What is Universal Basic Income? Examples and considerations

Can you imagine that from time to time a sum of money reaches your account regardless of your job, your marital status, the place where you live or if you have children or not? Facing a crisis, receiving news of economic impact or resolving unforeseen events would be less complicated. This is what the idea of ​​creating a universal minimum income is about, a proposal that has been discussed and tested in different countries for a relatively short time.

The Universal Basic Income (IBU) is a direct transfer of money granted by the government that has, yes or yes, these characteristics:

• It is periodic: that is delivered every certain established time; every year, every month, every two months and this period is constant.
• It is uniform: that all people receive the same amount of money.
• It is individual: which is given per person and not per household, family, marriage, etc.
• It’s universal: which is for all people without conditions

The Universal Basic Income is a project that seeks public revenue (mostly taxes) to subsidize a guaranteed income for all people who are legal residents of that country.

Differences between IBU and social programs

In Mexico, the government makes direct money transfers to students, the elderly, and people with disabilities. In Argentina, households where there are minors and the parents face labor vulnerabilities also receive a monthly amount of money. In the United States, if you lose your job, you can apply for insurance that guarantees income while you find a new one.

These are some social assistance programs that operate around the world, they are designed to reduce the gaps between the economically vulnerable population and the rest of the population. All these programs are different from what is known as the Universal Basic Income for a fundamental reason: the IBU implies eliminating the minimum requirements or the conditions to receive a money transfer.

Universal Basic Income is also different from Minimum Living Income (IMV), because in this second the universal character is removed. Instead of covering the entire population, the IMV is only received by certain groups in particular, such as the poor, those who do not have a job or those who have some other deficiency.

Some exercises close to the IBU

Around the world exercises have been carried out to test the possible effects of a Universal Basic Income. In Alaska, the United States since 1982, all residents received a direct transfer at the end of each year, without any conditions, despite being the longest year, it does not fit the definition either, because the program is financed by oil revenues and the amount transferred changes at the rate that this income changes.

The projects implemented in Canada and Finland are also more similar to social assistance programs in that they have been applied to specific groups in society. But its operation has allowed us to begin to have clues about the possible effects of a Universal Basic Income.

Another of the important applications in the world is in Kenya with the transfers that the GiveDirectly organization has coordinated. This cannot be considered an exact exercise of the IBU either, but with its close to 20,000 beneficiaries in rural areas, it has served to keep track of the impact in different spheres of life of the people who live in these localities.

Some of the reviews show consistent overall results. Direct transfers have a positive impact on welfare indicators in the population; in Alaska, for example, the birth rate increased, in Canada and Finland better levels of mental health and academic performance were observed.

In Kenya, GiveDirectly has carried out a more in-depth study of the impact in the 197 rural localities with beneficiaries and not only improved the well-being of the people, but also the economic situation, the mental and physical health indicators, the social dynamics and even a increased interest in taking financial risks such as accessing credit, making investments or starting their own businesses.

In Mexico, different political actors have put it on the table:

Is a Universal Basic Income possible?

The debate on the Universal Basic Income is complex, not only because there are economists and specialists in social development and other social sciences who assure that a UBI could have negative or regressive effects in labor matters. It is also complex because it is a very ambitious social policy commitment.

The CIAD (Center for Research in Food and Development) together with researchers and academics estimated that it would cost Mexico a little more than 10% of its GDP to pay a Universal Basic Income, only considering an amount of money sufficient for the minimum basket of foods.

To get a better dimension, the simulation considers that by delivering about 1,668 pesos to each person on a monthly, universal and consistent basis, the government would have to disburse the money equivalent to everything generated by the tourism industry and a little more.

The exercise finds that extreme poverty in Mexico could be eradicated if a UBI were implemented. While the social pension program for the elderly is the policy with the lowest cost-effect level, its scope for reducing poverty is significantly more limited.

The truth is that for each country the costs, the money to finance it and the effects are different. In the United States, for example, a study found that if an IBU of 1,000 dollars per month per person were implemented, the GDP of the North American giant could grow 12% for eight years.

It would also have a progressive impact because it would give the lowest paid workers the opportunity to improve their economic conditions. And in macroeconomic terms, the working classes having extra income returns greater benefits to the general economy than when the upper classes have extra income.

The debate about whether or not a Universal Basic Income is possible has changed perspective in recent years. The crises that the world has faced and the advance of technological phenomena that revolutionize the labor market put a new question on the table: how to make a Universal Basic Income possible?

A Universal Basic Income is not equivalent to eradicating inequality

Another important nuance is that despite the multiple benefits that could derive from implementing the UBI, this would not mean that inequality gaps will automatically be closed, especially if countries like Mexico are considered.

The idea of ​​guaranteeing a minimum income for all people is more in line with human dignity. That people who lose their jobs can take the time to find one that, in fact, is compatible with their pretensions, skills and experience, and not take anything just because of necessity. That people who already have a job, have an extra income to cover an emergency or to pay for other educational or leisure activities. That people don’t drop out of school because they can’t pay for books or transportation. Or that some worker who has IMSS can one day avoid the bureaucracy and pay for a consultation with a private dentist to treat a toothache.

For this reason, many experts in economic development support the idea of ​​Universal Basic Income as a complement to public policies and other development programs that are aimed at reducing inequality gaps and decentralizing wealth.

Although, for now, the idea of ​​having an IBU is still far away, some existing social assistance programs and their positive results in different areas of life could pave the way or new alternatives to guarantee the essentials to all people.

ana.garcia@eleconomista.mx