'Universal basic income' an alternative to the current welfare system
Introduction:
Universal basic income (UBI) refers to a social welfare program in which all individuals within a specific geographic area, typically a country, are unconditionally provided with a regular and consistent cash payment from the government. This income is provided to every citizen, regardless of their employment status, income level, or any other eligibility criteria. The payment is universal in the sense that it is granted to all individuals, without means-testing or work requirements.
The primary goal of Universal Basic Income is to ensure that every person has a minimum level of income to meet their basic needs and provide them with a foundation for economic security. By providing a guaranteed income floor, UBI aims to alleviate poverty, reduce income inequality, and provide individuals with the freedom and flexibility to pursue their goals, whether it is seeking employment, starting a business, pursuing education, or engaging in other meaningful activities.
Advantages of UBI over the current welfare system:
Existing welfare systems are often complex, with multiple programs and means-testing processes, leading to administrative overhead and bureaucratic inefficiencies. According to a report by the U.S. Government Accountability Office (GAO) in 2019, administrative costs for means-tested programs, including welfare programs like Temporary Assistance for Needy Families (TANF) and Supplemental Nutrition Assistance Program (SNAP), can range from 6 to 20 percent of program expenditures. These costs include eligibility determination, program monitoring, and other administrative functions. UBI, with its universal and unconditional nature, simplifies the system, potentially reducing administrative costs and streamlining the delivery of benefits.
Furthermore, the job market would benefit from UBI in multiple ways, the current welfare programs sometimes make use of “benefit cliffs”, this means that if a household makes above a certain amount they would not be eligible for benefits, this disentivises many households from finding a better paying job or a job in general. With UBI, which is unconditional and not tied to employment or income levels, there are no benefit cliffs. Individuals are not penalized for earning more, as the UBI payment remains consistent. This can encourage recipients to engage in work or seek higher-paying jobs without the fear of losing crucial support.
Moreover, UBI would promote better job matching by reducing the urgency to accept any available employment opportunity out of necessity. Individuals have more room to search for jobs that align with their skills, interests, and long-term career goals. This can lead to better job satisfaction, increased productivity, and a more efficient allocation of human capital in the labor market.
Disadvantages of UBI:
The first problem that comes to mind is the costs and funding of such a large scale program, providing a guaranteed income to every individual in a population requires substantial funding. Determining the funding sources and ensuring the financial sustainability of UBI without significantly increasing taxes or government debt poses a considerable policy challenge. Another problem with injecting a significant amount of money into the economy is that it can potentially lead to inflation, by increasing consumer spending, which may drive up demand for goods and services. If supply does not keep pace with the increased demand, it could result in inflationary pressure. Balancing the amount of UBI provided to avoid excessive inflation is a crucial consideration.
In conclusion, Universal Basic Income (UBI) presents both advantages and disadvantages that must be carefully considered when evaluating its potential as a social and economic policy.
On the positive side, UBI offers several potential benefits. It provides a guaranteed income floor that can alleviate poverty, reduce income inequality, and enhance economic security. UBI's universality ensures that all individuals, regardless of employment status or income level, receive support, promoting a sense of fairness and dignity. Additionally, UBI can simplify administrative processes, reduce bureaucracy, and streamline social welfare systems. It has the potential to stimulate entrepreneurship, innovation, and job flexibility, while also recognizing and valuing unpaid work and community contributions.
However, UBI is not without its challenges and concerns. Affordability and funding sources pose significant hurdles, and implementing UBI on a large scale may have substantial fiscal implications. Critics argue that UBI could disincentivize work and skill development, potentially reducing labor force participation and overall productivity. The universality of UBI raises questions of equity, as it provides the same benefit to all individuals, regardless of their financial need. There are concerns about potential inflationary pressures and the potential reduction or restructuring of existing social programs that target specific needs.
Written by Islam Buleshov | Written by Yasmin Uzykanova
