In an interview on March 27th with journalist Govindraj Ethiraj from BOOM, Baijayant “Jay” Panda, a member of Indian Parliament representing the Biju Janata Dal Party, explains his view about the potential benefits of an Indian Universal Basic Income (UBI).
“The 7.1% growth rate India has today does not create the number of jobs it used to ten or twenty years ago,” Panda explains. The global phenomenon of technological development has made UBI a hot topic in economics around the world for the last two or three years.
At the same time, the subsidiary system in India is very inefficient. Based on a planning commission’s study 5 years ago, Panda estimates that out of every rupee spent by the government, only 27 paisa reach the citizen. “That means that 73 paisa goes away in salaries, overhead, and corruption, and leakage. We have only seen tremendous success in for example the use of Aadhaar (an identification system based on biometric and demographic data) and converting the subsidy on LPG cooking gas and instead of giving cylinders, you give cash directly to beneficiaries and get it on the market. You can see the same kind of turn around in kerosene subsidy and other subsidies.”
Panda continues: “The argument that has been put out by many economists around the world, many of Indian origin, is that suppose you came up with something like a thousand rupees per month per citizen, maybe universal, maybe targeted, then you bring them above the basic poverty line and beyond that you focus on all the other aspirational things citizens have, such as getting jobs and education.”
But should this income be universal or targeted to a specific group? There are pros and cons on both sides, Panda argues.
“Why would somebody like you or somebody like me need to have a thousand rupees of basic income given by the government? The argument in favour of a UBI is that we waste too many resources and too much effort trying to target. You have armies of lower level government officials going around in the districts counting who has a house, who has electricity, who has a fan, who has a scooter, trying to decide who deserves a subsidy and who does not. If you make it universal, you save enormous effort. There is also enormous leakage in the system. People like you and I will most likely not take the thousand rupees per month, but those who need it, will take it.”
Panda is open to the idea of targeting as well, though, and states that with technology, like the use of Aadhaar, it is perhaps possible to target much better today then it was ten years ago. “We don’t have to go universal at one go. We should keep on extending the use of technology to target the most leaky, the most corrupt subsidy.” The kerosene subsidy is a perfect candidate for such a pilot, according to Panda.
He compares the Indian situation with the US and Europe and explains why the situation in India is different. “If you look at the US or Europe, they have large social service expenditures, which are relatively efficient. In our case, we have a lot of low hanging fruit of inefficiency so that it is a win-win scenario. A UBI in India can be funded from the savings of the current systems. The fiscal deficit is not going to get worse. In the US and Europe, they have to take something away from the citizens. Here in India we are not taking anything away because whatever subsidies we have, it is mostly being leaked so it is not reaching the citizens anyway.”
In the process of cowriting a book about the upcoming Unconditional Basic Income Trials, I’ve been trying to come up with a list of the claims that tend appear in the debate. Below are two lists: first a list of supporters’ claims and then one of opponents’ claims. I gave each claim a name to make it easier to talk about them, but these names do not reflect any standard definition. I tried to order the claims in each list from the relatively more important or more common to the relatively less important or less common.
To say that a claim appears on the supporters’ or opponents’ lists is not to say that all supporters or all opponents agree on it. In fact, some of the claims contradict each other, which is to be expected, because different people support or oppose UBI for diverse reason. They might have little in common but their support or opposition to one policy proposal.
Supporters have claimed:
The freedom claim: UBI gives people greater freedom by giving them more effective power over their own lives.
The poverty claim: UBI (usually in combination with other policies) can eliminate poverty.
The anti-exploitation claim: UBI reduces exploitation in employment by giving all workers the power to refuse exploitive working conditions.
The welfare claim: UBI raises the welfare of net-recipients (by eliminating destitution, reducing poverty, increasing incomes of people near poverty, reducing inequality, and other effects) and many net-contributors (by removing the fear of destitution, improving their bargaining position in the market, and so on). To the welfare claim we could add many supporting claims, that UBI is good for physical and mental health, that it decreases homeless and malnutrition, that it decreases infant mortality, and so on.
