As the COVID-19 pandemic continues to paralyze economies causing millions of job losses worldwide. The adoption of Universal Basic Income is being intercepted as the panacea in the time of global chaos. Universal Basic Income aims at giving out a sum of money to all the citizens to guarantee a minimum level of income.
The following program has been criticized on a possible moral hazard and wastage of funds by the government. The critics have emphasized that individuals when exposed to UBI will take more risks since this burden will be borne by others. A possible “taken for granted” attitude was also feared. The animadvert approach highlighted the futility of providing funds to the richer population, which will increase the disparities between the rich and poor.
However, the times have taken a turn and the UBI has come in limelight. The Canadian experiment of the UBI conducted in the 1970s in Manitoba has resurfaced as a testimonial of its success. The 2016-17 Economic Survey and the International Monetary Fund (IMF) had once proposed quasi-basic income schemes that leave out the well-off top quartile of the population as an effective means of alleviating poverty and hunger. The fiscal cost of a UBI pegged at ₹7,620, at 75% universality, was 4.9% of the GDP then. A UBI on par with the numbers suggested by the Economic Survey could lead to targeted household incomes increasing by almost ₹40,000 per annum. A similar experiment is being undertaken in Finland, the happiest country in the world is upping its game.
Additionally, the Nobel prize winning theory of behavioural economics which has three prominent concepts viz. inclination towards satisfactory combinations, intertemporal choices and alteration of choice set, play an inevitable role in ensuring desired, lucid results. The theory gives an insight of how individuals prefer satisfactory combinations to optimal combinations. It also emphasizes on the concept of intertemporal choices i.e., the implication of an action taken by the individual occurs in a different time period and hence the individual is not directly affected by their own actions. Furthermore, the theory also emphasizes on the idea that the preferred set of choices of an individual can be altered by the means of reinforcements by the government or the concerned institution in favour of the individual themselves who do not undertake optimal choices. In context of the universal basic income the following theory facilitates by providing a conducive environment to reap favourable results of the scheme. Since individuals prefer satisfactory choices to optimal ones the government can undertake positive reinforcement methods to ensure that the individuals make optimum use of their given resources to attain economic growth and prosperity along with their individual growth and prosperity. In this regard, the concept of intertemporal choices to play a very crucial role in this experiment as the output of the actions undertaken can be observed with long-term prospects in mind through the above mentioned. Positive reinforcements can include proper educational, counselling, subsidies, cultural and social appreciation to provide a better and more educational use of the fund allocated in the current paradigm. Individuals can also be motivated to undertake entrepreneurship and allied activities. Negative reinforcements which include penalisation, fines, regressive taxation schemes can also be implemented to prevent the individuals from deviating from the optimum path.
We have entered an era of crumbling economies, increasing unemployment and recessionary trends. The limping economies have been striving to reinstate normalcy and restore the collapsing sectors. With the fall of major economic sectors and Nations falling prey to recessionary trends the major business houses have seen huge pay cuts within the employees the collapse of the automobile sector in developing Nation, the oil sector, the travel and tourism sector, aviation sector etc. traces parallel to the Great Depression. The world has found itself at an impasse where the universal basic income is the Noah’s ark. The argument which criticizes the same for increasing disparities is void till sine die. The backlash of the virus and long lockdown periods along with the vaccination, health and other factors have created a high deadweight loss in the production and economic sectors providing a Universal basic income to each individual in the country is crucial. To warrant that the individuals have enough financial assistance to come out as entrepreneurs and job providers in a time when the jobs have declined or have been wiped out due to deteriorating economic sectors, the universal basic income becomes inevitable. The same is especially true for countries which do not have any potential diversification options. Countries like the OPEC group, underdeveloped and developing deserts, island countries and countries based on tourism and travelling sectors do not have an option of diversification and hence are facing greater loss as compared to others. The catastrophic situation can further instigate a possible depression and economic failure. With GDP declining, inflationary trends, falling production, decreasing employment rates and salaries the world is inadvertently marching towards doomsday. Hence, the UBI is the sole choice.
Likewise, the policy for the Indian economy can provide a head start that is required to bring the economy back on track. It will eliminate poverty to a large extent by providing an income source for the people who are daily wagers, agricultural labourers, below poverty line manual labourers and other synonyms groups, thus converting them to assets. The same Universal basic income will ensure that the middle income groups which were juggling taxes and forms have access to better facilities and astronomically contribute to their productivity .For the higher income groups this will establish that they sustain their own entrepreneurship activities which provide a source of employment for the people of the other two groups, it will also ensure that they are able to repay their loans and do not shut the enterprise which will cause a disequilibrium between the jobs available in the country and the people seeking employment. This means the government will ensure that the people who are suffering during the pandemic period will have enough to strike through. Some critics might argue that the following can cause inflationary trends in the medium and long run however, since the paradigm calls for an action and the same shall be highly appreciated. Another Nobel Prize winning theory called, the management of common pool resources which explains how commonly used resources are better maintained as compared to privately owned resources, as the community works together in a vigilant fashion to ensure that the resources are efficiently utilised. Under the basic income policy, the common resources will be optimised to maximise the economic gain of the nation, since these individuals will have better access to the facilities and thence will be better at organising and using the common pool resources which will again add to the country’s GNP and GDP.
In bird’s eye view, the policy of Universal Basic Income will metamorph the society to a more economically Independent and prosperous one. In the current paradigm implementation of the universal basic income policy will lead to a substantial improvement in, the infrastructure, production equation, skill set, export and allied sectors. In juxtaposition it can be observed that a Universal Basic Income policy paradigm has better results as compared to a paradigm without the same. A meticulously drafted and earnestly implemented policy will exponentially elevate the economic outlook of the country.
By VIDUSHI SHARMA