You searched for india | Page 28 of 63 | BIEN

Study Finds Issues with Universal Basic Income for Developing Countries

by Benjamin Sadlek | Apr 7, 2019 | News, Research

Picture credit to: Biodiversity & Community Health.

Measuring income in developing countries

A study published in the National Bureau of Economic Research in the Fall examines cash transfer programs across a range of developing countries and uses household data from Indonesia and Peru to examine the effectiveness of targeted transfer programs in those countries. The study explores the costs and benefits of targeted and universal cash transfer programs, and the different circumstances that developing countries face that affect the performance of different transfer schemes.

One of the key challenges identified for developing countries that affect the viability of a universal basic income (UBI) are the sizes of the informal sector (1) and the resulting revenue sources. Developed countries largely get their revenue from income taxes (2), but given the size of the informal sector in many developing countries, the bulk of government revenue comes from sources like consumption taxes and official development assistance (ODA), with the latter in some low-income countries accounting for more than half of that country’s operating budget.

Effectively targeting the poor for cash transfer means that you must have a way to reliably measure income and means, and therein lies the problem for many developing countries. In Indonesia and Peru, 88% and 79% of the employed populations are reported as below the tax exclusion threshold, and therefore do not pay income taxes. This is not necessarily to say that upwards of 80% of true income is below the income tax threshold, but it shows the problems associated with informality and lack of information. In any case, it complicates the means-testing portion of targeted transfer programs like those in the US.

In lieu of directly measuring income for means-testing, developing country governments can use what’s called a “proxy-means test” by measuring indirect things like assets and consumption. Another complication is that people can easily misrepresent their economic situation, depending on what indicator the proxy-test uses to measure poverty. Therefore, the mechanism for determining who qualifies for the transfers are often a mystery kept by the designers of the proxy-tests, and the data collection method must in some way provide incentives for telling the truth.

Findings from the data

To measure the success of the targeted programs in Indonesia and Peru, the authors used consumption data from 2010-2011 period from the Indonesian National Socioeconomic Survey (SUSENAS) and the Peruvian National Household Survey (ENAHO) to measure the size of the program’s “inclusion errors” and the “exclusion errors”, meaning the amount of people who do receive transfers who shouldn’t and the amount of people who don’t receive transfers who should. They are able to do this because the datasets used provide information on predicted consumption used by the proxy-means tests of each country, and the actual consumption for that period in each country.

In the 2010 period, in both Indonesia and Peru, transfers reached around 80% of intended beneficiaries, meaning those whose economic situation actually qualified them to receive benefits got them 80% of the time, and 20% did not (meaning a 20% exclusion error). There was also a cost of transferring the benefit to 22% and 31% of those whose economic situation did not actually qualify them for the benefits, judging by the actual consumption data (meaning the inclusion error).

The authors then employ a social welfare function, which measures the utility of a dollar between a low-income person and a high-income person, to measure the effectiveness of more narrowly targeted programs in relation to a universal program (UBI). Using this function, they were able to identify a socially optimal targeted transfer amount, which was 19% and 18% of the population for Indonesia and Peru respectively. While utility is lowest at the point of no transfer, the graph shows utility and overall social welfare both decline steadily after the socially optimal point. A UBI, then, has the lowest utility of almost any ratio, and even with the administrative cost savings included, the added benefit is almost imperceptible (these are represented by the little tick mark pointing upwards at the point of “UBI”).

This is nothing too surprising, though, because it essentially confirms that having a system where wealthier individuals also receive the benefit is not as socially efficient as targeting the poorest individuals, because the dollars are worth more to poorer individuals. What is interesting is that savings in administrative costs in this model also do not provide a big boost to social welfare.

Advantages and drawbacks of universal cash transfers

A UBI would address some of the failings of targeted transfer programs by providing what the authors call “horizontal equity”, which essentially measures the degree of errors at different levels of transfer, and also an added benefit of transparency.

If we imagine a family in the exclusion error population goes to apply for benefits and find that they are not eligible, verifying their eligibility would be difficult given the secrecy of the methods used in proxy-means identification. A UBI would be an ideal fix for this problem because it is available to everyone, and though you would be including those who may not necessarily need it, you would not deny anyone who actually does need it.

There is also the issue of labor market distortions that targeted transfers can cause. It is well known that programs in the US and in some European countries result in recipients to avoid finding work because they risk losing their entitlement. Even if the methods used in proxy-means testing are not known, households in developing countries may restrain themselves on activities that they perceive may end up disqualifying them for the benefit, such as reducing consumption or avoiding formal income.

