Africa: Universal Basic Income - Here's What You Need to Know

As the coronavirus pandemic pushes the economy into recession, the idea of unconditional cash payments is gaining traction

Twitter head Jack Dorsey became one of the highest-profile advocates of universal basic income (UBI) this week when he said he was donating the equivalent of $1 billion to fund coronavirus relief efforts.

The money will go to his charity fund, Start Small LLC, which will focus on universal basic income and girls' health and education, he said.

As the coronavirus pandemic pushes the global economy into recession, the idea of unconditional cash payments is gaining traction, with authorities in hard-hit Spain working a plan to introduce a basic income for struggling citizens.

But how does universal basic income work? Here's what you need to know.

What is universal basic income?

It involves giving people a guaranteed income in the form of regular cash payments, no strings attached. Unlike welfare benefits it is not tied to specific needs like housing or food, meaning recipients can spend it however they want.

How could universal basic income help in the fight against coronavirus?

It is being explored by politicians and economists as a way to offer relief as the global economy heads towards recession and people lose their jobs and livelihoods, pushing them towards or deeper into poverty.

Which countries have a universal basic income?

Countries from Brazil to Kenya have schemes, but only Iran has a nationwide cash transfer programme. It launched in 2011 to help families facing cuts to fuel and bread subsidies.

Last month U.S. lawmakers agreed to send direct payments to citizens as part of its historic $2 trillion stimulus package. Most Americans will receive cheques of up to $1,200 for an individual earning up to $75,000 a year, with an additional $500 per child.

Spain has said it plans to introduce basic income as soon as possible.

Does universal basic income work?

It is still being experimented with, and there are questions about its effectiveness.

Advocates say the simplicity of universal basic income reduces the often complex and burdensome bureaucratic processes involved in assessing and giving income support.

A universal payment prevents people who need help from slipping through the cracks and is flexible - people can spend it to suit their needs, which are likely to be different for a single working parent than an elderly person living alone.

Crucially at a time of economic slowdown, it can help boost spending.

Critics say unconditional handouts could be spent recklessly or discourage people from finding work.

Some governments are cautious of introducing UBI as an emergency measure - Britain has rejected the idea in favour of other policies to help people withstand the coronavirus crisis, such as underwriting workers' wages.

There are also concerns that marginalised people such as refugees could slip through the net if the system is based on taxpayer records, or that the payments could push people's income over the threshold for other benefits.

What have the experiments shown?

Different schemes have yielded some evidence of success.

In Alaska, a scheme giving each resident an annual sum based on revenues from an oil wealth fund has helped low-income families out of poverty and been used as a blueprint for similar schemes elsewhere.

Finland was the first European government to introduce a basic income scheme, with a two-year trial starting in 2017, giving unemployed people a monthly payment of 560 euros.

Researchers found that while UBI boosted recipients' happiness, it did not lead them to find work, as intended.

In Stockton, California, a pilot is under way, giving $500 a month to 125 people living below the median income of $46,000.

While the results are not yet in, researchers said recipients so far have been "rational and savvy" about how they use the income, with 40% of payments spent on food.

How would universal basic income be funded?

Some of the pilots have been funded by local or federal governments, NGOs or in the case of Alaska, a wealth fund. Larger-scale basic income initiatives could require central banks to create new money, as they did for quantitative easing programes after the 2008 global economic crisis.

More From: Thomson Reuters Foundation

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