Examining Universal Basic Income: A Handbook for Understanding Ideas, Proof, and Methods
Universal basic income (UBI) represents a transformative concept with far-reaching implications across various domains. It is characterized by its universal, unconditional, and cash-based nature, promising significant changes in numerous areas such as social welfare coverage, fairness in societal contracts, power dynamics within labor markets, and gender equality. For many, UBI resonates as a response to the pressing need for social justice in the face of widening societal disparities. It is not merely viewed as a program but as an aspirational societal ideal.
UBI also garners attention as a potential solution to address the anticipated job displacement resulting from automation and to rationalize the complex landscape of existing state welfare schemes. Additionally, proponents argue that UBI has the potential to empower individuals by reallocating revenues derived from natural resources directly to citizens. Despite the compelling arguments in favor of UBI, no country has fully implemented it on a national scale. Instead, there have been various small-scale pilot programs and limited experiences, with only Mongolia and the Islamic Republic of Iran briefly implementing national UBI schemes.
The majority of UBI pilots conducted to date have been modified versions of targeted income assistance programs rather than true UBI initiatives. For example, proposals such as the “quasi-universal basic rural income” for India by Felman et al. (2019) resemble traditional guaranteed minimum income programs. These pilots raise important system-wide questions concerning financing, inflation, integration with existing pension systems, alignment with minimum wage policies, and the broader political and economic implications, which cannot be fully addressed through pilot programs alone.
A universal basic income (UBI) is characterized by its key features of unconditional cash transfers provided to all individuals, without any conditions or targeting criteria. These design principles challenge existing practices in various ways.
The rationale behind implementing universal cash transfers is supported by five primary arguments. Firstly, by eliminating eligibility criteria, except for perhaps citizenship or established residency and age (such as individuals above the age of 18), universality avoids the inherent issues of exclusion and inclusion errors that often arise in needs-based targeting systems. With a UBI, such errors are eliminated since every individual is automatically included, leading to significant expansions in coverage.
Another argument in favor of universality is that it could eliminate any stigma associated with being a beneficiary of social welfare programs. Additionally, by shifting individuals from the status of potential beneficiaries, subject to eligibility verification, to guaranteed recipients, there may be fewer transaction costs involved in accessing benefits. This means there would be no need for individuals to spend time applying for assistance, and it could lead to various economic and psychological benefits, such as reduced stress, increased empowerment, and avoidance of desperate actions due to economic hardship.
Furthermore, a universal transfer system would be more compatible with labor participation compared to most targeted programs, as it removes the disincentive for labor supply caused by the reduction in benefits with increased income. Lastly, universality may enhance the political sustainability of programs, as beneficiaries (who are also voters) would come from the entire income distribution.
However, critics argue against the universality of UBI primarily on grounds of cost, suitability for specific purposes, and differing perceptions of the potential benefits it could offer.
- In cases when social assistance offers comparatively sufficient benefits, extensive coverage, and moderate to significant progressivity, policymakers may choose to address specific bottlenecks that impede eligibility, access, coverage, or delivery within the current system. If a universal basic income (UBI) is to be explored, it could need to be driven by goals other than alleviating poverty (such as social dividends, automation-induced job insecurity, etc.).
- Where coverage is broad but lacks progressiveness, a UBI might be considered as an option, although certain vulnerable groups, such as the elderly, may face challenges due to the transition.
- In contexts where social assistance is scarce but delivered progressively, implementing a UBI would broaden coverage but also result in a more uniform distribution of benefits. If implemented without increasing the budget, this could translate to “less funding for a larger population,” potentially resulting in reduced support for those at the bottom of the income spectrum.
- In scenarios where existing social assistance programs are sporadic and provide uniform or disproportionately lesser support to individuals regardless of their income level, implementing a UBI could be a viable option to enhance coverage. This could be achieved by funding the UBI through progressive income taxation, phasing out energy subsidies, or reallocating revenues from unexpected windfalls. While many low-income nations might lack the financial mechanisms for such funding, certain middle-income countries with abundant resources may possess these characteristics.
- In a conventional low-income environment, implementing a UBI could indeed broaden coverage, yet the financial burden appears formidable. Additionally, diverse contextual factors, like variations across subnational regions (e.g., remote areas with limited market access), may advocate for design adaptability. This could entail a combination of in-kind and cash transfers, as well as pragmatic approaches to accommodate dependent children, potentially rendering the rigid structure of a UBI less feasible.
The influence of ideological perspectives and diverse anticipations underscores the necessity for a well-rounded, evidence-driven strategy. This report refrains from offering definitive endorsements or rejections of a UBI but instead presents a framework for contemplation. Its objective is to furnish guidance for grappling with critical considerations, delineating trade-offs, and furnishing fresh insights and analyses to enhance decision-making regarding the suitability and viability of a UBI, primarily within low- and middle-income nations.
