- The Universal Basic Income (UBI) is a proposed system that would give individuals with a minimal income to help prevent poverty and close economic gaps.
- Some proposals propose that a UBI be paid to anybody earning up to a certain amount of money (e.g., $50,000 per year), whether or not they are employed. Other suggestions propose that a UBI be distributed only to people who have lost their jobs especially, those who have lost their jobs due to automation.
- The main argument against, or disadvantage of, a universal basic income system is that it has the potential to produce runaway inflation, raising the cost of living.
What is the economic impact of UBI?
UBI results in increased job growth and a reduction in school dropout rates. People are protected by the UBI guarantee against sluggish pay growth, low earnings, and job insecurity induced by the rising gig economy, such as Uber/Lyft driving and short-term contracts.
Is welfare a source of inflation?
A documentary about a priest who brought three or four university students to see street-sleepers in a dismal region of Kowloon aired recently on a local television channel. The program depicted a priest and students visiting homeless people on the street in order to have a better understanding of what life is like for the impoverished. This was all about pity, but there was no mention of how university students could assist homeless people in improving their lives, developing skills, or entering the workforce. University students are expected to come up with more inventive ways to assist the poor. A similar comment may be made regarding the Chief Executive’s recent Policy Address, in which he showed sympathy for families who choose not to have a second child due to a lack of living space.
Sympathy is a word that refers to personal feelings and should only be used in specific situations. But it would be nave to believe that sympathy can be converted into economic policies, particularly when it comes to welfare. In Hong Kong, it has almost become a clich that the poorest portions of the population must be protected. While sympathy is understandable, extending blanket assistance to these individuals is not the solution. The question is, in fact, how to improve the marketability of people with low abilities. While we must be compassionate toward the poor, we must equally encourage them to contribute to the economy. In other words, assistance is required, but we should also assist them in becoming self-sufficient.
There are significant theories about government expenditure that should be respected without putting undue strain on other areas of the economy. In bad times, government spending typically rises, as it should to avoid a slump. When the economy is doing well, however, government spending should be curtailed. This is due to the fact that increased government expenditure in good times is akin to “pouring oil on the fire” and might result in inflation.
The recent push to increase welfare spending may have unintended repercussions by raising inflation. The economic situation in Hong Kong in 2014 is far from ideal. On the one hand, the Policy Address’s pledges of long-term development will take time to fulfill. The economy, on the other hand, is not likely to expand significantly.
Furthermore, when welfare spending rises, it is possible that firms in Hong Kong, particularly small businesses, will raise their pricing. The explanation for this is straightforward. Businesses anticipate that once households have more money to spend as a consequence of increased government assistance, consumers will tolerate higher pricing. As a result, rising welfare costs will lead to inflation. Inflation is predicted to climb significantly in 2014. Prices will rise as a result of increased welfare spending, hurting everyone, including welfare beneficiaries. Life will be harder for non-welfare recipients as their purchasing power is undermined. Inflation will erode the benefits of welfare increases for welfare recipients. Because there will be little inflation during a recession, welfare spending should only increase when low-income people want assistance.
However, if government assistance spending continues to rise in normal economic times, firms will see an opportunity to boost their pricing. If economic growth is not available, or is not rising at the same rate as welfare spending, stagflation will occur from rising inflation combined with low growth. This is precisely what the Hong Kong economy does not want because it will negatively impact everyone. The government will have to spend even more money on welfare as a result. When economic growth is modest, the budgetary burden continues to rise. We must assist the poor, but when assistance becomes politicized, the economic repercussions can be disastrous. Hong Kong’s authorities must avoid turning the city into a welfare state.
The author is an associate professor at City University of Hong Kong’s Department of Economics and Finance.
Can Universal Basic Income help the economy?
Everyone from Elon Musk to Sir Richard Branson has recently expressed support for universal basic income (UBI), a system in which everyone receives a regular payout merely for existing. According to a research conducted by the Roosevelt Institute, implementing a UBI in the United States might have a favorable impact on the economy.
