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UNIVERSAL BASIC INCOME: CRAZY IDEA OR THE FUTURE?

Would you work if you didn't have to?


 

A proposal to introduce a universal basic income (UBI) scheme was overwhelmingly rejected in the referendum put to the Swiss people, with 77% votes against and only 23% in favour. Switzerland is the first country in the world to hold a referendum on the introduction of UBI.

 

But how exactly would UBI work and is it as crazy as some commentators say?

 

Very simply put, UBI would introduce a fixed monthly transfer to each citizen, regardless of their income or wealth. In the case of Switzerland the proposal suggested the sum of $30,000 a year. Over three-quarters of the added $200 billion cost were foreseen to be raised through additional taxes. Basic income is seen as a way of putting a floor under the poorest, and minimizing inefficiencies in current welfare systems.

What are the arguments?

 

That sounds all great! What could possibly go wrong?

 

 

What other places are trying it?

Although Switzerland is the first country in the world to put the idea to a referendum, there are governments from the US, to Finland and The Netherlands who have been exploring the possibility of introducing some form of UBI. In the United States, the city of Oakland, California is planning on giving it a go. Around 100 families will be given between $1,000 and $2,000 each month to test how a basic income will affect their lives. In Europe, Finland is the only country that will be running trials on a national level. Starting in 2017, up to 100,000 Finns could get up to 1,000 euros a month, in lieu of other benefits. This experiment will be tested for a period of two years, and citizens will be free to use their fixed lump sums as they see fit. Finally, four Dutch municipalities will implemented a local UBI of circa $1000 a month.

 

The question at the heart of the debate is as follows: If you give citizens a certain lump sum of free money, will they simply spend it and do nothing of social or economic value with their lives or will they use that amount as a way to earn more money and live richer, more productive lives? The different experiments that will be run in the aforementioned countries will be very informative, however the results should be treated with caution. People in certain countries may respond differently to the UBI. This could be due to socio-economic but also cultural reasons.
Whatever these experiments may conclude, and despite the negative press that UBI has been receiving, there are clear arguments in favour of it as well as many limitations. What is clear is that the debate should be localised rather than global, different countries and even different regions will always respond differently to policy interventions, and sweeping generalisations are in this case counterproductive.