The Establishment of Global Universal Basic Income
Hoynes, Hilary, and Jesse Rothstein. “Universal basic income in the United States and advanced countries.” Annual Review of Economics 11 (2019): 929-958.
Hoynes et al. discussed how much Universal Basic income could help improve the general quality of life and economic growth in developed countries. They termed Universal basic income as a concept that is gaining popularity among scholars in developed countries. The researchers outlined the three problems that Universal basic income is meant to resolve: providing adequate finances to the individuals and households to meet their basic needs in the absence of other income sources.
They also wanted to explore a common notion among scholars that the Universal Basic income tends to phase out as the general income level rises. Lastly, a large proportion of the population has substantial financial need and limited streams of income like single parents.
For accuracy in the qualitative analysis, the researchers used the United States case, which presented a problem because it has relatively low-income transfer and focuses on work. They found out that a true Universal Basic Income would be hard to achieve due to its immense expense. However, some other basic income forms would better suit the United States, like Medicaid, Medicare, and Social security.
The researcher focused on the incentive effect of Universal Basic Income and the right transfer framework to be adapted. That also assesses the incentives surrounding the accumulation of human capital, the cultivation of entrepreneurial culture, and the economy’s labor supply. This is because the greatest motivation for supplying labor and working hard to grow the economy is that the individual and households can earn a living. However, it will reduce the stigma against the poor and help improve the general quality of living.
Banerjee, Abhijit, Paul Niehaus, and Tavneet Suri. “Universal basic income in the developing world.” Annual Review of Economics (2019).
Banerjee, Niehaus, and Suri’s examination of UBI in the developing world offers valuable insights into this widely debated economic concept.
Emergence of UBI in Developing Countries:
- Rising Popularity: The authors recognize the growing interest in UBI within developing nations, acknowledging its surge in popularity over recent years. They set out to assess whether these countries possess the financial capacity to implement such programs.
Taxation and Wealth Redistribution:
- Taxing the Wealthy: Banerjee et al. delve into the ethical and economic arguments surrounding taxing the rich to support the less affluent. They emphasize the contention that affluent individuals benefit from society’s resources and should contribute more to its welfare.
Motivation and Workforce Dynamics:
- Impact on Motivation: The researchers address concerns that UBI might diminish individuals’ motivation to engage in income-generating activities perceived as less cost-effective. This perspective highlights potential behavioral implications of UBI adoption.
Feasibility of UBI in Developing Nations:
- Financial Feasibility: Banerjee et al. critically evaluate whether developing countries have the financial means to implement comprehensive UBI programs. They explore the challenges and constraints that such nations might encounter.
Targeted Basic Income vs. Universal Basic Income:
- Effective Targeting: The authors present targeted basic income as an alternative approach, focusing on providing financial assistance to those in dire need, such as the elderly and individuals with disabilities. They emphasize the importance of efficient targeting mechanisms.
- Resource Allocation: Banerjee et al. argue that government resources should primarily be directed toward providing essential services and supporting development initiatives, rather than channeling a significant portion into recurring UBI expenditures.
Acceptance of UBI:
- Middle and High-Income Resistance: The researchers anticipate resistance from middle and high-income earners when it comes to shouldering higher tax burdens to fund UBI programs, underlining the political and societal challenges of UBI implementation.
Merits of UBI:
- Social Cohesion: Banerjee et al. posit that UBI has the potential to foster social cohesion among a nation’s citizenry by providing a common financial baseline. They highlight the role of UBI in mitigating social disparities.
Unique Challenges in Developing Nations:
- Resource Disparity: The authors underscore disparities between developed and developing nations concerning the availability of resources for UBI programs. They delve into the economic and practical disparities faced by these countries.
Impact of Automation on Labor Demand:
- Global Technological Trends: Banerjee et al. explore the impact of technological advancements, particularly automation, on labor demand in both developed and developing countries. They emphasize the need for adapting economic policies to evolving labor markets.
Emphasis on Development Projects:
- Investment Priorities: The researchers advocate for developing countries to prioritize investments in sustainable development projects over allocating substantial revenue to recurrent UBI expenses. They offer insights into strategic economic planning.
