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MINIMUM GUARANTEED BASIC INCOME

An unconditional basic income (also called basic income or citizen’s income) is a form of social security system in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.

History

The idea that every individual should have access to a minimum guaranteed basic income is not new. Thomas Paine sought an equal inheritance for everyone, “a national fund” which would pay every adult a sum of “fifteen pounds sterling as compensation” for the introduction of the system of landed property. Over the last century, with the Great Depression, welfare policy in the U.S. was transformed with minimum wage legislation, while Keynesianism meant that the government would attempt to stimulate the economy during downturns by directly financing public employment and public works. Long-term support was offered to the aged, the disabled and single mothers while unemployment insurance sought to support the temporarily unemployed.

Experiment of basic income worldwide

These are some of the most well-known basic income pilots up to date.

  • The experiments with negative income tax in United States and Canada in the 1960s and 1970s.
  • The experiments in Namibia (starting 2008)
  • The experiment in Brazil (starting 2008)
  • The experiments in India (starting 2011)
  • The GiveDirectly experiment in Kenya and Uganda
  • The study in rural North Carolina
  • Utrecht, Netherlands, 2015 experiment

 

Now, however, the idea of an unconditional annual income is gathering momentum.

Finland is considering a plan to give 100,000 citizens $1,000 a month, while four cities in Netherlands are starting trial programmes. Switzerland may have rejected, in a referendum, the idea of giving citizens about $2,500 a month, but the Canadian province of Ontario is planning a trial run.

Benefits

  • allow poor households to build assets
  • increase in consumption level
  • reduce hunger
  • increase investment in and revenue from livestock and small businesses
  • increase psychological well-being of recipients and their families
  • an expansion in scope of the “social economy”, by granting citizens greater means to pursue activities

Criticism

A commission of the German parliament has discussed basic income in 2013 and concluded that it is “unrealizable” because:

  • it would cause a significant decrease in the motivation to work among citizens, with unforeseen consequences for the national economy
  • it would require a complete restructuring of the taxation, social insurance and pension systems, which will cost a significant amount of money
  • the amount of help provided is not fixed and depends on the financial situation of the person; for some socially vulnerable groups the basic income could be not sufficient
  • it would cause a rise of the shadow economy
  • the corresponding rise of taxes would cause more inequality: higher taxes would translate themselves into higher prices of everyday products, harming the finances of poor people
  • no viable way to finance basic income

 

Experiment in India so far

Even India has seen its share of basic income experiments. A pilot in eight villages in Madhya Pradesh provided over 6,000 individuals a monthly payment (Rs.100 for a child, Rs.200 for an adult; later raised to Rs.150 and Rs.300, respectively). The money was initially paid out as cash, while transitioning to bank accounts three months later. The transfer was unconditional, save the prevention of substitution of food subsidies for cash grants.

The results were intriguing

  • Most villagers used the money on household improvements (latrines, walls, roofs) while taking precautions against malaria — 24.3 per cent of the households changed their main source of energy for cooking or lighting; 16 per cent had made changes to their toilet.
  • There was a seeming shift towards markets, instead of ration shops, given better financial liquidity, leading to improved nutrition, particularly among SC and ST households, and better school attendance and performance.
  • There was an increase in small-scale investments (better seeds, sewing machines, equipment repairs etc).
  • Bonded labour decreased, along with casual wage labour, while self-employed farming and business activity increased.
  • Financial inclusion was rapid – within four months of the pilot, 95.6 per cent of the individuals had bank accounts.
  • Within a year, 73 per cent of the households reported a reduction in their debt. There was no evidence of any increase in spending on alcohol.

So why not experimenting at universal level in India?

Because still we need more data to prove its applicability in the Indian context. There have only been eight large-scale pilot programmes testing the impact of a universal basic income on human well-being. Social context too matters — what might have worked in other countries might not necessarily be applicable to India. We need a greater depth of pilot studies, focussed on ensuring universal access and covering minimum living expenses.

Way forward

A regular unconditional basic income, scaled up through pilots, and rolled out slowly and carefully, seems ideal for India. It can help improve living conditions including sanitation in our villages, providing them with access to better drinking water, while improving children’s nutrition. Regular basic income payments can help institute rational responses to illness or hunger, enabling households to fund their health expenses instead of encountering a vicious cycle of debt. It can help reduce child labour, while facilitating an increase in school spending. It can transform villages, enabling the growth of productive work, leading to a sustained increase in income. It could cut inequality; grow the economy; all while offering the pursuit of happiness. As job concerns about automation grow, the basic income stands out as a panacea.

 

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