Coronavirus response shows how universal basic income can improve life for everyone
- Subsidies given to firms and individuals to protect livelihoods during the pandemic offer insight into how a universal income can be implemented intelligently and successfully
- An unconditional recurring payment to every member of society will help everyone meet their basic needs and restore dignity
With one eye already on re-election, US President Donald Trump is racing towards opening up America again despite economists’ consensus that reopening the economy only when it is safe is better than risking another lockdown soon after. Regardless, once business does get back up to speed it is certain we will face a new normal.
Social distancing may have slowed the virus’ spread, but it also paralysed significant parts of the global economy. Small and medium-sized enterprises have been particularly badly hit, making governments more important than ever. Administrations around the world have dug into their reserves to keep their economies alive and, more importantly, cash flowing among individuals.
It is useful to differentiate between stimulus packages and survival handouts. When lay-offs, furloughs and salary cuts envelop a significant portion of the labour force, various handouts to help businesses stay afloat are of utmost importance.
That we needed a pandemic and an economic meltdown to realise the need for a guaranteed income so that basic needs can be met is a tragedy in itself. The idea of universal basic income is not new. From the 19th-century British philosopher John Stuart Mill to the 2020 US Democratic presidential candidate Andrew Yang, many have discussed the idea.
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A popular argument against a universal basic income is that a guaranteed income would make people satisfied with handouts and unwilling to work, but this assumes poor people are lazy. Results from the World Values Survey show otherwise.
In the sixth wave of the study involving 60 countries and nearly 90,000 respondents from 2010 to 2014, more than a quarter of the sample agreed that, in the long run, only hard work brings a better life. Less than 7 per cent said success is a result of only luck and connections. There was little difference in opinions between the richest and poorest quintiles.
In the same survey, 24 per cent agreed the government should take more responsibility to ensure that everyone is provided for, while only 7 per cent said it is the sole responsibility of the individual.
Another concern is that a universal income would break the bank. An annual US$10,000 payment to every American would cost more than US$3 trillion a year, almost equivalent to the entire tax revenue collected by the federal government.
However, social expenditure – defined as all cash benefits, provisions of in-kind goods and services and tax breaks with a social purpose – make up about 19 per cent of US GDP. This is marginally below the Organisation for Economic Cooperation and Development average of 20 per cent.
The subsidies given to companies and individuals to protect livelihoods during this pandemic can offer governments insight into how a universal basic income can be implemented intelligently and successfully in the new normal.
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Every crisis brings change. The Great Depression brought about greater spending on job creation and social welfare programmes, democracy and freedom bloomed in many developing countries after World War II and a stronger financial system emerged from the 2008 financial crisis.
The Covid-19 pandemic shows that health and social welfare systems need to be revamped everywhere. Let’s not waste this once-in-a-century opportunity.
Dr Bala Ramasamy is a professor of economics and associate dean at the China Europe International Business School