Basic Income Guarantee: Are You For or Against It?

Basic Income Guarantee: Are You For or Against It?

Basic Income Guarantee: Are You For or Against It?

This week we’ll continue the discussion about the extremely popular, and highly controversial Basic Income Guarantee! Last week we dug into the basics, and this week we will explore the main arguments for and against the policy. 

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You also read about how the Basic Income Guarantee works here.

Arguments For Basic Income Guarantee

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Qualify of Life Increases

This is the biggest argument for the Basic Income Guarantee (BIG). Many individuals suffer from financial hardship due to a variety of reasons, and they usually lack a basic quality of life. Implementing BIG will help alleviate these financial stresses and create new opportunities.

A BIG policy will also protect the labour market from economic changes. Technology and globalization have undoubtedly affected many workers across the globe, and these changes will continue to occur. Having a guaranteed income will grant these workers stability and offer new retraining opportunities.

Elimination of Inefficient Government Spending

This argument is based on the belief that the government’s social spending policies are inefficient. The process of targeting select demographics require large bureaucratic departments that decide who is approved and not. Many needy individuals are excluded for an array of reasons, and many programs pay those that do not require the income.

The BIG program would effectively replace these existing social programs, and the government spending behind them. Under a BIG policy, everyone would qualify for one universal payment instead of various social programs. Therefore qualification would be simple and efficient.

Helps Individuals to Achieve Their Dreams

BIG will grant many individuals the ability to achieve their goals in life. By partially removing financial obstacles, individuals will be able to receive an education, create a business, embrace an arts career, and much more. This will help lead individuals to more personally rewarding outcomes.

 

Arguments Against the Basic Income Guarantee

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The Cost

This is the big roadblock to launching an effective BIG program. The cost needs to cover a universal income are enormously expensive. Undoubtedly, taxes will increase to fund this policy.

While the cost will be partially offset by cancelling other government spending, this will not be enough. The required spending is unknown as this policy has never been fully implemented before, and we don’t know how it will impact a government’s finances in the short and long-run.

Many estimates exist, they depend on the amount of the BIG payment and how many other social programs will be replaced. For example, The Economist estimates that a country wide BIG program in Canada that pays $10k a year to all citizens will require a tax increase of 12% of current GDP.

You can use the Economist’s BIG tool here

Lack of Incentives

Another big arguments against BIG is how the population will respond to receiving an unconditional payment and tax increases.

One of the big concerns is recipients will lose the incentive to work, and ultimately a decrease in economic activity. Another concern is that workers will also quit their jobs to focus on other past-times.

Undoubtedly, taxes will increase and many argue that this will further reduce the incentive to work and to take employment risks. This is because you now earn less for your performed work, and you may replace that time with other more valuable activities.

If these negative work incentives are large enough, they will reduce government income and increase their expenses. This would increase the governmental deficit and the pressures that come with it.

How Should The Basic Income Guarantee Be Designed?

Another big question revolves around how BIG should be designed. How much do we pay and to whom? Do we include immigrants, youths, and others? These decisions have the potential to segregate portions of the population further and create new tensions.

Conclusion

Overall, the basic income guarantee offers some very positive benefits, but at an unknown cost. Thankfully, courageous countries are beginning to embrace the theory of BIG, and their experience will help illuminate the path for the rest of the world.

Next week, we’ll look into BIG projects that have already been implemented or are in the process of implementation.

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