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ON THE RIGHT: Now not right time for UBI


ON THE RIGHT: Now not right time for UBI

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A UNIVERSAL BASIC INCOME (UBI) is a modest periodic income provided by the state of all citizens unconditionally. It is a natural extention of traditional welfare systems but avoids the negative connotation normally associated with the receipt of government welfare type payments or mechanisms (for example, food stamps). The state has resources for bestowing benefits and for preventing harms. But there are limitations. The designing of poverty alleviation (and ultimately elimination) policies is a task of incurable complexity. Yet, it is fundamentally grounded in a clear and simple claim: people should not needlessly suffer. The emergence of the welfare system stems from this claim. This system has been funded primarily through state taxation; but, liberalisation of capital flows has persistently corroded the plausible tax base to which states gain revenue. This revenue anaemia threatens, severely, the continuation of Barbados’ welfare system.

The state should look for creative policies to progress under these conditions. A UBI is a plausible solution to combat poverty while facing a decaying traditional tax base. The UBI is a modest periodic income provided by the state to all citizens unconditionally. The sheer simplicity of this idea may be misconstrued as theoretical fragility but such misconstruing will be mistaken. The UBI is conceived as a cash transfer, rather than being paid in kind. There are multiple examples of welfare systems in which people are given some sort of special currency, say food stamps, to use; or, some kind of special grant to be used for pre-specified purposes like housing. These are not cash transfers and they are not done under a policy of UBI as defined here.

UBI is a period transfer of cash (by cheque or direct deposit). The periodic nature is also important. It is not a one-off payment but, rather, a UBI consists in purchasing power provided at regular intervals. The bane of poverty has problematised social development in most countries; and it is apparent that Barbados has not escaped this scourge. Approximately 15 per cent of households; or, one in five individuals, fall below the poverty line, with a similar number achingly close to this threshold. These poverty statistics are rather unanticipated given the relatively high per capita income of the country.

Every percentage point of poverty is akin to a laceration into the social body; and, it is critical that this problem is resolved – for each laceration (each percentage increase in poverty) leads to a veritable rapture of a social body.

The introduction of a UBI would only have marginal effects on key indicators followed in Barbados such as net international reserves, imports and employment. The fiscal implications of such a policy, however, seem to make this proposal for a UBI in Barbados inoperable at this time. Indeed, for even modest definitions of the basic income concept, the fiscal deficit would more than double. Any attempt to introduce a UBI in the island will therefore need to confront the problem of financing such an initiative. But once this aspect of the problem is addressed, the overall macroeconomic implications of such a proposal do not seem to be detrimental to the economic development of the island.

The above information is taken from a recently-released Central Bank of Barbados working paper, but the views are those of economists Rasheed Griffith, Dr Winston Moore, and Shekira Thompson.