The increased-worker-income claim: UBI increases in the income of workers directly by acting as a wage subsidy for lower-income workers and indirectly by creating market conditions likely to increase wages.
The better-working-conditions claim: UBI improves working conditions for many workers both by giving them the flexibility to move more attractive sectors and by creating market conditions likely to give employers incentive to improve working conditions.
The affordability claim: UBI at the desired level is affordable. (Most UBI proposals call for one high enough to eliminate official poverty or to raise incomes to 150% of the officially poverty level. Some call for meeting basic needs or to enable social participation and to secure a life in dignity. Some simply call for the highest sustainable UBI regardless of what that might be.)
The economic equality claim: UBI increases economic equality both by direct redistribution to lower income people and by creating market conditions where workers can command higher wages and better working conditions. (The taxes used to support it can also be formulated to increase equality.)
The social equality claim: UBI increases social equality by reducing social isolation of people with very low incomes, by reducing the stigmatization of people who benefit from redistributive programs, by reducing housing segregation, and by other means.
The poverty-trap claim: UBI encourages people on benefits to reenter the labor force in greater numbers than a conditional system, by ensuring they are always better off earning more private income than earning less.
The anti-ghettoization claim: UBI reduces (both personal and social) costs linked to high concentrations of poverty both by reducing housing segregation and by significantly raising average incomes in those communities.
The cost-effectiveness claim: UBI is relatively more cost-effective than traditional, conditional welfare policies (in achieving goals such as increasing equality, raising welfare levels of recipients, and so on).
The reduced-capture claim: UBI’s benefits are less likely to be captured by others (such as employers, landlords, and bureaucrats) than conditional welfare state policies.
The bureaucracy claim: UBI reduces the overhead cost associated with income support.
The labor-productivity claim: UBI increases labor productivity both by encouraging employers to substitute skilled for unskilled workers and by improving workers’ ability to enhance their skills and search for higher-productivity jobs.
The productive non-labor claim: UBI allows people to do more unpaid work (such as care work and volunteering), some of which is more productive (or socially valuable) than many forms of paid labor.
The politically-enabled-proletarian claim: UBI—by freeing low-wage workers from long hours and low pay—makes them a greater force for progressive social change on all other issues.
The acceptable-labor-supply-effect claim(s): if UBI causes a reduction in labor supply, it will be within acceptable levels, and/or if UBI causes a greater-than-desirable labor-supply reduction, it can be at least partially counteracted by other policies to increase labor supply or the demand for higher-wage employees.
The macro-stimulus claim: UBI, in combination with the taxes that support it, helps improve economic growth and reduce unemployment by helping to stimulate and stabilize aggregate demand.
The “degrowth” claim: UBI helps economies move away from overconsumption and overexploitation of resources.
Greater respect for people in need: UBI and other universal programs treat everyone with respect while many conditional programs treat virtually all recipients as suspected cheats, even if they fit almost anyone’s definition of the most truly needy.
The increased-overall-redistribution claim: UBI results in greater overall redistribution to the poor, because universal policies foster greater feelings of solidarity and support once in place
Opponents have claimed:
The reciprocity claim: UBI allows people to share in the benefits of social production without contributing their labor.
The exploitation claim: a tax-financed UBI redistributes income from workers to people who do not work, thereby exploiting workers.
The harm-to-workers claim: the taxes needed to support UBI financially harm workers, all things considered.
The unacceptable-labor-supply-effect claim(s): UBI causes an unacceptably large reduction in labor supply that is not easily counteracted by other policies.
The self-destruction claim: UBI increases self-destructive behavior in recipients.
The meaninglessness claim: UBI makes it possible for people to live lives that they will eventually find meaningless because paid labor is a central source life meaning.
The capture claim: many of the benefits of UBI will go to someone other than the recipients, perhaps because employers reduce wages, because landlords increase rents in low-income areas, because bureaucrats create overhead costs, etc.
The inflation claim: UBI causes inflation that is not easily counteracted by other policies.
The migration claim: UBI encourages immigration and/or migration into areas with UBI.
The unaffordability claim: UBI at the proposed level is prohibitively expensive.
The negative, relative cost-effectiveness claim: UBI is more expensive than other programs that can achieve similar goals.
