What is Universal Basic Income?
Universal basic income is a payment made to all adults, regardless of employment status or any other variable, at a set amount. This sum is usually that which would cover their basic living costs.
The amount can vary according to parameters such as average salaried income, the cost of groceries, rental costs, fuel prices, and the rate of inflation. It can be set nationally, or according to state, province, or even towns, depending on which authority administers tax and welfare distribution.
A similar system to universal basic income is negative income tax. As the name suggests, this is a procedure whereby people earning below a certain threshold do not pay tax; instead of receiving separate welfare payments, their income is supplemented by the government through the tax infrastructure.
Universal basic income is slightly different to another similar process called guaranteed minimum income. Under this system, people are provided with sufficient payments to bring them up to a set level of income.
If their salary already surpasses this level, they won’t receive payments. Whereas under universal basic income, there is no means test, so all citizens would receive it, no matter their salaried income.
One of the main purposes of universal basic income is to prevent people from falling below the poverty line.
It is thought that if all citizens have access to an income that is provided automatically, without having to go through an application process or means testing, the most vulnerable in society will be protected from extreme poverty, as well as related outcomes like preventable illness and homelessness.
What are the Benefits of Universal Basic Income?
The key benefit of a universal basic income is that it can help to protect people from poverty. Citizens who have sufficient income to cover their most essential needs are less likely to fall into a poverty trap, providing that the money is being used for that purpose.
Of course, this isn’t 100% guaranteed, but the majority of people would be inclined to ensure that housing, utilities, and food bills are taken care of in the first instance.
Linked to the issue of poverty is homelessness. In fact, poverty – alongside unemployment, domestic violence, and unaffordable housing – is one of the key reasons for homelessness.
By introducing a universal basic income, it is assumed that the link between extreme poverty and homelessness can be broken, which should reduce the total number of people living in temporary accommodation or on the streets.
Aiding the ‘Working Poor’
Poverty has many causes, and there are a substantial number of people who are in work – some earning good salaries – who still struggle to make ends meet, particularly if their wages are not rising in line with inflation.
A universal basic income would therefore help the ‘working poor’ to emerge from a difficult financial position, reducing stress caused by money worries.
Poverty is one of the leading causes of inequality in society. It is theorised that a universal basic income will help to bridge the equality gap, giving people from poorer background the chance to explore opportunities they might otherwise have to skip for financial reasons.
What are the Drawbacks of Universal Basic Income?
Providing universal income is likely to be an expensive endeavour, creating a substantial drain on central resources. There are approximately 1 million working-age people in Hawaii; supporting them with a universal basic income would cost billions of dollars.
With the cost of most essential needs covered, a universal basic income can disincentivize seeking and retaining employment. This is particularly true if living costs are low; with a guaranteed income in place, there may be reduced desire to go out to work.
Given the high cost of running a universal basic income scheme, governments need tax receipts to fund it. This issue could make such a scheme impossible to implement.
With greater purchasing power comes a desire to spend money. The introduction of universal basic income may coincide with a boost in inflation, as demand for goods increases rapidly.
Suppliers bump up prices in line with demand, which results in higher rates of inflation. This can be particularly detrimental if a government brings in universal basic income to help offset the effects of an already high rate of inflation, such as the unaffordability of essential products and services.
Why is Hawaii Considering the Introduction of Universal Basic Income?
Automation is becoming increasingly popular in the workplace. Technological innovations in robotics, machinery, and software means that people in some professions – particularly blue-collar – may eventually be replaced by hardware.
This presents a set of problems for those put out of work, particularly around retraining and job availability. Universal basic income can help to solve these problems, by giving people the funds to keep their heads above water, allowing them to search for new jobs and retrain.
Thanks to its thriving tourism industry, Hawaii has a substantial service sector. Many of the blue-collar jobs within Hawaii are ripe for replacement by machines.
This is why the Hawaiian government is considering the introduction of a universal basic income – to help its workforce transition, and protect citizens from falling into poverty in the meantime.
State Representative Chris Lee said considering a universal basic income was an important step “to be sure that everybody will benefit from the technological revolution that we’re seeing (and) to make sure no one’s left behind.”
How Would Hawaii Pay for Universal Basic Income?
The big challenge for legislators is to find the cash to support a universal basic income in Hawaii. It has been suggested that hotels and other tourist facilities in the state could be charged a levy to raise funds for this system.
An alternative option is to replace welfare schemes with the universal basic income, and reroute existing funding.
A third possibility is to run this scheme with the support of businesses and philanthropists, through a non-profit organisation. However, generating sufficient donations to fund an entire state’s universal basic income bill would be a substantial challenge.
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