Case for targeted basic income

January 27, 2017 12:15 am | Updated January 30, 2017 11:49 am IST

TIRUCHI : TAMILNADU : 08/01/2017: Villagers engaged in desilting of a pond under Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) at Siruganur Village in Tiruchi District.Photo: B.Velankanni Raj

TIRUCHI : TAMILNADU : 08/01/2017: Villagers engaged in desilting of a pond under Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) at Siruganur Village in Tiruchi District.Photo: B.Velankanni Raj

The idea of a basic income is not new. The first known suggestion on an unconditional universal basic income for all adults regardless of other income sources was from Thomas More. Centuries later, in 1918, Bertrand Russell discussed a basic income sufficient for necessities as central to the social model combining the advantages of anarchism and socialism that he argued for in Proposed Roads to Freedom. “A certain small income, sufficient for necessities should be secured to all, whether they work or not, and that a larger income — as much larger as might be warranted by the total amount of commodities produced — should be given to those who are willing to engage in some work which the community recognises as useful.” Even on finishing education, no one should be compelled to work, and those who choose not to work should receive a bare livelihood and be left completely free, he wrote.

With anti-globalist populism on the rise, several advanced countries are considering whether they should start mailing cheques to the unemployed. Finland’s is the best known trial. Two thousand randomly selected unemployed Finns will for the next two years receive €560 in guaranteed tax-free incomes every month. The payments will continue even when they try out odd jobs. If the pilot is successful, the programme could be extended to all adult Finns.

Economists are advocating universal basic incomes for fighting inequality, slow wage growth, advancing automation and fears that immigrants will take away jobs. While free trade and technological advances have grown national incomes, not every individual is better off. There are winners and losers. Redistributive government intervention is needed so that no one is left worse off.

Lessons from a pilot project

The ‘transformative’ potential of guaranteed unconditional incomes was demonstrated in Madhya Pradesh back in 2014, which is documented in the book Basic Income: A Transformative Policy for India (2015) by Sarath Davala, Renana Jhabvala, Soumya K. Mehta and Guy Standing. The income supplements given amounted to less than a third of monthly expenditure for families living at the poverty line. The authors reported several positive effects of the experiment, some of which were published in Seminar . One, nutrition intake rose. Specifically, consumption of pulses, fresh vegetables and meat was up 1,000%, 888% and 600% respectively. As a result, incidence of illness dropped. Enrolment and attendance, especially among female students, in schools improved. Two, it resulted in more equitable development. On receiving the payments, marginalised individuals began exercising agency within their households and the community. Three, there were also economic spin-offs as villagers worked harder than before, with a number of adults engaging in two economic activities (own-account farming with small business on the side). Four, indebtedness decreased as the propensity to save increased over the pilot period.

The results dispel doubts such as whether ungrateful welfare abusers will buy alcohol with their new-found income, if welfare payments are dignity-destroying and other such apprehensions often expressed as ‘don’t just give them fish; teach them how to fish’.

To those too weak, unwell or challenged physically to pick up skills and take up jobs, guaranteed incomes provide a safety net. Where people are skilled and employed, but receive low wages, as seen in the case of handloom weavers or in small enterprises, basic incomes can supplement earnings and support welfare.

The feasibility quotient

Chief Economic Adviser Arvind Subramanian has said that he is devoting a chapter in the annual Economic Survey (to be presented on January 31) to discussing unconditional universal basic income as a tool for poverty reduction.

The Food Security Act already provides for statutory income transfers, but the appeal of a policy idea involving money payments to voters cannot be overstated —especially to a government past the midpoint in its first term.

The United Progressive Alliance’s return to office in 2009 is at times attributed to a job-guarantee scheme covering manual labour work and wages for 100 days in a year at the going notified wage rates. The scheme was made applicable in all the 615 districts of the country by 2008-09. A basic income scheme will be administratively easier and cleaner than the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS): putting money into select Aadhaar-seeded Jan-Dhan bank accounts ought to be relatively simple.

If a basic income is introduced in addition to the two statutory income transfer schemes for food and wage jobs already in place, the government’s deficit will balloon. Both will have to be reformed if the plan is to guarantee all three: food, basic income and wage jobs. Even if there are no plans for a new income guarantee, the Centre should attend to MGNREGS funding, implementation and course correction — something it has committed to doing. The UPA flagship’s accomplishments, despite the numerous imperfections it suffers from, are well-documented.

A new universal basic income for all Indians won’t be affordable unless it replaces the whole multitude of programmes and subsidies currently in place. That would rid the welfare system of all the existing overlaps and gaps, but the simplicity will extract huge political capital.

More feasible is a basic income targeted at the most deprived, using the socio-economic census. Creating sustainable funding sources for it, whether by way of new taxes or by streamlining entrenched subsidies and incentives, will still be a challenge. One worth taking up, for it will also be an opportunity to reinvent the welfare system.

Puja Mehra is a Delhi-based journalist.

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