Universal Basic Income: Should Singapore Consider?
Universal basic income has been a buzzphrase of 2017.
A recent McKinsey report on what the future of work will mean for jobs, skills and wages revealed some worrying news.
An estimated 800,000 full-time equivalent positions in Singapore and 23% of our current work activities may be potentially displaced by automation by 2030 (which will arrive in about 12+ years’ time).
The report also mentioned 4 key areas all societies need to address, of which one was providing income (such as Universal Basic Income) and transition support to workers.
What is Universal Basic income and will it work in Singapore?
Imagine getting paid €560 (almost S$900) per month for doing absolutely nothing. No strings attached. No means testing, no restrictions on how it is spent.
A randomly selected group of unemployed people in Finland enjoy just that, as part of the country’s experiment with Universal Basic Income (UBI), to figure out how it affects her social security framework and people’s motivation to find work.
But what exactly is UBI and is it feasible?
It is worth taking a closer look at the possible positive and negative outcomes of the UBI because this form of income support is such a radical departure from how unemployment is managed in Singapore, where there is a greater emphasis on re-training, skills upgrading and institutional support (via government, unions, professional associations etc) to find work.
What is Universal Basic Income?
Like its name suggests, Universal Basic Income refers to an income that every citizen receives unconditionally, regardless of employment status and financial status.
Pros of Universal Basic Income
UBI could encourage entrepreneurship
UBI could give the unemployed more breathing room and reduce the stress experienced by lack of funds.
This could reduce the financial uncertainty associated with unemployment and encourage people to start their own businesses.
UBI gives the unemployed time to find the right job and get training
UBI could allow unemployed people to have more time to find suitable long-term work, or undergo training, instead of having to take up sub-optimal roles or accept exploitative work conditions due to immediate financial pressures.
UBI will also help soften the blow of job losses due to technological disruptions in sectors such as manufacturing and retail.
UBI gives direct aid for low-income families
UBI eases the burden on low-income households as it will help them pay for basic needs if they suddenly become unemployed or are unable to work due to health reasons.
It also helps low-income families avoid debt traps where they have to continually borrow to make ends meet.
Cons of Universal Basic Income
UBI monies may be misused
As there is no restriction on the usage of the UBI monies, people may misuse the money and spend on non-essential items or temptation goods (for example, alcohol and cigarettes).
UBI may also be wielded by politicians as a political tool to win votes and become a way to ‘buy votes’ without regard for possible negative consequences down the road.
UBI can be a financial burden to the state
UBI can be costly. The money must come from somewhere.
If our GST may increase in future just to fund our forecasted social spending without UBI in the equation, do we have enough government revenues to fund UBI?
UBI may reduce people’s desire to find work
With a guaranteed income, will unemployed people have a diminished incentive to find work?
Opponents to UBI have concerns that UBI could result in a growing number of people who are financially dependent on the state and reduce our resident labour supply.
What do people think about Universal Basic Income?
“We should have a society that measures progress not just by economic metrics like GDP, but by how many of us have a role we find meaningful. We should explore ideas like universal basic income to give everyone a cushion to try new things.”
“I’m fully supportive of his (India’s Chief Economic Adviser Arvind Subramanian) idea, but realising the limitations of Indian politics, I have always expressed to him the fear that once he moots ideas like the UBI, we will be landing in a situation where people will stand up in Parliament and demand the continuation of the present subsidies and UBI over and above that, which is something that the Budget will not be able to afford.”
“Some opine that the UBI carries more bane than boon due to the monetary resources involved… In fact, many traditional social welfare states in Europe like the United Kingdom and Germany are starting to pursue what they called ‘active labour market policies‘ (where the unemployed must actively apply for work or embark on training if not they face reduced or delayed social welfare / unemployment benefits)”