The study looked at three different proposals: a $1,000 monthly “basic income” for every adult, a $500 monthly “base income” for every adult, and a $250 monthly “child allowance” for every child. The researchers came to the conclusion that the higher the sum, the greater the favorable economic impact.
They estimated that a $1,000 basic income would expand the GDP by 12.56 percent over the next eight years, after which its impact would wane. This would result in a $2.48 trillion rise in the country’s gross domestic output.
The researchers assumed that the UBI in the United States would be supported by increasing the federal deficit for the sake of their research. They also looked into the possibility of supporting it by raising household taxes, but found that route to be less effective.
Is a Universal Basic Income socialism?
Towards the end of the summer, the Trudeau government made a lot of noise about a prospective UBI change. The Liberal government appeared to be hinting that a proposal for universal basic income, a Green New Deal, or both might be included in the Throne Speech at the end of September.
At one point, Chrystia Freeland stated, “COVID-19 presents a fantastic opportunity for a ‘fair’ and ‘green’ recovery.” Trudeau was planned “Canada’s biggest left turn in economic policy in decades,” according to Bloomberg, and Chrystia Freeland had been “tasked with nothing less than overhauling the country’s socio-economic infrastructure.”
This supposition has driven the right wing insane. While the right side salivates at the possibility of universal basic income and an increase in the country’s already large debt, neither UBI nor Green New Deals are intrinsically communist or leftist. The implementation of some form of universal basic income policy does not imply a fundamental shift in capitalism, a shift in property relations, or even socialism.
UBI is nearly typically offered as a way of saving capitalism, or as a way of papering over capitalism’s difficulties in order to make the system run more smoothly, rather than as a socialist strategy. UBI is not about reforming or destroying capitalism; rather, it is about improving it from the standpoint of its supporters, whether they are on the left or the right.
The right wing is going insane not because Universal Basic Income entails socialist revolution, but because it is a question of who will pay for itand the ruling class refuses to pay. This is why the right wing becomes enraged and starts shouting about socialism.
With opposition to the idea on Bay Street, Trudeau and Freeland are clearly reversing their previous statements “The country is being “remade.” Trudeau began to say by the end of October that the pandemic recovery benefits should not be viewed as permanent changes to the social safety net. He has explicitly stated that the CRB is “not a measure that we can automatically continue in a post-pandemic world” and that “just because relief programs are helpful during the pandemic doesn’t guarantee they’ll be valuable once the crisis passes.”
However, just because the Trudeau administration is stepping away from universal basic income and the idea of making pandemic benefits permanent does not mean that universal basic income is off the agenda.
The Liberal Party’s convention was scheduled for mid-November. A guaranteed or universal basic income was the top policy priority for Liberal MPs. In a priority resolution for the convention, the Liberal caucus called on the government to adopt UBI, and they made it the top resolution, ensuring that it would be debated and voted on. Liberal MPs and Ministers who favor UBI have expressed public hope that CERB will be turned into a basic income program.
A letter to the government was written by 50 Senators in April of this year. The letter was portrayed as pushing the government to transform the CERB into a type of universal basic income, although the message seemed to be more about making the CERB permanent than universal. The Senate, on the other hand, is looking into and costing UBI proposals. The debate over Universal Basic Income is genuine, and it’s happening at the highest levels of government.
Is UBI beneficial to the economy?
Our findings are clear: adopting a universal basic income and funding it by raising the government debt would be expansionary, as it would enhance aggregate demand. As the economy converges to a bigger size, economic growth is higher than in the baseline when the policy is first implemented.
Is there a Universal Basic Income in any country?
The concept of universal basic income (UBI), which is defined as a cash distribution that is given to everyone, unconditionally, and in a timely manner, holds a lot of promise. These include, among other things, coverage potential, social contract justice, labor market power relations, and gender equity. It may speak to certain people’s desire for social justice, which is fueled by society’s glaring and expanding disparities. A UBI, from this perspective, engenders interest as a societal ideal to which to aspire, rather than just a program. Others believe that a UBI will help to cushion the effects of alleged enormous job losses due to automation, streamline the tangle of state-provided schemes, or empower people by diverting natural resource-related earnings from government coffers to individuals.
