Universal Basic Income is only an idea in the making, but within its first year of conceptualisation, it seems like the first two terms of the acronym have already been reduced to notional ideas.
Problems have cropped up in conceptualising Universal Basic Income. Credit: Reuters/Rupak De Chowdhuri/Files
A chapter in this year’s Economic Survey titled ‘Universal Basic Income: A Conversation With and Within the Mahatma’ in the Economic Survey of 2016-17, engages at length with the concept of Universal Basic Income (UBI). Although UBI has not been realised in this year’s budget, its place in the Survey reflects the seriousness of the present government in pursuing it as a major – and possibly, the only – social welfare measure in the foreseeable future. At face value, it would seem that by pursuing UBI, the present government has its heart in the right place – trying to provide security of income to all. However, before reaching that conclusion, perhaps we should consider a footnote in the chapter that says,
“Traditionally income and employment have been aligned in most societies; even welfare benefits were stop gap arrangements on pathways to employment. A few aberrations apart, unemployment is no longer a consequence of lack of individual effort. All societies must aim for full employment. But in an era where collective arrangements are not able to guarantee the availability of jobs, it is imperative that the alignment of income and employment be loosened somewhat. In the twenty first century it may no longer be possible to guarantee social security or minimum support by linking it to employment.”
Taking cognisance of this footnote, UBI ceases to seem solely like a pro-people policy, but instead appears as a shortcut measure to manage a situation where economic growth is independent of job growth and the state admits to having given up on the idea of employment for all.
The planners turn to Gandhi for a solution to the problem of ensuring a dignified life for all. The Gandhi evoked in the chapter shall be referred to here forward as the ‘Planner’s Gandhi’. Under the guidance of ‘Planner’s Gandhi’ the planners close their eyes and think of the ‘last person’. The last person is poor, unable to survive with existing subsidies and other poverty alleviation programmes. They are awaiting work or maybe not because they are too old and too frail to work. Pained by the last person’s situation, the planners envision ‘basic income’ as a promise, for a better future.
The morality of UBI
By the time they get back to Lutyens Delhi, the questions and challenges of this promise stare back at them. The first being – is basic income morally appropriate? If yes, how much should the ‘basic’ income be? And while it is called universal, does it need to be universal after all?
They turn to their Gandhi again. This time the ‘Planner’s Gandhi’ further confuses them by suggesting that their idea is morally challenged since it carries the potential of encouraging laziness, idleness, hypocrisy and even crime. He further insists that the governing rule should be “no labour, no meal”. The planners exchange confounded looks since in post-independence India, not providing food or death by starvation is a constitutional crime. So they sit down to draft a perfect proposal which, as guided by the ‘Planner’s Gandhi’, is both in the interest of the poor and does not inflict any pain on the rich.
The first challenge that they need to overcome is the moral one – what a travesty it would be if a well intentioned policy intervention produces hordes of lazy people out of those who are at present only poor but not lazy. They therefore begin the chapter by talking about ensuring, “a life of dignity” and “wiping tears away from every eye” – but always with caveats. The first among them, “the risk that UBI would become an add-on to, rather than a replacement of, current anti-poverty and social programmes, which would make it fiscally unaffordable.” The second caveat is about the over riding ‘Gandhian’ concern – that the poor should never feel like all their needs are taken care of and hence, while it is conceived to be ‘basic income’, it should barely cover a subsistence level of existence. Another important point we note is flexibility of the labour market that will come about as a positive outcome of UBI. While jobs are in short supply by the admission of the first footnote, it really does not mean that the state and employers should be compelled to provide employment and accompanying job security. That is a dream forgone at the turn of the century.
Quantifying UBI
The second challenge the planners address is – how much should a ‘basic’ income be? The planners present possible policy interventions after dialogue with their Gandhi. But we found them confusing. So we decided to carry out lay persons’ calculations which we share below more to understand the issue than to make definitive claims. The Economic Survey 2016-17 conceptualises the rationale for UBI based on the assumption that the current expenditure (5% of the GDP) of government on several social welfare and infrastructure programs, if replaced by UBI will yield at least the same standard of living and in all likelihood will endow the poor with adequate purchasing power to improve their condition manifold.
At the heart of the matter is the question of whether UBI will liberate citizens from a paternalistic and clientelistic relationships with the state, or make it more difficult for citizens to sustain themselves, given the insufficient resources in their hands. We believe that social welfare schemes have a rightful share in the aggregate wealth produced by the nation. If UBI is not conceived in addition to the existing welfare schemes but as a replacement then the budget need to compare to the outlays on social welfare schemes. Additionally, the individual entitlement must allow for dignified living and provide enough income to all its beneficiaries to participate and procure from market what they earlier received in subsidies and in kind. In effect it is only worth pursuing the idea of introducing UBI if and when the standard of living of people is improved.
