COVID-19 Strengthens the Case for UBI

Free Money For All?

COVID-19 Strengthens the Case for UBI

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Necessity is the mother of invention, so the old proverb goes. And with coronavirus spreading through countries, deep economic recession clambering at its coattails, the collective need has rarely been higher. In just four months, almost 300,000 lives have been taken worldwide, and lockdown, in its various forms, is threatening untold livelihoods - as of May 9th, 33 million jobs have been lost in the US alone. True to the saying, some invention has been forthcoming as incumbents have scrambled to protect their citizens and economies. The UK’s Chancellor, Rishi Sunak, for instance, has shown great ideological flexibility, committing to stimulus packages so large they’d make the most ardent of socialists blush. And similar developments can be seen across the world.

coronavirus covid-19 strengthens the case for UBI

It’s not enough

However, despite such pledges, the panoply of bailouts, furlough schemes, and loans are failing to reach all those in need. It’s a familiar story: the effects of the crisis are driving a wedge into societies’ already pronounced divisions, entrenching and exacerbating them - they will soon be untenable. In the US, it’s ‘women, particularly women of color, communities of color, and impoverished Americans…[that] are bearing the brunt of the economic downturn’, according to data from Vox. In spite of the largest relief package in history, the so-called ‘left-behind’ are being cut further adrift.

Research from the International Labour Organisation (ILO) makes for similarly depressing reading. They have estimated that the ‘lost labour income [as a result of the virus] will result in an increase in relative poverty for informal workers and their families… of almost 52 [percentage] points in high-income countries and 56 points in lower and low-income countries’, confirming the unequal distribution of the economic fallout. Over 2 billion people work informally worldwide and if they, and other vulnerable demographics, are to be protected, more is needed, more invention is due. Without additional support, societies will destabilise, leading to, as Kanni Wignaraja, UN Assistant Secretary-General, has warned, ‘a heightened risk of societal conflict’.

Introducing UBI

‘This may be time for a universal basic wage’, contemplated Pope Francis in his Easter Address in April, observing the economic destruction around him. And the Pontiff may be right. No longer fringe, the case for UBI is as strong as it’s been, its popularity soaring. A 2018 poll of 28 European countries showed that 68% of Europeans are in favour of direct no-strings-attached cash payments to citizens. Since coronavirus has cruelly exposed the precarity that underpins so many people’s lives, the harsh hand-to-mouth reality, one would now expect that figure to be even higher.

And this really is UBI’s greatest selling point: the stability it ensures, both psychological and material. The guarantee that no matter what happens, be it a change in work, temporary unemployment, divorce, or even a global pandemic, a modest income will always be there to break your fall and provide a baseline of security. Its benefits scale up to societal level too. Crises always risk societal cohesion, and although coronavirus has, in some areas, elicited a collective spirit, the economic downturn will be crushing, and threaten these bonds. As we know, deprivation often leads to accusation, a combustible situation readily exploited by the far right. UBI offers protection from this, and would insulate people against the worst of any economic turbulence, helping neutralise social tension and stem the need for scapegoats. It promises, in the words of its most famous champion, Rutget Bregman, what all people desire: ‘a life of dignity’. 

Increasing demand

More immediately, and crucial to economic recovery, it would address the crisis of demand, felt everywhere. While many economies begin the process of ‘unlockdown’, there are fears that economic behaviour will take some time to return to normal, that a combination of health anxiety, reduced income, and greater inequality will contribute to a sustained decline in aggregate demand. This will compound economic hardship on a microscale that plays out as follows: despite being allowed to open, restaurants won’t fill up, meaning less profits; this will force employers to let workers go, which, in turn, will further reduce demand, as fewer people working means less money being spent in the economy. And the cycle continues. 

Although UBI cannot directly address health fears, it could disrupt this spiral into deep recession. Economists, Adrien Auclert and Matthew Rognlie, have shown that cash in the hands of the rich tends to be saved, and that greater inequality correlates with lower aggregate demand. UBI, or some kind of income guarantee, would counter this, putting money into the pockets of the people most in need, and on whose spending habits the health of the economy is dependent. Research from the Roosevelt Institute supports this argument, demonstrating that UBI, regardless of whether funded by debt or taxation, is an effective way to grow an economy and expand the labour force. With global GDP set to contract by 3.9% in 2020 according to Fitchratings, it’s perhaps no surprise that UBI is attracting such high-profile advocates.

To the naysayers

Questions of expense accompany any discussion of UBI, and people are right to query: giving citizens free money sounds expensive. Its expense, though, shouldn’t be considered in isolation and must be contextualised, made relative to the economic resources available to states, which, as the coronavirus has shown, are extensive. When deemed necessary, governments have had no issue bankrolling stimulus packages, furlough schemes and bailouts, running up deficits previously thought untenable. No one batted an eyelid. Why should UBI be any different? 

Even putting countries’ impressive borrowing capacity to one side, UBI still makes financial sense. US economists have calculated that a negative income tax, which guarantees a level of income just above the poverty line (in effect, a graded basic income, not universal) would only cost the US $336 billion. For perspective that’s just 1% of US GDP or about half the military budget. The same researchers then estimated the cost currently incurred by child poverty - including higher healthcare expenditure, increased crime rates, etc. - which they found was $500 billion. Their conclusion is clear: it costs more to sustain child poverty than to eradicate poverty altogether. Interestingly, they believed their findings were relevant not just to the US, predicting similar data for much of the developed world, adding, finally, that funding could be aided by removing fossil fuel subsidies and tweaking unfair tax systems. Far from a utopian pipe dream, UBI appears to be well within our grasp.

The iron is warming

On top of UBI’s money-saving (its simplicity would likely save billions on paperwork and bureaucrats) and poverty-alleviating attributes, it’s what it stands for which could be of most value. For UBI honours labour that typically goes unpaid, such as that done by parents and carers, labour that society could not function without, and which for too long has gone underappreciated. With coronavirus forcing a reappraisal of the current social settlement, it could be on the sentiments of gratitude and egalitarianism that the new, post-corona world is built. Implementing UBI would make a fine first step