing experiments, some on small scales and some on large scales (like the MGNREGA in India), which have given indications as to the actual effect of the implementation of such schemes (it hasn’t been very positive on large scales, reasonably positive in small scales)

2 Cents

With that overview, which I hope was reasonably objective, here’s my take on it, for whatever its worth (2 cents apparently)

I tend to have a negative view on any and all tax payer funded programs, especially when they claim to replace existing tax payer funded programs with a new, better, shiny one.
The fundamental reason for this is that one cannot opt-in/opt-out of any government mandated program, especially on large scales (it’s more malleable on small scales) As a result, it leaves any ‘beneficiary’ of such programs at the discretion of large faceless entities in the form of goverments.

With that fundamental reason covered, my opposition to UBI/NIT/GI is more direct. A lot of the opposition for such schemes states arguments like ‘People won’t work if they get free money’ or ‘People will act irresponsibly’.

My opposition for UBI is not on the basis of the concept itself, but, its application in the modern society.

As nations, we have all gone from reasonably high levels of market freedoms to high levels of regulation and bureaucracies.

The main argument for UBI is that it frees people up to do what they want to do and that’s a good thing. I agree.

Another way to do that would be to deregulate and reduce/abolish income taxes which in turn would reduce the burden on tax payers and private markets, which then could create room for concepts like UBI to be implemented.

The world that we live in does that enable people to be free, it puts people in chains of deceptively long length that we do not know we are held by until they are pulled from a distance, this distance is getting shorter as time goes by.

UBI as a concept is fine, but, there was a time when it could have worked, I don’t think it applies anymore, there’s a cleanup of existing schemes and reduction of governmental power necessary before something like the UBI could take root.

Another way in which I could find myself supporting UBI is, if it is made voluntary - only the people receiving the basic income would have to pay tax on it, this could create more equitable scenarios and would enable people to clearly discern between the alternatives and pick the one they would like to be a part of. One caveat is that this must be applied only a small scale, the fund and taxation must be controlled at a district level and not at a central/federal level.

It is an interesting concept to study nonetheless and the future will happen anyway.

Would love to hear what you think.

Thank you for reading

Sainath