Poverty Today: Is Universal Basic Income a Solution?

Over the last 15 years or so, a concept called Universal Basic Income (UBI) has taken hold in some economic circles as a way to help eliminate for the 1.2 billion people in the world who are struggling to simply exist. While the concept remains controversial, a number of famous businesspeople, including Richard Branson, Elon Musk and Mark Zuckerberg, see it as a viable way to boost the economies of individual countries.

What is Universal Basic Income?

The concept behind UBI is simple. The government gives everyone enough money to live on with no strings attached. Proponents of this system believe that UBI will help the underemployed get back into the workforce in developed countries, while unrelenting poverty could effectively be wiped out in third world areas. The system has the potential to radically remake society in the face of impending technological change.

Finland’s Experiment

The Scandinavian country of Finland is nearing the end of a two-year trial program in which 2,000 participants received a monthly basic income payment of €560, independent of any income they may also receive. The Finnish government hopes that the program, launched in January 2017, will reduce the country’s 8.5 percent unemployment rate.

Although the Finnish program is not dependent upon participants undertaking an active search for employment, researchers will study how increasing cash incentives may influence job searches. The group of 2,000 receiving UBI will be compared against a control group of 173,000 of people in the program’s target population but who were not included in the study. Data will focus on whether differences in employment occurred between those receiving UBI and those who did not. Secondary objects will determine if a difference in the well being of participants occurred.

Controversies Surrounding UBI

UBI is controversial for several reasons. First off, there are disagreements on the uses of such income. While some believe it should be used solely for eliminating poverty, others believe it is a tool to help those who lose their jobs because of automation. A $12,000 annual income, however, wouldn’t be enough for one person to live on, but it could help fund that person’s job search or retraining for a new position.

How such programs are funded is also controversial. The programs put forth by several economists would eliminate current programs such as Medicare and Medicaid and ultimately result in a reduction of benefits by about 20 percent to those who are unable or cannot find work. One solution to that problem would be to develop a UBI program that puts children first instead of adults.

Developing World Stands to Gain the Most

The greatest potential for UBI is in developing countries. Arvind Subramanian, India’s chief economist has come out in favor of a UBI system as the country’s vast system of subsidies for items such as fuel and food, never makes it to the poor population. Such inefficiency raises the question of whether instituting a basic income for everyone will be better.