The Welsh government announced earlier this year their thoughts on a potential trial regarding the implementation of a Universal Basic Income.
A UBI for short refers to a cash grant provided by the state to each individual within an economy regarding their income. Many who support such policy believe that for one, it is more efficient than conditional cash transfers as an unconditional transfer reduces bureaucracy, and, for two, such a transfer will allow for greater improvements in the quality of life for individuals.
This is because a UBI will enable individuals to have the basic income needed to satisfy their basic wants and needs if they are on the lower income brackets, and, a recent report suggests that such a scheme could reduce poverty levels in Wales by a half.
The study, which was commissioned by future generations commissioner for Wales Sophie Howe, found that 69% of people in Wales would support a UBI trial.
The report analysed the effectiveness of a trial of about 2,500 people would cost about £50m and each participant would be paid £60 a week.
The Welsh government first announced a trial in May and stated that there is excitement around the potential of this policy but it should also be viewed in a critical way.
The study found that after the implementation of such a scheme, overall poverty decreased by 50%, the study also found child poverty would decrease by 64%.
Poverty is not having enough money to buy food, clothing and a safe place to live according to the BBC.
The government has set a target to "make sure no child is living in poverty by 2020".
However, at the same time, poverty can refer to a families inability to satisfy certain wants and needs that are becoming more and more essential in society. For example, families on lower incomes may be able to afford both food, shelter, electricity, and water, but, due to their low incomes, they may be unable to afford phones and electronics for their children.
Although these do not seem like necessities for conventual wisdom, in reality, access to technology is becoming increasingly important for a child's development. According to the Guardian, 53% of kids owned mobile phones by around the age of seven, with ownership increasing to 90% by the age of 11.
This means that it is likely that many in the UK are experiencing this hidden poverty as having no access to a smartphone or any technology can put a child behind their peers in development as they will be excluded from being able to socialise with their classmates within online spaces.
Consequently, this lack of socialising means that a child without access to these modern-day necessities means that they will not develop the interpersonal skills at an early age to make them a suitable candidate for certain careers in the future. Hence, not only will a UBI scheme prevent food poverty, but, it will also enable the parents of the 10% of children who don’t have mobile phones to have one, which, will improve their children's chances of becoming properly socialised.
So, a UBI will improve the chances of future generations to experience the same opportunities as their peers, at the same time, a UBI can allow current adults to focus on their own aspirations in their free time as having a guaranteed source of income may prompt certain individuals to decrease their weekly hours with their employer. This brings us to a potential downside with a Universal Basic Income, as many speculate that such as policy could bring large levels of voluntary unemployment, after all, why work if you have a guaranteed source of income? Well, the truth is that income, or money for that matter, is just one of the components of why people work. A job provides structure to one's life and some degree of meaning and purpose.
This is evidenced by the book, Good Economics for Hard Times, as UBI has little to no effect on unemployment, we can look at the US’ Alaska Permanent Fund, which, since 1982, has been given each Alaskan citizen $2000 per year and seems to have no effect on employment
However, the big issue with UBI is the fiscal cost. A UBI in America which would pay each American $1000 each month would approximately cost $3.9 trillion a year, which is the entire Federal Budget. Yet, a different UBI which gives more cash to poorer individuals could cost a more affordable $1.95 trillion dollars, but that would still require some severe changes in the American budget, especially when it comes to cutting spending for other welfare measures, the armed forces and maybe education. The point of this trial however is to mitigate the fiscal cost of the policy to see whether these claims of reducing poverty are true, if they are, then perhaps introducing a UBI for the previously mentioned benefits of increasing social mobility might be a good tradeoff for the large fiscal cost of such policy.
Written by Hubert Kucharski