A Universal Basic Income (UBI) is a cash-based scheme that is available to everyone. Its design elements, such as all-cash transactions, no conditions, and no targeting, all pose challenges to present methods to varied degrees.
The case for universal transfers is based on five key considerations. First, universality avoids the problematic issue of exclusion and inclusion errors that are inherent in needs-based targeting by not creating eligibility requirements (apart from potentially citizenship or documented residency and age, e.g., for individuals above the age of 18). There would be no such errors under a UBI because everyone is included by design, resulting in significant coverage expansions.
Second, universality has the potential to remove any stigma associated with recipients. Third, by changing people’s default status from potential beneficiaries (subject to eligibility verification) to guaranteed recipients, there may be fewer transaction costs (e.g., no need to spend time applying), as well as various economic and psychological benefits resulting from a consistent source of income over time (e.g., stress reduction, empowerment, avoiding taking desperate actions out of economic hardship). Fourth, because it eliminates the price effect of transfers, a universal transfer would be more labor-friendly than most programs (i.e., the reduction in labor supply to avoid a reduction in benefits). Finally, universality may increase the political viability of programs by allowing recipients (and voters) to benefit from the whole income distribution. The case against the “U” in UBI is mostly based on cost, suitability, and a differing understanding of the size of its potential advantages.
So, in what situations is a UBI more or less likely to be a viable option? Based on the creation of novel data as well as a thorough examination of the theoretical and operational literature, the analysis suggests some stylised implications for various scenarios. These can be summed up in the following way:
- Policymakers should consider addressing specific bottlenecks that impede eligibility, access, coverage, or delivery within the existing system when social assistance offers reasonably adequate benefits, large coverage, and minor to marked progressivity. If a UBI is to be considered, it may need to be motivated by goals other than alleviating poverty (e.g., automation-driven job insecurity, social dividends, etc.)
- A UBI could be explored in cases where coverage is high but not progressive, albeit some vulnerable (age) groups may suffer as a result of the change.
- A UBI would expand coverage while simultaneously flattening the distribution in areas where social assistance is restricted but delivered gradually. If the budget is balanced, this means “less money for more people,” and “less at the bottom” is likely.
- If supported through progressive income taxation, the abolition of energy subsidies, or the transfer of windfall earnings, a UBI could be a viable option for expanding coverage in areas where social assistance is spotty, flat, or regressive. Most low-income countries are unlikely to have such financial elements, although some middle-income, resource-rich countries may.
- A universal basic income (UBI) may expand coverage in a typical low-income situation, but it would be prohibitively expensive. Other factors, such as diversity in subnational contexts (e.g., remote areas with little access to markets, etc. ), may indicate the need for design flexibility (e.g., a balance of in-kind and cash transfers, sensible ways to account for children, etc. ), making the rigid design of a UBI less appealing.
Because of the prominence of ideological factors and differing expectations, a balanced and evidence-based approach is required. This paper is not intended to make explicit recommendations for or against a UBI, but rather to provide a framework within which to consider it. The purpose of the paper is to provide a compass to help navigate critical challenges, clarify trade-offs, and provide additional data and analysis to better guide decisions about the appropriateness and practicality of a UBI in various situations, particularly in low- and middle-income nations.
Universal Basic Income: A Guide to Navigating Concepts, Evidence, and Practices (Universal Basic Income: A Guide to Navigating Concepts, Evidence, and Practices) (Universal Basic Income: A Guide
What’s the big deal about universal basic income?
Because UBI is designed to ignore the aspects of life that make families more or less reliant on government assistance such as having a child with a serious illness or having a work-limiting condition it would result in a highly wasteful allocation of resources.
Does Universal Basic Income discourage work?
Is Universal Basic Income (UBI) a deterrent to working? In a study done in Finland, UBI was proven to enhance happiness and employment when compared to traditional unemployment compensation. However, because this was a small-scale study, it’s possible that the behaviors found in Finland will not be replicated in other nations.