Universal Basic Income: A solution for a diverse country

The poor in the country have different backgrounds and aspirations. Universal basic income can empower them to meet their needs as they deem appropriate without conditionalities

Universal Basic Income: A solution for a diverse country
Universal Basic Income: A solution for a diverse country

By Vibhor Mathur

See original post here.

The lack of access to disposable income is not just the result, but also a cause of great poverty and inequality. Recent experiences like the COVID-19 pandemic have brutally highlighted that traditional policy tools are inadequate in protecting the weakest sections of India. In this context, there are calls for universal basic income (UBI) to strengthen welfare architecture and unlock the nation’s latent demographic potential. UBI is a regular cash payment made individually to each member of a political community, without any means-testing, work requirements or conditionalities.

India’s diversity has always thrown up unique governance challenges. A tribal woman in Assam, a young graduate in Delhi, a landless labourer in Maharashtra belonging to a marginalised caste and a homemaker in peri-urban Tamil Nadu all have such diverse and distinct needs that creation of uniform policies a near impossible task. The proposals put forward, thus, either fail to recognise the different needs and to provide efficient mechanisms of delivery, or worse, take a priori and ill-informed decisions on the needs of different groups. For instance, free buses are of no use to those who live in areas without public transport.

Similarly, distribution of sewing machines to empower women misses the key step of asking them if tailoring is the path they want to pursue, or if employment is even the biggest challenge they are facing at the time. Narrowly defined and targeted policies for different groups create inefficient governance and perverse populist political incentives.

Cash, as a universal medium of exchange, has the unique potential to provide to each person a basic economic floor and empower them to meet their needs as they deem fit. This is not to say that good quality and accessible government services are not essential. But the addition of a cash-based support allows for protecting those who can fall through the cracks and enhance people’s capacity to access better services. The basic income pilot in Hyderabad, WorkFREE, has seen increased health insurance coverage among participants. The Delhi pilot by Self-Employed Women’s Association (SEWA) saw people gaining access to better quality food and thus improving nutritional outcomes. Additionally, universality and unconditionality of the scheme would mean that the government does not need to spend time and resources in assessing eligibility of the potential beneficiaries, and poor and vulnerable people are freed from the burden of such paperwork. In a country with inadequate documentation and awareness, such a scheme provides the state the best chance of robust coverage.

A basic income also provides the crucial security that can help people tide through crises like health shocks, loss of employment, seasonal or natural disasters, deaths or any extenuating circumstances. These thrust the already poor into extreme poverty, exploitation and endless debt traps. Cash transfer and basic income programmes from around the world show evidence of people being able to invest in better housing, healthcare, education and savings, reducing their reliance on credit and accessing further training or education, entrepreneurship, asset building or more decent work.

A basic income proposal usually draws two criticisms. First, that beneficiaries will no longer have incentive to participate in the labour market. Second, that giving cash in the hands of the poor will lead to misuse on alcohol and drugs. But basic income pilots around the world have shown that an unconditional cash transfer has no negative effects on people’s desire to work. Even in the SEWA and WorkFREE pilots, many women have been able to negotiate themselves out of exploitative daily wage work and invest in small businesses. As for substance abuse, a meta review of data from around the world by Nobel Prize laureate Abhijit Banerjee and colleagues found that it in fact reduced among cash transfer recipients. Clearly, poverty is a cause of, rather than an inhibitor for, substance abuse among the poor.

Automation, unemployment, climate crises, pandemics, declining female labour force participation and growing inequality are among the crises that make people, especially the underserved and marginalised, more vulnerable. UBI and better government services are perhaps the best way to provide control, benefits and freedom to the poorest and weakest sections.

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