About The Universal Basic Income

Context:

Recently, the positive outcome Universal Basic Income (UBI), can have on individuals and families has been highlighted through the WorkFREE pilot project, started in 2022 in Telangana.

Relevance:

GS II: Government Policies and Interventions

Dimensions of the Article:

1. Universal Basic Income (UBI)
2. WorkFREE Pilot Project: A Transformative Social Initiative
3. The Way Forward for Universal Basic Income (UBI)

Universal Basic Income (UBI):

Universal Basic Income (UBI) is a social welfare proposal that entails providing all beneficiaries with a guaranteed income through unconditional transfer payments. It is designed to alleviate poverty and replace other need-based social programs, potentially reducing bureaucratic involvement.

Pros of UBI:

• Poverty Reduction: UBI reduces poverty and income inequality by establishing a minimum income floor, particularly benefiting vulnerable and marginalized groups. It enables people to afford basic necessities like food, healthcare, education, and housing.
• Improved Health: UBI can enhance physical and mental health by reducing stress, anxiety, and depression associated with poverty and financial insecurity. It also facilitates access to better healthcare, sanitation, and nutrition.
• Streamlined Welfare System: UBI simplifies the existing welfare system by replacing multiple targeted social assistance programs. This reduces administrative costs and eliminates the complexities of means-testing and eligibility requirements.
• Financial Security and Freedom: UBI provides individuals with financial security and greater freedom to make choices about work, education, and personal lives.
• Economic Stimulus: It injects money directly into the hands of individuals, stimulating consumer spending and driving economic growth. This benefits local businesses, generates employment opportunities, and creates demand for goods and services.
• Entrepreneurship and Creativity: UBI empowers people to pursue entrepreneurship, take risks, and engage in creative or socially beneficial activities that might not be economically viable otherwise.

Cons of UBI:

• Cost: UBI is costly and requires higher taxes, spending cuts, or increased debt to finance it. This could potentially lead to inflation, distort the labor market, and reduce economic growth.
• Work Motivation: There is a concern that UBI may decrease motivation to work, leading to reduced productivity and efficiency. It could create a culture of dependency, entitlement, and laziness, discouraging individuals from acquiring skills and education.
• Inflationary Pressure: UBI could contribute to inflation as businesses adjust their pricing strategies to capture the additional income available in the market.
• Reliance on Government Support: UBI may lead to a reliance on government support, with some individuals becoming complacent or dependent on the basic income, reducing motivation for personal and professional growth.

WorkFREE Pilot Project: A Transformative Social Initiative

The WorkFREE Pilot Project is a collaborative effort between the University of Bath, Montfort Social Institute in Hyderabad, and the India Network for Basic Income. It is funded by the European Research Council.

Key Features:

• Under this pilot project, participating adults receive Rs 1,000, and children receive Rs 500 every month for a duration of 18 months.
• The project is currently supporting 1,250 residents living in five slums in Hyderabad.

Positive Outcomes and Transformative Impact:

• The WorkFREE pilot project is presented as a transformative initiative that has had positive outcomes for individuals and families.
• Some residents in Telangana who were adversely affected by relocation have found financial stability through the Universal Basic Income (UBI) support provided by the project. For instance, they used the cash support to start a bangle business, resulting in a significant improvement in their income.

Utilization of UBI Support:

• The residents have used the cash support for various purposes, including buying food, fuel, clothes, and paying utility bills, which typically constitute a significant portion of their monthly expenses.

Similar Pilot Projects:

• The Self-Employed Women’s Association (SEWA) conducted a pilot project in Delhi and Madhya Pradesh in 2011. In Delhi, approximately 100 families living below the poverty line received Rs 1,000 per month as part of the pilot project.

The Way Forward for Universal Basic Income (UBI)

• Balanced Income Amounts: To ensure that UBI does not discourage work while providing essential support, the amount provided as a basic income should be carefully balanced. Striking the right balance is crucial to maintain individual motivation for employment and self-sufficiency.
• Complementary Support Systems: The effectiveness of UBI can be enhanced by implementing robust support systems, including universal healthcare and education. These complementary measures can ensure that individuals receiving UBI have access to essential services that contribute to their well-being and quality of life.
• Alignment with UBI Principles: While schemes like cash transfers align with the principles of UBI, they often target specific demographics or populations. This targeted approach can carry the risk of excluding potential beneficiaries and may not cover everyone who could benefit from a basic income.
• Efficiency and Reduced Misallocation: To address issues related to misallocation of funds and reduce leakages in existing welfare schemes, introducing UBI is suggested as a more efficient option. UBI’s universality can minimize administrative complexities, ensuring that financial support reaches those who need it while reducing overhead costs associated with means-testing and targeting.

-Source: The Hindu