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Strong case for a Universal Basic Income in India but is it realistic?

April 13, 2017 Leave a comment

UBI IndiaI have blogged about the UBI and read about how India would provide a strong case for its implementation. The rationale for this is the fact that India’s welfare programmes (950 that the central government run) are numerous, inefficiently run and encourage corruption. Add to those the programmes run by each state and you have a bureaucratic nightmare unfolding. However this has been part of Indian society and not so long ago it took businesses 6 months to acquire a permit to import computers. The UBI was raised as an alternative to the inefficiency of welfare handouts and this unconditional cash payment be disbursed not just to the poor but to everyone. In more advanced countries the case for UBI is based on technology making many jobs obsolete and no new jobs being created in their place. Although this is not the case in India and it warrants the UBI for other reasons:

1. UBI is easier to administer than India’s current antipoverty programmes which largely take the form of subsidies paid to sellers of grain, fuel, fertilizer and other essentials. Current programmes are plagued by waste, corruption and abuse. UBI would save 2.07% of GDP.

2. By making everyone eligible, a universal basic income removes the messy task of identifying who is and who isn’t in need of assistance.

3. By paying money directly into bank accounts, it would allow India to do away with the vast administrative machinery currently needed to supply the poor with cheap wheat, rice and other goods.

4. By one estimate, around one-third of the grain set aside for India’s food-welfare program never reached the intended beneficiaries in 2012, the most recent year for which comprehensive data are available. Payments under a giant rural-work program are regularly delayed, leaving families in the lurch.

5. paying a basic income directly into bank accounts would encourage more people to use formal financial services, which would then help banks invest in expanding access to banks and ATMs.

Concerns

1.  households—“especially male members”—may fritter away their basic income on liquor and tobacco

2. India’s underdeveloped financial infrastructure could make it hard for many people to access their entitlements. According to the World Bank, there are only around 20 ATMs for every 100,000 adults in India, compared with 70 in South Africa, 114 in Brazil and 132 in the U.K. Although the government says it has helped open 260 million bank accounts since 2014, one-third of Indian adults remain unbanked.

3. The government paper suggests that 25% of the population should be excluded in order to make it more affordable. However deciding who is poor and who isn’t an easy task especially when over 35% of the richest 1% of Indians benefit from subsidized food to which they are not entitled.

4. There is a risk that a UBI would just supplement the welfare programmes rather than replacing them.

Source: The Economist – Wall Street Journal

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Should we have a Universal Basic Income?

November 28, 2016 Leave a comment

Post Cap MasonI posted on this issue last year when Kim Hill (Radio NZ) interviewed Paul Mason  – author of Post Capitalism (now out in paperback). Mason makes the point that we are going to live through a long transition from capitalism – the state and the market to post capitalism which is the state, the market and the shared collaborative economy. With technology taking a lot of the jobs in traditional industries in the UK he states that further development in this sector is not the way of creating new jobs. He talks about delinking work from wages by just paying people to actually exist – rather than tax to exist.
Liam Dann (NZ Herald) wrote a piece about Amin Toufani’s presentation at SingualrityU summit in Christchurch where he talked about people in the labour force having to learn, unlearn, and learn again – unlearning should be core competency. However as there maybe many people who will struggle with this concept Toufani believes that a universal basic income (UBI) may need to be adopted – see RSA video below.

Recent events – UBI

  • Switzerland held a referendum on a basic income in June this year but it was comprehensively turned down.
  • Finland is going to run a U.B.I. experiment in 2018
  • Y-Combinator, a Silicon Valley incubator firm, is sponsoring a similar test in Oakland USA.

Why has the UBI become such a popular talking point?

  • The automation of a lot of jobs has left people very concerned about redundancy.
  • The modern economy can’t be expected to provide jobs for everyone
  • The UBI is easy to administer and it avoids paternalism of social-welfare programmes that tell people what they can and can’t do with the money they receive from the government.

Concerns

  • Potentially drives up wages and employees will compare their wages with the UBI.
  • Easier for people to take risks with their job knowing there is the UBI to fall back on.
  • It takes away the incentive to work and lowers GDP
  • UBI – not cheap to administer and would likely cost 13% of GDP in the US

Positives

  • In the Canadian province of Manitoba where the UBI was trialled, working hours for men dropped by just 1%.
  • The UBI would make it easier for people to think twice about taking unrewarding jobs which is a good consequence.
  • In the developing world direct-cash grant programs are used very effectively – Columbian economist Chris Blattman.
  • In New Jersey young people with UBI were more likely to stay in education

If the U.B.I. comes to be seen as a kind of insurance against a radically changing job market, rather than simply as a handout, the politics around it will change. When this happens, it’s easy to imagine a basic income going overnight from completely improbable to totally necessary. 

James Surowiecki – New Yorker – 20th June 2016

 

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