A GOOD IDEA THAT’S UNAFFORDABLE

POVERTY and unemployment are issues every country — including developed nations — have to deal with. Some countries, especially in Western Europe, prefer a welfare state type of approach where the government provides unemployment benefits for those out of work. Asian countries tend to not have social welfare schemes and the unemployed turn instead to family members for support.

Which approach is better is a source of unending debate. The welfare state approach is good in that it provides a safety net for the unemployed but it results in higher taxes for those who are employed. It also leads to some people opting not to find work and relying on the state, in some cases for years, for subsistence.

The Asian approach can be regarded as a kind of survival of the fittest precisely because there is no formal safety net. People know that they have to find work in order to get by because no one will give them any handouts. It could be said that this is a less compassionate approach but there is stronger impetus to find work this way.

One unique alternative is something called Universal Basic Income (UBI). It’s actually not a new idea, with its origins dating back to Utopia, a social political satire by Thomas More, published in 1516. In it, More alluded to a UBI-like concept through one of the key characters, Raphael Hythlodaeus, who’s quoted as saying: “No penalty on earth will stop people from stealing, if it is their only way of getting food. It would be far more to the point to provide everyone with some means of livelihood.”

But perhaps the first person to properly articulate a government-sponsored UBI would be Thomas Paine, one of the founding fathers of the United States, who in his booklet, Agrarian Justice, published in 1795, talked about the notion of every citizen getting some cash every year in order to ensure that their basic needs were provided for.

Although there are different variations of UBI, the basic concept is simple. The government would provide every adult citizen a basic salary, regardless of whether they worked or not. It’s basically free money to cover a person’s basic needs. Guaranteeing an unconditional baseline salary, according to UBI’s proponents, will help solve a host of social-economic issues such as poverty itself, crime and chronic unemployment.

You would expect that only hard-core socialists would support such an idea but actually some of the world’s most prominent entrepreneurs — who are by definition hard-core capitalists — support some form of UBI. They include Virgin’s Richard Branson, Facebook’s Mark Zuckerberg and Tesla’s Elon Musk.

In fact, a lot of Silicon Valley personalities support it, which isn’t surprising given the economic disruption caused by technology — especially automation — which could threaten economic security in both developed and developing countries. Last year, Musk told the National Governors Association that job disruption caused by technology was “the scariest problem to me”.

Google’s natural language processing guru and prominent futurist, Raymond Kurzweil, made a bold prediction about UBI saying that by the 2030s, this will become commonplace globally and that we’ll be able to “live very well on that.”

Pilot projects have been initiated in several countries including Canada, the Netherlands, Italy and Kenya. One of the most notable national experiments with UBI is the one being undertaken by Finland, which began in January 2017.

In this pilot project of sorts, Finland pays 2,000 unemployed Finns (aged between 25 and 58) a fixed salary of €560 every month. Unlike unemployment benefits, this money would still keep coming even if they managed to find a job. The reasoning behind this is if you reduce or remove this income from them once they get employed, it could be a disincentive for some from finding work.

The reality is that people would rather not work and live on that basic income if working means a reduction or removal of that free money, which is the case in countries like the UK where some people stay unemployed for years, surviving on the dole.

This programme will come to an end in January

2019 as the Finnish government has rejected a request from Kela, the country’s social security agency, for additional funding to extend and expand the programme.

It’s worth noting that the Finnish trial isn’t universal and was very limited (only 2,000 people were selected for the pilot project). To extend it to the entire adult population would have cost a whole lot more.

A study published earlier this year by the Organisation for Economic Co-operation and Development (OECD) found that the income tax working adults in Finland would have had to pay to support UBI would have to be increased by an additional 30 per cent. It’s questionable whether the working population would agree to this although workers themselves would also get UBI.

Even though Finland is ending its UBI experiment, this is an idea that will not go away. It does have strong proponents. The World Bank had, in April, released a draft report entitled The Changing Nature of Work in which it proposes basic income as a policy to “be read through the lens of ‘progressive universalism’”.

And there is some empirical evidence that shows that it does help to alleviate social issues. A Canadian experiment called “mincome” (minimum income), which ran for four years, yielded many positive health benefits, with noticeable decreases in the number of low-birth-weight babies, infant mortality and psychiatric emergencies.

Around the time that Finland’s UBI trial scheme starts to wind down, sometime towards the end of this year, a new one will begin in Stockton, California — a city with a 25 per cent poverty rate. In the Stockton experiment, 100 of its citizens will each receive US$500 (RM1,960) a month for a 12 to 18 month period, with no work requirements and no strings attached. Unlike the Finnish experiment however, this one is being financed by a private organisation, the Economic Security Project.

So, this idea will go on although whether Google’s Kurzweil’s prediction will come true is doubtful. Perhaps some countries will indeed implement some form of UBI in the future (probably European countries) but it’s hard to imagine this being implemented in many Asian countries where even unemployment benefits are a rarity.

The main challenge to UBI is quite simply the high cost of implementing it. Not many governments will be able to afford it even if it wanted to do it. Luke Martinelli, a researcher at the University of Bath’s Institute for Policy Research put it best when he said “... an affordable UBI is inadequate, and an

adequate UBI is unaffordable.”