The gender-role reinforcement claim: UBI helps maintain traditional gender roles by making it easier for women to remain out of the paid labor force while performing unpaid care work and other traditional women’s roles.
The macro-deterrent claim: UBI decreases economic growth by enabling reduced labor market participation and increasing costs.
The shut-door claim: UBI creates political pressure to restrict immigration and migration.
The bought-off-proletarian claim: UBI—by providing a minimal level of contentment for workers—reduces their effectiveness as a force to challenge the deeper inequalities and other social inequities in society.
The consumerism claim: UBI leads to even more environmental destruction because of increased consumption.
The decreased-overall-redistribution claim: UBI is (politically and/or economically) feasible only at such a low level and only accompanied by so many other social programs that it will leave low-income people worse off than traditional, conditional social policies.
The strategy-to-cut-redistribution claim: factions in government will use UBI as an excuse to cut other programs, then cut in a strategy that will lead to much less overall redistribution.
I compiled this list from general knowledge accumulated over years of reading about the UBI debate. It is bound to be incomplete. Many more claims (of various levels of relevance, certainty, and testability) are undoubtedly circulating in the academic and nonacademic literature on UBI. But I hope it captures a significant range of what is being said. This list is enough to demonstrate the difficulty of designing a trial and communicating its results in a way that successfully raises the level of debate over these claims. Some are things that can’t be tested. Some are things that can only be tested indirectly, partially, or inconclusively. Few if any of these claims can be directed tested with any accuracy in a trial.
I’m interested to know how comprehensive people think it is. Did I include all the relevant claims you can think of? Did I overblow any claims that don’t deserve to be on the list?
A stock image used to evoke a mental connect with the word “experiment”
Jamie Cooke, Head of RSA Scotland, will deliver a TEDx talk titled “Basic income – Scotland’s radical chance to lead the world (again)” in Glasgow on June 2, 2017.
TEDxGlasgow provides the following summary:
The welfare state, built for a different age, is crumbling.
As films such as ‘I, Daniel Blake’ have vividly demonstrated, a system designed to support and protect people at moments of vulnerability in their lives has been warped into one which uses sanctions to punish and control. As wages have stagnated, jobs have changed and incomes have been unpredictable, we have seen the growth of a section of society which Guy Standing calls the ‘Precariat’, living precarious, insecure lives. In turn, we have seen dangerous forces start to harness these insecurities, fuelling the rise of the far right in various parts of the world.
It’s a depressing picture, but there is hope – and Scotland, once again, has a chance to act as a beacon of enlightenment.
Glasgow is leading the way on developing basic income pilots, radical schemes to change the way we envisage work, income and our place in society; and in which we fundamentally shift the relationship between the citizen and state.
In this talk, Jamie will outline some of the positive paths we could take, and the role that basic income could play in creating a radically different Glasgow and Scotland.
For more information about the upcoming TEDxGlasgow event, including biographies and talk summaries of other speakers, see: https://www.tedxglasgow.com/speakers/.
Scotland is already becoming a hotbed of interest in basic income.
Earlier in the year, the City Council of Glasgow partnered with the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) to investigate designs for a basic income pilot program. At present, the Council and RSA are working on a study of the financial, administrative, and constitutional feasibility of a pilot in Glasgow. Workshops on the topics are planned in June and July 2017, with a report to follow in September.
Other regions in Scotland, including the council areas of Fife and North Ayrshire, are also exploring the possibility of basic income pilot programs.
The publisher of a paper I wrote in 2015 has now given me the right to share the published version of my own article without charge. (That is, without them charging me for sharing my own work with you.)
