I am quietly excited with the unexpected chance the pandemic brought us: the experimentation of a universal basic income (UBI).
UBI is a social policy that provides every individual of a society with a certain amount of cash on a regular basis, and that payment is delivered unconditionally regardless of income and labour status. It has five characteristics: it is paid regularly (periodic); payment should be in cash that enables those who receive it to decide what they spend it on (cash payment); it is individual-based, not household-based; beneficiaries are every member in the society (universality); it does not require a recipient to hold a job or to demonstrate a willingness-to-work (unconditionality).
The concept emerged with the rising awareness of a crisis since the last decade, which is referred to as the Fourth Industrial Revolution. The increased dependence on artificial intelligence and industrial automation are causing large-scale unemployment. The unemployment decreases public consumption of products, which results in a decrease in the profit of business sectors. Companies continue to restructure themselves to meet this loss which results in mass unemployment and puts the vulnerable in deep poverty.
It seems obvious that we are living in the era of the Fourth Industrial Revolution and its influence on our lives are extensive and irreversible. Many jobs are replaced by machines, and society becomes extensively automated. Many people face job insecurities or bear tougher working conditions. Therefore, the vulnerable groups are at more risks.
I believe that UBI helps tackle poverty caused by unemployment, and ensures a basic living standard for everyone. By adopting this policy, governments can reduce the knock-on effects of automation and can expect more revenue. UBI will enable people to consume; this, in turn, will help companies to remain profitable and not have to lay-off; then, people will be less likely to be unemployed; and thus, ultimately, the economy will be invigorated. Besides, people can invest the money to improve their living conditions or achieve self-fulfilment.
There have been several attempts to introduce UBI, but the outcomes were not successful. Most of them were ceased (e.g. Swiss in 2016, Canada in 2017, and Finland in 2018). However, it seems that the COVID-19 pandemic, unintentionally, gives governments a chance to experiment with the effectiveness of UBI.
In recent days, several governments are proposing and implementing various types of bailout policies to cope with the pandemic. Among them, some kinds of financial support for individuals remind us of UBI. For example, the US government delivered 1,000 US dollars to every US citizen. The UK government decided to pay up to 80 percent of the salary for those who were furloughed in the pandemic.
These US and UK’s bailouts are designed to help people who are in risk of financial deficit because of lockdown. They enable people to pay for the basic necessities of life such as rent, bills, or foods. Similarly, but a bit differently, South Korea’s financial support for citizens is intended to reinvigorate the economy by increasing real purchasing power.
As the pandemic situation has prolonged, people avoid visits to restaurants, gyms, shops, etc. Profits of small business fell, and many people lost their jobs. Particularly, vulnerable groups have are facing financial difficulties. It has been predicted that South Korea’s economy will shrink 0.3% in 2020 due to the impacts of the pandemic on global economic activities.
To help such vulnerable people and to revitalise the local economy, different kinds of local governments have been delivering emergency funds (cash, voucher..) to their residents, already. These local-level bailout strategies put pressure on the central government for an extensive, nationwide bailout strategy. Finally, the Korean government and ruling party largely reached a compromise to offer blanket pay-outs (about 700 pounds) to its citizens (but, the plan hasn't been finalized yet).
This is called “Basic Disaster Income” (tentatively) and is given to each household (based on a family of four). They plan to complete the budget supplement bill by April and provide cash from 13th of May (although it still requires the agreement of the opposite party; and they are highly likely to agree). The total amount for this bailout is about 10 billion pounds.
This cash payment seems to satisfy the characteristics of UBI (i.e. universality, unconditionality and cash payment). However, it is paid to households (not individuals) and resembles an emergency relief grant because it is a one-off payment. But it is worth paying attention to how this scheme develops, because it may reignite discussion on UBI in the country by giving people ideas of what UBI is like, in a practical way. The concept of UBI emerged and was broadly discussed in the 2017 presidential election in South Korea. However, that attention quickly disappeared as many people were concerned about costs to sustain the policy. It was broadly believed that UBI may weaken the government’s public financial sustainability. However, there are opposite vires on this. I think, (and I hope) COVID-19 can restart the discussion on UBI.
There are two points to observe regarding the policy in South Korea. First, ‘How people use the grant’. As the government has not locked down cities, most people go to work and get a salary. Perhaps, people use the COVID-19 cash either for saving, developing a career, buying necessities, or investing for self-fulfilment. If they just save the cash, it may not contribute to stimulate the sluggish economy but would rather strengthen the pessimism on the concept of UBI.
The second point is ‘How many, and which group of people donate their share’. This plan includes that people receive 15 percent tax deductions if they give the amount back to the government. This is to encourage high-income earners to voluntarily give theirs back. The government plans to use the donations to support vocational training, education, and living costs of the unemployed.
If people use the COVID-19 cash in local shops and in their career building, and if high-income groups donate their shares, we can use these outcomes to rebut the pessimisms on UBI (i.e. the negative effects on the soundness of national budget; the minimum effects on boosting the economy). Even if people do not behave like what we expect them to do, I believe we can overcome these weaknesses by developing other ways (such as imposing taxes on the highest-income groups and companies that make money by utilising individuals’ information).
However, I also see the dark side of the scheme. It does not offer the cash payment to foreigners, who are working and living in South Korea, as well as paying national health insurance but they are not given citizenship. Many immigrants, especially from Southeast Asian countries, are low-paid workers and suffer from poverty. Excluding them from the beneficiaries may put them at more risk. If they pay tax, they should get the welfare package.
We are witnessing financial support schemes that remind us of UBI in the pandemic. The size and amount of the aids vary, and they do not satisfy the characteristics of UBI. However, there are variations in the concepts of UBI, and no one knows for sure which one is the best. These schemes can go either way: they might succeed and advocate the ideas of UBI; or they may end in failure, or even worse, may strengthen the pessimism on extensive social welfare.
However, I must note that we cannot judge or evaluate the effectiveness of UBI from the outcomes of these cases. This is because they are not designed to be implemented as UBI, and many of the schemes are proposed as a one-off financial support in the pandemic.
Regardless of the outcomes of these schemes, it seems obvious that COVID-19 brings a great chance for us to think about UBI seriously and predict its effectiveness.