#minimum basic income

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Minimum Basic Income or sometimes quite simply called Basic Income is a state funded social program in which the government pays a monthly sum of money to its subjects on an unconditional individual basis. What that means is that every citizen of a particular nation would receive a certain fixed amount of money monthly most probably in their bank account irrespective of their income, family structure, gender or housing cost. The amount is given on an individual basis to singular citizens not to a household or any equivalent social group. This idea has been increasingly gaining traction in recent times and as economic trends suggest, will continue to do so. So much so that people all over the world are talking about it; from Andrew Yang in the United States of America to both major parties- INC and BJP in India, Scottish National Party in the United Kingdom etc. There is a lot of skepticism and misinformation surrounding minimum basic income and I shall try to unravel some of it with this article.

The very first objection people might have against minimum basic income that comes to mind is that if free money was simply handed to the poor people, they would stop working all together and transform into a permanent burden on the society. However, instead of arguing over ideologies, let’s look at the facts. In Dauphin, Manitoba, Canada, a minimum basic income plan, called ‘Minicome’, was incorporated by then elected Pierre Trudeau. This plan was implemented starting from 1974 but was scrapped in 1978 due to Canada’s economic recession in the same year, since then the government officials had not analyzed the data collected during the course of the scheme, until 2009 when Evelyn Forget of the University of Manitoba secured the data. As the data suggested-

“Only two segments of Dauphin's labour force worked less as a result of Mincome—new mothers and teenagers. Mothers with newborns stopped working because they wanted to stay at home longer with their babies. And teenagers worked less because they weren't under as much pressure to support their families.

The end result was that they spent more time at school and more teenagers graduated. Those who continued to work were given more opportunities to choose what type of work they did.”

(Read more about it here)

Another major example is Alaska’s Permanent Fund Dividend, the largest scale universal basic income program in the USA, as data suggested-

“They found that full-time employment did not change at all, and the share of Alaskans who worked part-time jobs increased by 17%.”

(Read more here)

Another concern is that damaged households, those with addicts, would simply indulge in their addictions if given a minimum basic income instead of contributing to the society. I have to disappoint you, but, a study conducted by the World Bank begs to differ-

“We find that almost without exception, studies find either no significant impact or a significant negative impact of transfers on expenditures on alcohol and tobacco.”

(Read the full report here)

Simply providing a poor individual $1000 resulted in his earnings increasing by $270, assets increasing by $430 and his nutrition spending increasing by $330, with a 0% increase in alcohol or tobacco spending. Source.

Another issue people have been heard raising is that minimum basic income is basically communism, but sadly it is not. Communism’s ideology ‘Everyone is Equal’ directly implies equal salaries; however the minimum basic income’s whole point is not to be a primary source of income. It is simply a tool with which the downtrodden and poor can receive to increase their qualifications and educations, or maybe start a business or even use it as leverage to demand better working conditions. Communism gives workers equal salaries whereas minimum basic income gives the workers a chance to invest in themselves and try to earn more than they do now.

As the author is Indian, this last paragraph focuses on the hypothetical application of minimum basic income in India. India yearly spends Rupees 361 billion on multiple social welfare programs, which is 11.1% of the total government expenditure. This includes the cost of the maintenance of the program and the bureaucracy it encompasses. There are 354 million people below the poverty line in India. That gives us approximately 1020 Rupees per person, which, if one talk to the poorest of the poor in India, is a lot of money. Further if minimum basic income is implemented it would probably pay a lot more than 1020 rupees as the Rupee 361 billion we started with are also used to maintain the multiple social welfare programs whereas minimum basic income would be one comprehensive program, furthermore a lot of bureaucracy would be curbed.

Lastly, my fellow Indians that might be reading this far, I leave you with the results (and the source) of a minimum basic income experiment in a village in Panthbadodiya, Madhya Pradesh receiving 200 rupees a month-

Even as a financial progressive, I initially read Annie Lowrey's piece on the Swiss proposal for a minimum basic income with deep skepticism.  Wouldn't it send inflation skyrocketing?  And what then would be the incentive to work if the government was handing everyone a check each week?  No, I thought, a minimum basic income, or "mincome", is simply a wonkish liberal pipe dream that could never get past a general election today. Heck, forget the liberal dream of a single payer health care system, the democrats are even running from RomneyObamacare now.

But the article stuck with me and in the days since reading it I found myself fantasizing (yeah, financial reforms really do occupy a large chunk of my fantasy life) all the ways a mincome could be good for the country.  Here are three:

The first thing I started fantasizing about was how I would use this extra income.  And the answer was easy.  I would use it to pay other people to do all of the chores in my life that I don't want to do like laundry and cooking.  Catherine Rampell wrote about the benefits of outsourcing a couple of weeks ago and that has also been on my mind lately. But if other people chose to use their money in the same way it could create a whole new category of home workers - entrepreneurs, stay at home parents, veterans, students, etc., who lack the time or ability to maintain a full time job but who could easily spend a few hours a week doing household work for their neighbors.  

Some employees would leave the work force and that's a good thing.  Employers would have to work harder to maintain workers knowing that their employees aren't dependent on them to put food on their tables or pay their mortgages on time.   And as demand for workers increases, employers would need to improve salaries and benefits to make jobs more attractive.  

More people will enter the spending class.  Because of low job growth and stagnant earnings, a growing number of Americans are not putting money back into our economy - either because they have no income to spend, so little that they are just barely covering food and shelter or because they lack confidence in their future and are saving their money.  We need citizens to be spenders to keep the circular nature of our economy flowing properly.  

Annie Lowrey covers a few other pros, as well as some cons, of a minimum basic income, but one in particular bears repeating because of its appeal to both liberals and conservatives:

Such a system might work better and be fairer than the current patchwork of programs, including welfare, food stamps and housing vouchers.  A single father with two jobs and two children would no longer have to worry about the hassle of visiting a bunch of offices to receive benefits. And giving him a single lump sum might help him use his federal dollars better. Housing vouchers have to be spent on housing, food stamps on food. Those dollars would be more valuable — both to the recipient and the economy at large — if they were fungible.