Thomas Piketty’s recent book, Capital in the Twenty-First Century, provides a great deal of empirical support for the observation that the rate of return on capital (r) is greater than the growth rate of the economy as a whole (g); i.e. “r > g”. From this observation, Piketty derives two important insights: entrepreneurs eventually become rentiers, and except during unusual circumstances, inequality tends to rise over time. This paper views Piketty’s observation against the institutional setting that has prevailed over the period of his study and makes two additional observations. First, whether Piketty’s two insights follow from his observation depends not simply on whether r is greater than g, but on whether the difference between the two is greater than the consumption of the capital-owning group. The relative size of capitalists’ consumption and capital income is not obvious, and therefore, more evidence is needed to confirm the connection between Piketty’s observation and his insights. Second, the statement r has been greater than g is more accurate than simply r is greater than g. Whether r continues to exceed g depends crucially on the political and institutional environment in question. Economists tend to view one specific institutional setting, a version of laissez faire, as natural. But there is no natural set of property institutions, and those that have prevailed over the two centuries of Piketty’s observations are extremely favorable to capital owners. Awareness of the flexibility of potential property institutions raises many ethical questions and makes many tools available to address inequality – one of the most obvious being the taxation of rent on capital distributed as a basic income
Three communities across Ontario have been selected for the Province’s guaranteed minimum income pilot. Ontario will be rolling out a three-year study in late spring and fall 2017. Premier Kathleen Wynne made the announcement with details of the project in Hamilton on April 24th.
The stated goal of the pilot on the official website of the Ontario Government is to ”test whether a basic income can better support vulnerable workers, improve health and education outcomes for people on low incomes, and help ensure that everyone shares in Ontario’s economic growth.”
The mayors of each community – Lindsay, Thunder Bay, and Brantford/Hamilton/Brant County, expressed hopeful to positive reactions at the announcement that their cities had been chosen to pilot in the project.
Kawartha Lakes Mayor Andy Letham, which is home to the community of Lindsay, describes precarious work as a cause for concern in his community and admits that the status quo of society isn’t functioning well. “The cost of poverty on people’s mental health is real,” said Letham. “So how to we break these cycles?” Lindsay will host 2,000 of the total 4,000 participants.
Thunder Bay Mayor Keith Hobbs, a 34-year veteran of the local police force, described his experience with some members of the community: “I saw the same people all the time, like a revolving door.” Hobbs expressed excitement at the possibility of this project positively impacting the lives of those he had consistently interacted with. Workers and citizens of Thunder Bay have had to reinvent themselves as the region transitioned from industries like pulp and paper to health research institutes, law, and genomics.
Pulp and Paper Mills in Thunder Bay, Ontario
Brantford Mayor Chris Friel expressed excitement to take part in a project that will reduce poverty and improve health and educational outcomes. Ron Eddy, the Mayor of Brant Country, stated that he looks forward to observing the results of the project. “The only way you’ll know the outcome is to try it out. So, let’s see what happens,” Mayor Eddy said.
Details on the Pilot
The basic income pilot will randomly select 4,000 individuals between ages 18 to 64 that meet certain criteria, and provide them with a minimum income despite their employment status. The plan will target populations who are in precarious work positions, those already on social assistance, and the homeless. The program will, however, target mostly the “working poor” according to Ontario’s Minister of Community and Social Services Helena Jaczek. Those receiving a minimum income will be compared to a control group, which will not receive payments. The project will look for outcomes using metrics like food security, health and health care usage, education and training, and labor market participation among others.
Recipients of the guaranteed minimum income will receive:
$16,989 per year for a single person (75 percent of the Canadian poverty line), less 50 percent of the recipient’s earnings from work;
$24,027 for a couple, less 50 percent of their earnings from work;
An additional $6,000 for those with disabilities.
In addition to this, recipients will continue to receive other provincial and child benefit payments.
With this version of a guaranteed minimum income, a person earning $12,000 a year would still receive a basic income of $10,989 (subtract $6,000, or half their earnings, from the base amount of $16,989) and therefore receive a total of $22,989. A recipient’s net income will still increase, with the minimum income still active, as earnings from work increase up until around a wage of $34,000, where the payments would disappear. The total cost of the project is expected at $50 million per year.
Hugh Segal, a former senator who was consulted for the project, noted in Manitoba’s “Mincome” experiment in the 1970’s that the community saw improvements in health with no drop in employment, and that the potential exists for the government to save money if it replaced the traditional social assistance programs like Ontario Works with a basic income. The Provincial government is also in the early stages of planning a fourth basic income pilot for the First Nations community.