Other issues with a large informal sector that would complicate implementation of a UBI are identification to avoid double counting, getting the money to recipients that may not have bank accounts or formal residences to mail a check to, and accruing taxes from the rise in incomes that will occur through increased consumption. Dependence on consumption taxes also presents a risk to the scheme, because large informal sectors might also affect tax losses from consumption.

Discussion on UBI in developing countries and alternative methods

The primary strength of the argument for UBI in the context of a developing country comes from the fact that targeted transfers currently deny resources to some of the extreme poor, where a UBI would theoretically not be denied to anyone. It would also theoretically be more straightforward and fairer of a system. A crucial strength with targeted transfers comes from the fact that it can use limited resources the most effectively, and even if it misallocates some resources, on the whole, it can effectively allocate resources.

It makes sense on an intuitive level for developing countries with tight budgets to send money where it would be the most effective through targeted transfers, but this results in both inclusion and exclusion errors, which can either be seen as the best outcome possible or simply insufficient. The exclusion error population could be seen as an unacceptable outcome creating a highly underprivileged class, and even the definition of the population that qualifies for transfers might be considered insufficient. In Indonesia, while the impoverished population has been receding, during the Asian financial crisis it rose to as high as 23%, and the population that is “near poor” have been estimated to be as much as 42% (3). This could play into an argument for UBI: by allowing everyone to have the same benefit, there would be no inclusion or exclusion errors, and it would still be much more socially optimal than no transfer at all.

While the authors recognize that targeted and universal programs work well in different circumstances, they seem to imply that, for developing countries, the social welfare achieved by targeted transfers is currently the best game in town. Universal programs like public education and health care are two examples of already widely accepted government programs, yet cash transfer programs remain largely targeted.

The authors also introduce some interesting alternatives that capture some of the strengths of targeted and universal programs. For example, with “community-based targeting”, a village might get a certain number of “beneficiary slots”, and in a completely public setting, the village communally decides where to allocate them. The strength of this program seems to emanate from the fact that local communities have a more intimate knowledge of who needs the assistance the most. In the “differential cost and self-identification” method, benefits would be available to an entire population like UBI, but your relative wealth would affect the ease of which you get the benefits, as determined by a proxy-means test. The key to this program would be the fact that the benefits are worth less the higher up the income ladder you are, and things like long application processes would deter some applicants. The added benefit to this would be that those who are in the exclusion error population would receive some recourse if they are initially denied benefits.

It is clear that having an income tax base with which to measure prosperity and draw taxes from is currently the ideal system to operate with a UBI. Jenson (2019) demonstrates that development accompanies a shift from self-employed to employed populations in the United States with over a century of data, which could be the natural outcome of development in other contexts. If a UBI turns out to be an ideal system for reducing extreme inequality and increasing other indicators of human wellbeing, a question of its appropriateness might also entail identifying the correct level of development. Advancing this issue still requires more pilots in more varied circumstances.

This research adds to the knowledge of basic income in developing countries from pilots in Namibia (2008), Madhya Pradesh (India, 2010), and in other expansions of cash transfer schemes in Zambia (2010) and in Iran (2011).

Notes

1 – The informal sector describes the portion of the population who work but do not contribute to a social security system, are often self-employed, and whose activities and revenue amounts are largely unknown.

2 – By contrast, in the 2017 US Federal Government budget, 83% of revenue came from individual income and payroll taxes.

3 – Figures from the World Bank’s report “Making the New Indonesia Work for the Poor”.

More information at:

Rema Hanna, Benjamin A. Olken, “Universal Basic Incomes vs. Targeted Transfers: Anti-Poverty Programs in Developing Countries”, The National Bureau of Economic Research, August 2018

Abhijit Banerjee, Paul Niehaus, Tavneet Suri, “Universal Basic Income in the Developing World”, The National Bureau of Economic Research, February 2019

Anders Jensen, “Employment Structures and the Rise of the Modern Tax System”, The National Bureau of Economic Research, January 2019

Namibia Pilot Project, Basic Income Grant Coalition

SEWA, “Piloting Basic Income Transfers in Madhya Pradesh, India”, SEWA and UNICEF, January 2014

Pedro Arruda and Laura Dubois, “A brief history of Zambia’s Social Cash Transfer Programme”, International Policy Research Brief, June 2018

Chris Weller, “Iran tried its own basic income scheme — and people didn’t give up working”, Business Insider (France), May 23^rd 2017

Jehan Arulpragasam and Vivi Alatas (coords.), “Making the New Indonesia work for the poor”, The World Bank, November 2006

Adi Renaldi, “Poverty Isn’t Decreasing, Indonesia’s Official Poverty Line Is Just Too Low”, Vice, July 23^rd 2018

UBI Taiwan to discuss ‘key trends’ at international summit

by Tyler Prochazka | Mar 7, 2019 | News

The third annual UBI Taiwan international summit will be held in Taipei on March 16, 2019. This year’s theme is “Key Trends of the Next Generation,” focusing on technological development as well as growing income inequality and how these trends intersect with basic income.

