Citizen's right to minimum economic security

Context: Implementation of Universal Basic Income (UBI) in developing countries requires to perceive it as a tool to mitigate economic insecurity rather than economic inequality.

Challenges in Developing Countries:

• Overemphasis on poverty reduction:

• Has exclusion errors which are more problematic than inclusion errors 
• Population is just above poverty line: equally suffers brutal risks, like job losses, illness, weather fluctuations.

• Protective labour laws: discourages businesses while most trade unions are dependent on these laws to ensure job security due to high unemployment.
• Subjugation of women: Majority of women do not participate in income-earning labour making them financially dependent.
• Reduced bargaining power of workers: due to occupational Stigma attached to certain categories of works like manual scavenging and garbage collection.
• Incidence of clientelism: The politics of redistribution is often centred around group-specific or individual-specific patronage — like job reservation, ‘jobs for the boys’.
• More informal work: results in absence of social security benefits and suppresses the labour union made by informal workers.

UBI as a solution

• Focuses on economic insecurity: rather than economic inequality which is being mishandled through poverty reduction programs due to exclusion errors.
• Basic human rights: are upheld as it does not differentiate between a plutocrat and a poor in distributing the resources
• Improved labour market: as the problems of worker's economic insecurity are checked and labour hiring and firing norms are relaxed for the firms to encourage them.
• Economic empowerment of the women: ensured through regular payments in their accounts.
• Enhance bargaining power of the stigmatised and informal workforce: in the form of guaranteed social security and universal benefits like healthcare will strengthen labour movement.

Tackling the arguments against UBI:

• Will encourage laziness: There is no systematic evidence that cash transfers discourage work or encourage the use of drugs or alcohol.

• Try to develop a social norm of every recipient expected to give something back to society to the best of their ability 

• May break the budget:

• At a quarter of the median income per capita, the gross fiscal cost of a UBI (as percentage of GDP) would be for the US (6.4%), Poland (4.9%) and Brazil (4.6%), than for Mexico (3.7%), Egypt (3.5%) or South Africa (2.3%) [IMF report, 2017]

• A ploy to undermine existing welfare programme: It becomes irrelevant if following steps are taken:

• Remove non-merit subsidies: which make 5.7% of the GDP in 2015-16; they are primarily received by better-of section of the population.

• Minimising revenue foregone: in the form of tax exemptions given to the firms to be reduced to 2.5% from the current 5% of the GDP.

• Introduce fresh taxes: As the tax-GDP ratio is substantially lower than China, Brazil and some other developing countries; around 1.8% additional revenue expected.

• Money should be spent on education, health, and infrastructure:

• Additional resources: Apart from the above measures, additional ‘corona levy’ can act as additional revenue source.

• Only 2.5% of the GDP is required for an effective UBI of Rs 20,000 per family, the rest revenue generated (around 10% of GDP) can be used in these 3 sectors.

Implementation Issues:

• Political difficulty: is carrying out such a structural reform that eliminated long-standing subsidies and imposition of new taxes.
• Problems with basing the UBI: UBI as a share of GDP has annexation issues as the GDP may fluctuate and its measurements may be manipulated.
• Banking Inaccessibility: about two-thirds of the people in low-income countries and 42% in lower middle-income countries do to have bank access.

Way Forward:

• Focus on women: In case of lack of political will, one can start with half the projected costs and supplement only women for now.
• Accepting the concept: For now, it is essential to first accept the proposal and the implementation would take its due course having a mix of pragmatic and flexible parameters.
• Develop alternate ways of cash payments: to promote financial inclusion in unbanked and remote areas roving banking agents or mobile phone banking.
• Need for social insurance:

• Last decade has been subjected to traumatic events like financial crisis, job losses, ethno-nationalist excess and natural disasters 
• UBI can provide minimum economic security to the vulnerable section especially in developing countries.