The concept of Universal Basic Income (UBI) has received a lot of attention in the ongoing common effort to combat poverty. But can it really serve as a means of eradicating poverty? How effective can it be? This article will examine the benefits, drawbacks, and consequences of implementing UBI as an innovative social policy.
What is Universal Basic Income?
Universal Basic Income (UBI) is a program launched by a government to provide a regular, unconditional payment to all individuals or households within a certain jurisdiction. While this mechanism has both supporters and opponents, it is important to analyze both the possible benefits and potential drawbacks of its adoption.
Can Universal Basic Income reduce poverty?
UBI proponents believe that giving low-income individuals and their families a reliable source of income is a great way to combat poverty and unfairness in society.
They argue that UBI will provide access to high-quality education rather than having to work to earn a living, and children in poor households will have free time to learn as their parents will have additional income in the form of the monthly UBI. Education is widely acknowledged as being a means to eradicate poverty since it can provide a number of opportunities, including access to the job market, the potential to start a business, and an increase in employment. In addition, supporters of UBI state that more individuals will be able to afford healthcare which means that UBI will improve both a person’s financial situation and health outcomes.
But is it as simple as that?
Apparently, other instruments and measures are much more successful at lowering poverty rates. In comparison to UBI, other policies such as targeted social welfare programs, fostering employment, providing access to high-quality healthcare, and social safety nets have demonstrated more success in reducing poverty.
UBI is complex and costly
UBI may not be sufficient to pull everyone out of poverty, particularly in areas that have substantial living expenses. The amount of money required to provide basic necessities could differ significantly based on areas such as medical care, schooling, housing, and other essential expenses.
According to the Organization for Economic Co-operation and Development (OECD), UBI distributed at a flat rate to all individuals would not significantly lower poverty rates in modern nations and would instead require significantly higher taxes to finance its simplicity.
Poverty is a complicated issue that is driven by variables other than wealth. Making sure that everybody benefits from access to quality healthcare, affordable housing, and job prospects are among the most crucial reasons for it to be eliminated. It is possible that UBI will not be able to address all of these issues on its own and will need input from other initiatives (social, educational, etc.).
While UBI can offer financial assistance, basic structural problems such as persistent discrimination, restricted access to resources, and disparities in wealth distribution might not be directly addressed by it. To alleviate systemic inequities and encourage social and economic mobility, more tools and policies are needed.
See also: Top 10 world problems and their solutions
Universal Basic Income: Pros and Cons
Poverty is a complex problem that affects numerous people from different nations. Many factors such as unemployment, low salaries, poor social services, and discrimination, can influence the level of poverty.
According to World Bank data, around 648 million people on Earth live in extreme poverty. So, how can UBI help?
✔️ Pros of UBI
- The elimination of income inequality is one of the main benefits of UBI. By giving everyone a minimum level of income, UBI can help to close the growing wealth disparity that is present in many nations.
- UBI can help to provide freedom of choice – people can either return to school or choose to remain at home to look after a family member.
- With UBI, employees could wait for better circumstances, for a better job, or for higher pay. Instead of simply concentrating on immediate financial needs, UBI might allow people to pursue career options that meet with their interests and ideals and could promote creativity and entrepreneurship.
- The “poverty trap” that exists in conventional aid systems can be eliminated by UBI.
* People receiving welfare assistance may find it challenging to overcome poverty in a condition known as the “poverty trap” whereby benefits decline as income rises. UBI strives to free people from this trap by giving them a steady income independent of their employment situation.
- UBI supporters contend that the strain of UBI on government budgets will be outweighed by greater economic growth and lower poverty rates.
❌ Cons of UBI
- The funding issue is one of the biggest obstacles to the implementation of UBI which, if undertaken on a large scale, could be extremely costly.For instance, according to estimates, if implemented in the UK, the costs would vary between £67 billion and £427 billion annually.A country must either find a way to increase tax revenue or create new services to cover the high cost of offering UBI.
- Unearned income might discourage individuals from seeking employment because UBI could make employment appear to be optional. Many people may choose to live off this free money and refrain from developing professional abilities to add to their resumes.
- UBI could maintain a declining labor force engagement rate: some individuals may decide to just accept the payouts rather than work to avoid ever having to find an employment opportunity in a competitive atmosphere, hence lowering an already-falling workforce engagement rate.
- UBI raises equity concerns. No matter what their socioeconomic situation, everyone receiving UBI receives the same amount of money which in turn might not effectively address certain needs or social disparities. Some contend that focused assistance would be more successful.
- In order to successfully implement UBI, thorough planning and an analysis of the unique circumstances are necessary. This involves considering any potential impacts on current social programs, tax structures, and labor markets. Inadequate attention being paid to these areas could have unforeseen consequences.
Which countries have implemented UBI?
Actually, at a global level, no governments are currently providing UBI. For a short time, just two nations – Mongolia and the Islamic Republic of Iran – implemented a national UBI.
UBI systems are more prevalent when smaller in size. One such program, the Alaska Permanent Fund, can be witnessed in Alaska. Its impartial and ubiquitous nature makes it somewhat close to a pure UBI because, irrespective of income or work position, the payout is available to nearly all Alaskan residents.
Canada, Brazil, Kenya, Germany, Finland, and other nations have all experimented with UBI.
For instance, in 2017-2018 an experiment was carried out in Finland where the UBI was set at 560 euros a month. The two-year program offered 2,000 randomly chosen jobless individuals a monthly income of €560 without any obligation to look for employment and no reduction in their benefits if they found a job. The experiment sparked debates as to whether or not someone should be able to live entirely off UBI but unfortunately, the final results of the surveys and the rate of employment of the UBI beneficiaries were not made public.
Final word
Although there are still many issues with its implementation and funding, UBI is an alternative approach to ending poverty and reducing economic inequalities. The effect of UBI on eliminating poverty can differ based on the specific strategy, execution, and context. In addition, the high cost of UBI remains a major drawback of the program. All in all, UBI may offer a safety net and increase financial stability for people, but addressing poverty in its entirety requires a detailed strategy encompassing numerous techniques and policies.