Asia has progressed rapidly in the global basic income movement, led by India which has shown intense political interest in implementing policies containing aspects of basic income.

Sarath Davala, Basic Income Earth Network’s Vice Chair, will join the conference to discuss these developments and more in his keynote speech “Basic Income is the Foundation of A Caring Society.”

“This is the third consecutive year that UBI Taiwan is organizing a regional Basic Income Conference. UBI Taiwan is perhaps the only national level basic income group that organizes annual conferences. That is a demonstration of a robust movement, the strength of its leadership and their commitment to the idea of basic income,” Davala said.

Ryan Engen, an Economic Officer at the American Institute in Taiwan, America’s unofficial representative entity in Taiwan, will deliver the opening remarks discussing how digital transformations should make global economies consider updates to our social security systems.

Guy Standing, the co-founder of BIEN, Andrew Yang, the U.S. Democratic presidential candidate, and Peter Knight, the former World Bank economist, will join via pre-recorded messages.

This year, there will be a focus on bringing in academics and opinion makers from across Taiwan. Professors from Taiwan’s premier universities, National Taiwan University and National Chengchi University, as well as influential Taiwanese media figures, will address the conference.

The Critical Language Scholarship’s (CLS) Alumni Development Fund (ADF) provided a grant to help fund the conference and related events. CLS is a language program under the U.S. State Department.

James Davis, the former Field Research Director for UBI Taiwan and one of the project recipients for the ADF grant, said the conference demonstrates UBI Taiwan’s commitment to pushing this discussion in Asia and around the world.

“UBI Taiwan is here to change everything. We are not content with a society where wealth is concentrated in the hands of a few, as the wages of the working class fall year after year,” Davis said.

Davala has participated in every conference since it began in 2017.

“I am proud to be a regular participant of these conferences. I wish UBI Taiwan team success for this conference. With their kind of energy and dedication to basic income, I am sure one-day UBI will be a reality in Taiwan,” Davala said.

Brian Anderson, a senior at Western Kentucky University and also a recipient of the ADF grant, said this conference will help create academic connections between Taiwan and the United States.

“The push for UBI deserves international support and my project seeks to promote mutual understanding of shared interests between Taiwanese and American citizens,” Anderson said.

For Davis, society’s “inadequate” support for parents and caregivers as well as the financial difficulties faced by students illustrate the reasons why Taiwan should consider a basic income.

“UBI is the future. And UBI Taiwan is here to deliver,” Davis said.

The full conference information can be found on the UBI Taiwan website and on the Facebook event (Chinese).

United States: Alexandria Ocasio-Cortez gets to the point of what it means to be “unwilling to work”

by Andre Coelho | Feb 22, 2019 | News

Alexandria Ocasio-Cortez. Picture credit to: The Cut.

Alexandria Ocasio-Cortez (AOC) tabled a Resolution on the United States House of Representatives (H.RES.109) which hinted, in a first version, that “the Green New Deal would take care of people who are “unwilling to work””. That last bit of the sentence started a political hurricane in the United States. In that country, work is seen as tightly linked to jobs, and jobs are conceived as essential to value, and so “unwilling to work” is simply understood as “lazy”. Period. So, taking care of the lazy just sounds nonsensical to most Americans.

Because most people and politicians in the United States equate “unwilling” with “lazy”, it’s very difficult to pass on the message that “unwilling” might actually mean unwilling to perform a certain job/task that can be revolting, disgusting, unfair, tedious, repetitive and/or badly paid. Rigid work ethics and years of living in an economic crisis has also helped to lower people’s expectations, and be more open to exploitation. What is at dispute, at bottom, is the nature of work.

On the aftermath of those three words having been read on an official document, AOC was showered by a rain of criticism, particularly from Republicans, while being left isolated by colleague Democrats. Everybody fled, including AOC and her assessors. In an attempt to clear the record, AOC team tried to link it to the GOP, then alleged the release was a draft version. On the “final” version of the 109’th Resolution, cited above, indeed no reference is made to “unwilling to work”, or “unwilling” anywhere. Also, the reference to “basic income programs”, which was a part of a draft text for the Green New Deal that had already hit the news (for more positive reasons) was eliminated. So now, the creation of a Green New Deal, as proposed by AOC and some of her team and fellow Democrats, is completely devoid of references to basic income and unconditionality, while referring only to “universal access to clean water” and “universal access to healthy food”. And, on the H) paragraph of the 4th chapter, one can read the more fundamental and still core Democrats value as far as work is concerned: “guaranteeing a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States”. What remains to be seen is how AOC and other supportive Democrats envision achieving these universal rights – e.g.: access to clean water, healthy food and a decent income – without actually implementing a basic income in the country.

