Would Universal Basic Income Reduce Inequality?

Could a universal basic income build the base of a fair society?

In a world in which the rich are growing wealthier and the poor poorer, lower job security levels and technological advances, income inequalities are growing wider and becoming more challenging to reduce. Where once income distribution was seen as a collective responsibility and was part of political goals, today government intervention to achieve such distribution is seen as a threat to economic efficiency.^[1]

One proposal for a radical redistribution of income has been redesigned by Phillippe van Parijis, in the form of a Universal Basic Income (UBI), defined as “an income paid by a government, at a uniform level at regular intervals, to each adult member of society.”^[2] This income is paid regardless of an individual’s income level, marital status, ability to work or citizenship status, as long as he/she is a permanent resident. It is not necessarily an income amount that would allow an individual to manage all of his or her basic needs. On the other hand, additional income from work, savings or government benefits can be added to it. ^[3]

It is also argued that UBI would provide social justice, real freedom for all individuals, solve poverty and unemployment policy issues.^[4] A UBI supports the unemployed by significantly reducing their financial uncertainty and the pressure to accept a job that may not meet their skill levels or that they find fulfilling.^[5] Essentially it addresses the unemployment trap and the poverty gap, where household incomes fall below the poverty line. ^[6] Moreover, a UBI is also argued to be “the easiest way to fully harmonize income security and taxation and…ensure similar marginal tax rates for both the rich and poor.”^[7] Additionally, the incidence of welfare fraud would be reduced if not eliminated, except where individuals claim basic income more than once.^[8]

In poor developing countries, millions of children have access to schooling but do not attend because the poor financial situations of their families force their children to work.^[9] A UBI would provide sufficient income to provide at the very least a distribution of opportunity, especially to those with the least opportunities. Women disproportionately bear the labour in the household which in turn directly impact their job and income options. A UBI would therefore help to compensate women and also protects them in vulnerable times such as in times of marriage collapses. Finally, it is also believed that a UBI would provide an individual the freedom to choose unpaid care work and other autonomous activities. ^[10]

The greatest issue surrounding the introduction of the UBI is its cost. Parijis argues that the cost can be offset by the increase in basic income, an increase in taxes for the working population, a reduction in lower income tax rates and an abolition of benefits. Parijis also believes that all of the richer nations can now afford to make a contribution to individual income. ^[11] Another argument against the introduction of a UBI is that there would be a reduced supply of labour. Parijis argues that by reducing their working time, families can take greater time to look after their children and elderly, which in the long-run may reduce public spending on prisons and hospitals.

A final argument against a UBI is that it “gives the undeserving poor something for nothing”,^[12] which runs contrary to the principal of reciprocity in which those who receive benefits should respond by making a contribution. John Rawls argues that “those who surf all day off Malibu must find a way to support themselves and would not be entitled to public funds”. ^[13] However, the state cannot coerce individuals to be productive, even by legally enforcing an obligation to work. Gutmann and Thompson add that the obligation to work applies to the poor as well as to the wealthy stating that: “those who choose to live off inherited wealth without contributing their own labour to society may deserve no more respect from their fellow citizens than the Malibu surfers”.^[14] In such a case, respect is granted not by the state but by public opinion. Parijis adds that gifted talent, ambition and luck are not evenly distributed across a population and therefore a modest but guaranteed financial gift is a human entitlement.^[15]

In conclusion, a UBI has the potential to provide social justice and a real freedom for all individuals. It could significantly reduce poverty gaps, unemployment traps and harmonise income security and tax rates across all income levels, whilst significantly reducing welfare fraud. In developing countries a UBI will have the greatest impact on income distribution, education and freedom, particularly where women manage and care for the family and household. It would also support individuals looking to invest their time in unpaid charitable activities either nationally or internationally. These efforts would eventually benefit individuals of all income levels as greater time is given to the development of solutions to problems.

The main arguments against a UBI revolve around its cost, reciprocity of benefits and reduced labour supply and therefore productivity levels. In the case of the former, there are several options available ranging from increased income taxes to the abolition of benefits, with the richer nations being more able to implement it than the developing countries. With regards to reciprocity, it is difficult to coerce or legally require individuals to be productive in return for benefits received, regardless of their income levels. The only potential solution cited is a loss of respect for these individuals by society. Whilst there are many arguments against a UBI it the benefits to society and its poverty levels far outweigh them, and may prove to be a solution for worldwide poverty and unequal income distributions.

Bibliography

Blais, Francois and Hutchison, Jennifer (2002) Ending Poverty, James Lorimer & Company

Bloom, David et al. (n.d) Universal Basic and Secondary Education, American Academy of Arts & Sciences http://www.amacad.org/publications/ubase_universal.pdf

Groot, L.F and Parijs, P. (2004) Basic Income, Unemployment and Compensatory Justice, Springer

Honohan, P. (10^th January 1994) Basic Income as a Reform of Tax and Social Welfare, Economic and Social Research Institute

Muirhead, Russell (2004) Just Work, Harvard University Press

Parijs, Philippe Van (October/ November 2000) A Basic Income for All: If you really care about freedom, give people an unconditional income, Boston Review http://www.bostonreview.net/BR25.5/vanparijs.html

Wright, Erik (2006) Two redistributive proposals – universal basic income and stakeholder grants, Focus, Vol. 24, No. 2, Spring-Summer (2006)

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Footnotes

^[1] Wright, Erik (2006) Two redistributive proposals – universal basic income and stakeholder grants pg. 5

^[2] Parijs, Philippe Van (October/ November 2000) A Basic Income for All: If you really care about freedom, give people an unconditional income

^[3] Parijis (Ibid)

^[4] Groot, L.F and Parijs, P. (2004) Basic Income, Unemployment and Compensatory Justice pg. 11

^[5] Parijis (Ibid)

^[6] Honohan, P. (1994) Basic Income as a Reform of Tax and Social Welfare

^[7] Blais, Francois and Hutchison, Jennifer (2002) Ending Poverty pg. 17

^[8] Honohan, P. (1994) Basic Income as a Reform of Tax and Social Welfare

^[9] Bloom et al. (n.d) Universal Basic and Secondary Education pg. 1

^[10] Parijis (Ibid)

^[11] Parijis (Ibid)

^[12] Parijis (Ibid)

^[13] Muirhead, R (2004) Just Work, pg. 19

^[14] Muirhead, R (2004) Just Work, pg. 19

^[15] Parijis (Ibid)