In order to understand how the current government is aiming to “wipe every tear from every eye”, and what capacity the government has to improve the status quo of the poor, we tried to analyse the union government’s budgetary allocations in crucial social sector schemes which we think stand the chance of being dropped in favour of UBI. The list of schemes we have chosen is shorter than those reported in the chapter. As a result, so is the total budgeted outlay. We have not considered infrastructural schemes such as the Pradhan Mantri Gram Sadak Yojna or Swach Bharat Yojna, included in the chapter, because no individual level adequacy of income can excuse state spending on these public goods and infrastructure costs. Besides, the Economic Survey does not give details of 50% of the schemes they have considered to calculate the aggregate government expenditure on social welfare and subsidies.
The purpose of the calculation exercise undertaken here is to arrive at a better understanding of the extent of trade-offs and the resultant possible consequences of UBI – both for the government and the supposed individual beneficiaries. The sixteen schemes which at present provide safety nets are the Sarva Shiksha Abhiyan, the National Health Mission, National Food Security Mission, food subsidy, subsidy on LPG and kerosene, subsidy on fertilisers, Integrated Child Development Services, national social assistance program, mid-day meals, National Rural Drinking Water Programme (NRDWP), welfare programs for persons with disabilities, pre and post matric scholarships for minorities, SCs and OBCs, and MGNREGA.
As per our calculations, the total intended expenditure of the central government in the financial year 2016-17 on these schemes amounts to Rs 3,62,052 crores, or about 2.4% of the national GDP at current prices. The listed schemes represent both those which apply to the poorest (23% of the total population) and those that are more liberally targeted. Considering that the state would allocate the exact aggregate amount it intended to spend on social welfare for UBI for the below poverty line population, the per capita entitlement would amount to Rs 12,669 per person per annum. This excludes establishment and recurring costs to run the scheme which would form a substantial part of the total expenditure and in effect decrease the per person entitlement amount. If this scheme has to be expanded to 75% of the population, or in other words be quasi universal as is envisaged in the Economic Survey, the per person entitlement drops further to Rs 4,000 per person per annum, or the outlay increases four times to Rs 11,50,000 crores. Neither Rs 4,000 per person per annum nor Rs 12,669 per person per annum is even close to the minimum wages legally guaranteed at present. As per the document’s own admission, providing a modest income of Rs 12,000 per person per annum for a de facto targeted population should cost a staggering 10.8% of the GDP.
What is noteworthy is that this modest entitlement of Rs 1,000 to Rs 1,200 per month should be configured by an individual in a manner that it suffices for education, health, livelihood, food, fuel, nutrition, fertiliser and scholarship needs. Interestingly this amount is only slightly higher than the one presently used to determine basic minimal calorific consumption based poverty line at present. We decided to adopt the planners’ method of resolving dilemmas, borrowed from Gandhi and close our eyes to think about the last person. Somehow when we close our eyes we see a picture quite different from the one seen by the planners. Instead of a life of dignity we see the last person struggling for a living that has adequate nutrition and health, clean water and access to basic education in the ‘basic income’ the report plans to assure.
Qualifying UBI
The final question that the planners deal with is who should be provided with UBI. Don’t mind the fact that the first word of this acronym is ‘universal’. That is only a notional idea dismissed three pages into the chapter. In spite all the hassles and costs of targeting universalisation saves for the government, as admitted by the planners themselves, they think it will be too difficult to convince the rich to entitle themselves to a ‘basic’ income. They don’t like basic. So it quickly transitions – after three pages to Q-UBI – quasi universal basic income as expressed in footnote number four (Page-191) further lists the tactics that can be adopted to make quasi UBI successful.
The first tactic is exclusion, the second is voluntary exclusion. Both are acceptable. The third tactic is ‘naming and shaming’ and the fourth is introducing unnecessary administrative hassles. The assumption here is that the poor don’t get publicly shamed – that shame is only particular to the economically well off. Additionally, to discourage non-needy beneficiaries, undervalues the ‘opportunity cost of time’ for the poor as compared to the rich and lays claim to it by introducing a self admittedly, unnecessary administrative hurdle such as regular self-verification, as suggested on page number 191. Evidently, the planners didn’t fully describe the last person in the preceding paragraphs. By this logic the person in addition to being needy is also difficult to shame (unlike the rich) and is also willing to spend unnecessary time in procuring entitlements. The ‘Planner’s Gandhi’ too does not seem to have any moral dilemma with this formulation of the last person.
At this point, UBI is only an idea in the making. However within its first year of conceptualisation, it seems like the first two terms of the acronym have already been reduced to notional ideas. We think that the time will be ripe for discussing UBI when the state is able to assure both universality and adequacy and match it with adequate public infrastructure and safeguards from volatile market fluctuations.
Kinjal Sampat and Vivek Mishra are researchers at the Centre for Equity Studies, Delhi.