Basic income supporters / activists say, however, that the unwillingness to work is one of the reasons basic income should exist. American philosophy professor and author Karl Widerquist says it eloquently: “This idea that somehow people who are unwilling to work are bad or lazy is a horrible idea. Because whenever there’s a job offer and somebody doesn’t want it, what you have is a dispute about wages and working conditions”. Andrew Yang, the American presidential candidate who is running his campaign on the basic income concept, said that, in fact, the language (“unwilling to work”) “is unfortunate. It does make it easier to try and portrait [UBI] as extreme”. Widerquist added that “It’s really horrific to use the threat of poverty and homelessness as a work incentive”, qualifying that as “monstrous”. However, it seems, the monstrosity hasn’t been enough to break the bond most Americans hold dear, between wealth and work.

Senator Chris Murphy, on this issue, has stated that, although he thinks basic income is not sellable to the American public right now, the discussion about it should start today, because, to him, it will become a necessity in “decades” from now. In other countries, though, far away from the US geographically, economically and culturally, such as India, not only that debate has been going on for decades, but recent developments indicate that implementation of a basic income type of policy is on the verge of becoming a reality.

More information at:

André Coelho, “United States: Democrats add basic income to a climate change addressing plan”, Basic Income News, December 9^th 2018

Paul McLeod, “Alexandria Ocasio-Cortez Got Dragged For Suggesting People Who Are “Unwilling To Work” Should Get Paid. Advocates Say That’s The Point”, BuzzFeed News, February 15^th 2019

Anil Sasi: “Universal Basic Income: The ‘money for nothing’ idea”

by Andre Coelho | Feb 19, 2019 | News

Children playing in Sikkim, India. Picture credit to: India Today

Anil Sasi’s article starts from the Sikkim announcement to implement a basic income in the state, up until 2022. After describing the basic income concept in broad strokes, explains the Indian tapestry of conditional social benefits, in cash and in kind, which is riddled with inefficiency and corruption. It refers that, so as to finance a basic income, the structure of existing benefit programs would have to be completely changed, “in order to free up resources so that a particular amount can be directed to people on a periodic basis”. From there, Sasi goes on to describe a few of the most relevant basic income-like pilot programs and experiments, using that to contextualize the Sikkim situation.

As in many other regions in the world, the planning for a basic income implementation involves slashing on existing conditional programs, some of which might be rendered obsolete on their own terms (emptied out of beneficiaries, due to mean-testing). Sasi points out, though, that this cutting on governmental subsidy programs might be dangerous, even counterproductive, citing economist Bhalchandra Mungekar, a former member of Rajya Sabha and the Planning Commission. Interestingly enough, however, Mungekar was one of the Congress party leaders to promptly backup Rahul Ghandi’s announcement of a national basic income implementation in India, were the party elected in the next general elections in May.

More information at:

André Coelho, “India: Sikkim state is on the verge of becoming the first place on Earth implementing a basic income”, Basic Income News, January 11^th 2019

André Coelho, “India: Basic income is being promised to all poor people in India”, Basic Income News, February 1^st 2019

Anil Sasi, “Universal Basic Income: The ‘money for nothing’ idea”, The Indian Express, January 11^th 2019

Sri Lanka: Movement to grow awareness on basic income is starting to get momentum

by Andre Coelho | Feb 4, 2019 | News

Talal Rafi (on Twitter)

Sri Lanka, one of India’s closest neighbours, is starting to be the stage for a wide campaign to grow awareness about basic income. Talal Rafi, an entrepreneur, consultant and columnist from Sri Lanka is heading this awareness effort, since he is convinced automation will disrupt the economy, particularly by leaving millions of people unemployed.

Associated with Jim Pugh, ex-Director of Analytics for ex-US President Barack Obama, and Scott Santens, prominent international basic income activist, Talal Rafi has been referenced in Daily News, where he is cited for making an argument for basic income based on the onslaught of automation on jobs: “Artificial Intelligence will bring ease to humans, but would take away many of their jobs. Less than one fifth of jobs lost could be replaced. With half a billion people expected to be unemployed in the coming decades, crime alone would reach unprecedented levels. Self-driving cars, growing online shopping and robots for factories, mean millions of jobs taken over by machines. With IBM Watson, even doctors and lawyers are not safe. A possible solution is a guaranteed basic income for all.”

Rafi went on to be interviewed on Sri Lanka’s national TV (morning show, in English), where he was confronted with the usual questions concerning working productivity and financing. The answers surfed between automation and its consequences, results from already performed basic income pilots worldwide, and the prompt elimination of extreme poverty.