A centuries-old debate that continues to date is the importance of Universal Basic Income. Is it the deus ex machina for all our tragedies and indignation, or is it just another motion for a debate, periodically revived due to the global economic climate? While some claim that it is essential for the economy and an important social protection tool, others suggest it negatively affects the labour market and, consequently, the economy. Whatever may be the impact, this lugubrious pandemic has reignited the heated debate, this time more intense than ever, engaging all kinds of normative and positive arguments, further entangling the common person in the complex web of UBI and its future prospects, and exposing the inherent dichotomy of the economics of Universal Basic Income.

 

The concept of UBI is to provide periodic and unconditional payments to citizens to create a strong financial net that supports them and ensures that they do not fall through it, thereby fostering conditions that are conducive to a better standard of living for the precarious and self-employed. During the Covid crisis,  the global economy witnessed large scale retrenchment and shutdown of companies. This was accompanied by a major rise in social spending in most countries to support their citizens. For instance, Spain gave a $1200 a month cash transfer to 850,000 of its most needy households, and the USA paid $1200  to all of its citizens earning less than $99,000 annually, all with no strings attached. Though these are not examples of UBI in their purest form, they establish an influencing precedent and a sneak-peek into the future with Universal Basic Income, if there is one at all.

 

Despite the countries trying their best to support their citizens, there was a drastic increase in the level of global poverty. A negative exogenous shock of this degree has made the countries rethink the social contract and the nature of welfare states in the post-pandemic world. The reason behind Universal Basic Income taking the limelight in the discussion of ‘post-pandemic welfare state’ is that evidence suggests that Universal Basic Income can be a key to better access to a heavily privatised and highly expensive style of healthcare infrastructure, which has started to dominate the medical industries of most of the countries. A study of universal basic income in Sub Saharan Africa suggested that in 9 out of 11 trials, short term poverty was reduced, but more importantly, people went to the hospital relatively faster and often, in case of being diagnosed with an illness, instead of trying to treat it at home to avoid spending a fortune on treatment.

 

A Universal Basic Income has been deemed advantageous on an array of ethical, political and social grounds. It finds popular support amongst common citizens mainly because of the simplicity of the policy, its ability to support people during unemployment (which is a sine qua non-feature for the middle class), and the way it reduces stress and anxiety amongst the working about the uncertainty of their employment. The common populace opposing it does not feel comfortable giving a UBI to the rich, who do not need it. It also finds its opposition in a majority of mainstream economists who dismiss this idea due to technocratic reasons of ‘effects on labour supply and demand’, ‘negative effect on the economy, ‘redistribution errors’, etc. Though the pros and cons of  UBI remain the same, the covid epoch has restructured the preferences individuals give to these advantages and disadvantages. Results of a survey on UBI in the USA and UK in 2021 implied that people had re-evaluated the costs and benefits due to their tragic personal experiences. The respondents were more appealed to the advantages of UBI. They felt that if such a pandemic strikes back in the future, the simplicity of UBI will be an advantage to the central government. Their interest in UBI lowering job security related anxiety had also increased post-pandemic. Interestingly, the concern of respondents regarding job security was not for the poor group but relatively stable income groups since they bore the maximum brunt of retrenchment in companies. Therefore, their pandemic experience was marked by stark uncertainty regarding their employment. At the same, they seemed to care less about the disadvantages. For the common people, it did not matter if UBI had any negative effect on the labour supply or if the UBI went to somebody who did not need it. The centre of concern was redirected and more focused on the self rather than the economy. Hence, popular support for UBI increased post this crisis.

 

But does popular support mean this is the right way forward? Historically, in economics and public policy related matters, the technocratic and popular perception tend to be at odds with each other. Mainstream neoclassical economics rejects Universal Basic Income due to its threat of violating the sanctity of free markets. While this proposition continues to be debated, another important fact is that any such policy calls for an exhaustive inspection of state capacity and fiscal resources, both of which are in short supply in the majority of the countries. However, the Covid epoch has acted as a significant eye-opener in dealing with such matters. The fiscal and monetary context has dramatically altered because the global economy has had the largest ever contraction, yet most governments are transferring huge sums of money to support their population. If governments prefer to move forward with the UBI way, it will entail intensive (normative) political discussion to the extent of redistribution, and policymakers would also need to be able to fix such an amount that strikes the right balance between supporting the citizens and avoiding an overwhelming fiscal pressure on government budgets.