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COVID-19 has indeed exposed the existing vulnerabilities of the world, but it also shed light on models and concepts that need to be mainstreamed. That was the theme of a series of webinars by the AUC School of Business’s John D. Gerhart Center for Philanthropy, Civic Engagement and Responsible Business. In the series of articles “Changing Business As Usual”, Business Forward presents key ideas from a selected number of webinars.
Universal Basic Income (UBI) isn’t, as it may seem, a new concept. It has effectively been pioneered by one of the US founding fathers, Thomas Paine, all the way back in the 1790s. It has, however, never been fully implemented for a number of reasons, as revealed by the distinguished University of York professor, Louise Haagh, in a recent Gerhart Center webinar moderated by Abla Abdellatif, executive director of the Egyptian center for economic studies.
The resurrections of discussions around UBI usually happen during times of hardships.
“It’s appeared now and again and people talk about waves of basic income advocacy, and talk about those waves typically coincide with major crises,” explains Haagh.
“Of course, Covid-19 is such a moment when we realize that even despite the best efforts of governments spending so much money; they’re unable to reach everyone adequately. And so the case really is that in order to reach people adequately when we face crises, we need to have an infrastructure in place, that not only serves us from day to day, but that can also serve us and be extended in times of crises.”
What is UBI?
“The idea behind universal basic income is that people receive a small assistance grant throughout their life, and they receive it even when they don’t necessarily need it – that is what has caused so much controversy,” explains Haagh.
Naturally, the fact that everyone in society receives assistance regardless of needing it doesn’t make sense to many. Particularly if the recipients have stable jobs and good incomes – some even argue that receiving UBI could discourage people from work, which has been proven not to be true.
Professor Hania Sholkamy, associate research professor at the Social Research Center of the American University in Cairo, makes a counter argument to that in an article published by the AUC’s Alternative Policy Solution (APS). She explains that a 2017 research paper had examined the results of seven UBI trials across six countries.
“Across the seven programs, they found no systematic evidence of impact on either the tendency to work or the overall number of hours worked, by either men or women,” explained Sholkamy.
“We need to understand how making the case for UBI also transforms the way we understand work and motivation,” explains Haagh. “Now, this goes deep into the heart of the neo classical theory that individuals must be insecure or [must] fundamentally fear for their subsistence in order to work. And there’s now a growing body of evidence to suggest that isn’t in fact the case.”
In fact, Professor Haagh takes it a step further by integrating the argument for UBI with the universal human right to freedom of work.
“If you haven’t got the right not to work, exit a job or take another one with security, you actually don’t have the right to work so you don’t have freedom in the market,” she argues, highlighting how UBI, with the security it provides, is actually essential for people to be able to freely leave jobs and take others, which she believes is fundamental as a human right.
“You can see that UBI is both more secure for individuals, but also generates an actual scope for flexibility, both for individuals and the economy.”
UBI in the global south
UBI has historically been a concept most discussed in the global north. The global south, however, hasn’t been out of the discussion. The concept was trialed in Kenya, Namibia, India and Brazil, but never fully implemented in its full scope.
The welfare system of most countries both in the global north and south has mostly relied on conditional cash transfers, which have been found to be something counterproductive to its purpose.
“The evidence that conditional cash transfers, which is the anti-poverty initiative that emerges in response to neoliberal globalization, are also beginning to be recognized as flawed,” explains Haagh.
She further elaborates on that the fact that the cash transfers are bound by a time limit, as in no one is forever entitled to a poverty grant, ‘generates as many problems as poverty itself.’ Her justification is that this time constraint generates insecurity for the poor and ultimately impacts their motivation to look for work as they may then lose the right to the grant, which may offer them more stable income than a job would.
Furthermore, professor Haagh revealed that only up to 27 percent of income assistance and cash transfers actually ever make it to their true recipients. Finding the poorest of society who are actually deserving of cash transfers is a costly and inefficient process.
Only 20 to 27 percent of income assistance and targeted schemes have been found to reach beneficiaries, whereas in the case of this, the unconditional payment of grants, the receipt is 100 percent.
“It costs a lot to find the poorest and give them a small amount of money and then move that money to someone else that might be more deserving next month and so on,” says Haagh. “That’s very costly. And in many ways it’s a false economy, not least since the effect on beneficiaries of that uncertainty has been documented to be quite negative.”
Also, in a country like Egypt where the high fertility rate is often cited by government officials as a barrier to economic prosperity, UBI could also come to the rescue.
“There is lower fertility rates for women who grew up with economic security, so actually women had less children and were more perhaps active in other spheres,” explains Haagh. “And so, economic security is a form of birth control in that sense.”
Is UBI enough?
The short answer is no.
“It’s important to not think of universal basic income as a magic bullet – you actually need other interventions; you need employment opportunities to be organized and incentivized in society alongside a universal basic income for maximum effect,” adds Haagh.
“No amount of money can compensate the lack of affordable education, free health service, affordable means of transportation, a safe and sustainable environment, employee capacity building or unbound support needed by the unwell, elderly or disabled,” writes professor Sholkamy for APS. “Therefore, a UBI cannot replace social spending but rather should supplement it.”
Most fundamentally, UBI is a democratizing force that, if implemented with the right measures, can better the lives of millions of people and achieve sustainable development goals.
“How are you going to do that if people do not have the economic security to take up education and work freely?” exclaims Haagh. “So there really is a disjuncture between economics, good systems and the sustainable development goals. At the same time, the full benefit of stable and unconditional economic security depends on other active policies. So we are at a watershed moment today and the debate around UBI is at the center.”