Banerjee, Niehaus, and Suri’s research provides a comprehensive examination of the multifaceted dimensions of UBI in developing nations. Their insights contribute significantly to the ongoing global discourse surrounding UBI and its potential implications for addressing income inequality and poverty in diverse economic contexts.
Banerjee et al. assessed whether developing countries should have adequate income to distribute to its citizenry in Universal basic income. This was due to the immense popularity of Universal Basic income over the past few years. They also assessed the impact of such a program on the economy of a developing country. It is a common notion that the government should tax the rich and distribute the proceeds among the poor with an argument that the wealthy use society’s resources to create their fortune. They also addressed the fact that Universal Basic Income is expected to interfere with people’s motivation to partake in income-generating activities that are not cost-effective.
The researcher pointed out a Universal Basic Income program unaffordable to governments in developing countries. However, there are more preferable options, for example, targeted basic income that focuses on helping those who need financial aid the most. For example, older adults, people with disability, and people with disabilities and their success depend on targeting effectiveness. Governments’ resources should, however, go to the provision of amenities and development programs. They also projected that the middle and high-income earners would not accept paying more taxed to fund the Universal Basic income.
Banerjee et al. outlined the merits of Universal Basic Income, stating that targeted basic income transfer could lead to great controversy on the criteria of selecting beneficiaries. Universal basic income would therefore provide a basis for social cohesion among the citizenly of a country. They stated that Universal Basic Income was different in developing countries as in developed countries since the developed nations had more resources to distribute among their people.
However, technological development advancement leading to automation affected labor demand in both developing and developed countries. Developing countries should instead invest in development projects rather than invest a significant proportion of their revenue in recurring expenditure.
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Assessing Universal Basic Income (UBI) in Developing Countries: Banerjee et al.’s Insights
In their comprehensive assessment of Universal Basic Income (UBI) in developing countries, Banerjee, Niehaus, and Suri delve into critical aspects of this controversial economic concept.
The Popularity of UBI:
- Exploring the Global Phenomenon: Banerjee et al. begin by acknowledging the widespread popularity of UBI, which has gained substantial traction in recent years. They delve into the reasons behind this surge in interest and its implications for developing nations.
Economic Impact of UBI:
- Assessing the Financial Feasibility: The researchers critically evaluate whether developing countries possess the financial capacity to implement UBI programs. They shed light on the challenges and limitations, emphasizing the potential strains on government resources.
- Taxation and Wealth Redistribution: Banerjee et al. address the age-old debate of taxing the rich to support the poor. They explore the moral and economic arguments surrounding this concept and its feasibility in a UBI framework.
Motivation and Workforce Implications:
- Work Incentives: The authors highlight concerns that UBI might reduce individuals’ motivation to engage in income-generating activities that are not deemed cost-effective. This critical examination underscores the behavioral and societal implications of UBI.
Alternatives to UBI:
- Targeted vs. Universal: Banerjee et al. present a compelling argument for targeted basic income programs, focusing on aiding those in greatest need, such as older adults and people with disabilities. They explore the efficiency and effectiveness of targeted approaches.
- Resource Allocation: The researchers emphasize the importance of channeling government resources toward the provision of essential services and development projects, rather than committing a significant portion to recurring UBI expenses.
Social Cohesion and Resource Disparity:
- Social Cohesion Benefits: Banerjee et al. posit that UBI could serve as a unifying force, fostering social cohesion among a nation’s citizenry. They emphasize the role of UBI in mitigating social disparities.
- Resource Disparity: The researchers draw distinctions between developed and developing nations in terms of resource availability for UBI programs, highlighting the unique challenges faced by the latter.
Impact of Automation and Labor Demand:
- Global Technological Trends: Banerjee et al. explore how technological advancements, particularly automation, impact labor demand in both developing and developed countries. They underscore the importance of adapting economic policies to evolving labor markets.
Investment in Development:
- The Focus on Development Projects: The authors advocate for developing countries to prioritize investments in development projects over allocating a substantial portion of their revenue to recurring UBI expenditures. They provide insights into sustainable economic planning.
Banerjee et al.’s research provides a comprehensive analysis of the multifaceted aspects of UBI in developing countries, shedding light on the economic, societal, and political dimensions of this complex policy proposal. Their insights contribute significantly to the ongoing global discourse surrounding UBI and its potential implications for nations striving to address income inequality and poverty.
