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Universal basic income

Note4Students

From UPSC perspective, the following things are important :

Prelims level : various schemes for vulnerable section

Mains level : social security, universal basic income

universal basic income Context

  • New evidence from two Kenyan counties shows that universal basic income  and other income supplements reduce hunger, illness, and risk exposure during crises.
  • Countries should consider building universal basic income that can be activated at short notice to help people weather unanticipated shocks.

Why in news?

  • When the COVID-19 pandemic and the resulting recession pushed 120 million people worldwide into extreme poverty in 2020, many countries relied on social-protection measures to cushion the blow.

What is social protection?

  • Social protection is concerned with preventing, managing, and overcoming situations that adversely affect people’s well-being.
  • Social protection programs that assist low-income families, insure against shocks, and break poverty traps offer a potential solution.

universal basic income Universal basic income meaning

  • Universal basic income (UBI) is a model for providing all citizens of a country or other geographic area with a given sum of money, regardless of their income, resources or employment status.
  • The purpose of UBI is to prevent or reduce poverty and increase equality among citizens.

What is social security?

  • Social securityin India includes a variety of statutory insurances and social grant schemes bundled into a formerly complex and fragmented system run by the Indian government.
  • These are retirement, healthcare, disability, childcare, gratuity and provident fund and insurance programs.

What is insurance simple words?

  • An agreement by which a person pays a company and the company promises to pay money if the person becomes injured or dies or to pay for the value of property lost or damaged.

Constitutional mandate

  • The Directive Principles of State Policy, enshrined in Part IV of the Indian Constitution reflects that India is a welfare state.

Interesting fact

India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country.

What are the benefits of Universal Basic Income?

  • Ending poverty: Advocates for UBI say that it could help bring everyone’s income above the poverty line.
  • Discouraging low wages: UBI would give employees enough security to have bargaining power.
  • Redistributing wealth: The economic growth of high-income countries is making the rich richer, but having very little effect on the working classes.

Case study / value addition

Namibia

Namibia had a basic income pilot program between 2008 and 2009. Every resident of Otjivero-Omitara was entitled to 100 Namibian dollars ($6.75) every month. The program was funded by donors from around the world.

Findings from the pilot program showed that cases of child malnutrition had dropped significantly while school enrollment went up. Also, social crimes such as theft had significantly dropped.

universal basic income Negative implications of UBI

  • Induce lethargy: UBI removes the incentive to work, adversely affecting the economy and leading to a labour and skills shortage.
  • Inequity: Universal basic income would be just that: universal. That means that everyone, regardless of how poor, or rich, they were would get the same amount of money.
  • Huge Cost: The cost of implementing UBI could be huge. In the United States it’s estimated to be about $3.9 trillion per year.
  • Motivation to work: One concern is that UBI would incite millions of workers to stop working. If people aren’t working, there is less taxable income.

Some government initiatives

  • National Pension Scheme for Traders and Self Employed Persons.
  • Pradhan Mantri Suraksha Bima Yojana.
  • Employees’ State Insurance Scheme.
  • Minimum Wages for various employment roles.
  • National Pension System.

Conclusion

  • One of the major criticisms of poverty alleviation programs is significant leakages. UBI is seen as a more efficient alternative. Though UBI has many advantages, there are many practical challenges too. The idea should be to save costs with better targeting. This will help create the necessary conditions for higher growth which will decisively lift people out of poverty.

Mains question

Q. India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country. Do you think they are enough? Discuss in context of rising demand for universal basic income and its pros and cons for ensuring social security.

 

 

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