In the milieu of social security and poverty schemes, among the latest to implement a universal basic income scheme is Finland. For two years from now, around 2,000 unemployed Finnish citizens between the ages of 25 and 58 will be paid around €560 per month. The disbursement of these funds will not stop even if one of these citizens secures a job during this period.
What is universal basic income?
A universal basic income or grant is provided to citizens of a country to enhance the environment of social security for those without employment or livelihoods. This is a method employed to understand the consumption and savings patterns of those who would normally display risk-averse behaviour. The main purpose of this initiative is to eradicate extreme poverty and to stimulate the job market in an environment of slow growth.
Improved living conditions
Two trials of the basic income scheme were implemented in Madhya Pradesh and West Delhi in 2011. In Madhya Pradesh, cash transfers were made directly to individual accounts and to the accounts of the Self-Employment Women’s Association (SEWA) cooperatives, with no conditions on how to spend the money. Around 6,000 people received grants of ₹100-300 over a period of one year to 17 months.
Findings revealed that basic standards of living improved, with households using this income for basic facilities such as drinking water, sanitation, cooking and lighting. Food sufficiency and children’s nutrition improved, and some villages even registered an improvement in household assets. Around 21 per cent of the households started getting engaged in productive work on their own farms or as wage labourers (Madhya Pradesh Unconditional Cash Transfer Project – Executive Summary).
Wider coverage
Cut to the present, and the Government is planning to introduce a basic income scheme for all individuals below the poverty line, which amounts to around 20 million people (or 30 per cent of the total population).
With a slight twist to the scheme, to ensure smooth flow of money and financial sustainability of the programme, these will take the form of interest-free loans instead of grants. The amount envisaged to be paid is ₹1,000 per month. Beneficiaries of this scheme will most likely be removed from the lens of other poverty schemes that provide room for irregular disbursement and corruption (Amitabh Kant, World Economic Forum).
However, in the current economic situation, setting a regular income based on the poverty line level could cost the government dear (around 12.5 per cent of GDP, some estimates say).
The Madhya Pradesh study, however, showed that a basic income level of around ₹450 a month is itself sufficient to trigger responsible spending by households. Yet, the government needs to think about alternative sources of tax revenue before taking the plunge, or risk compromising on growth stability.