Universal Basic Income is answer to the migrant labour crisis

With livelihoods suddenly coming to an end due to the lockdown, the option left for the migrant workers was to make a hasty retreat to their home towns. The presence of some form of Universal Basic Income (UBI) could have mitigated their uncertainties to a certain extent, writes Partha Pratim Mitra for South Asia Monitor

Partha Pratim Mitra May 16, 2020

The migrant labour crisis post the national lockdown from March 25, 2020, has made the citizens look helplessly at the deplorable plight of a significant, but vulnerable section of the workforce.Although, it is difficult to get firm estimates about the number of migrant workers in the country estimates put them in the vicinity of about 120 to 140 million, not an insignificant number, out of a total workforce of about 480 million.

They are in a vulnerable position in the labour market as they don’t have any fixed incomes. They are mostly daily wagers, with very little savings, as most of their earnings are remitted home to their families. Most of them are not eligible for benefits under government schemes due to cumbersome registration procedures. The problem usually is that they don’t have any permanent resident in their places of work, making their enumeration under census or any other government surveys difficult.  The net result is uncertainty as they fail to get any social security coverage. With livelihoods suddenly coming to an end due to the lockdown, the option left for the migrant workers was to make a hasty retreat to their home towns.

Universal Basic Income

The presence of some form of Universal Basic Income (UBI) could have mitigated their uncertainties to a certain extent.A senior UN official has now brought the UBI back on the policy agenda of countries and has called for a serious look at the concept in the context of uncertain livelihoods of the vulnerable sections of society. The discussion at  the UN revolved around the fact that if there was no minimum income to fall back upon and  no means to sustain themselves, the chances are that the vulnerable sections would succumb to hunger or other diseases, well before COVID-19 gets to them.

The context within which UBI had to be introduced was very well put forth by Kanni Wignaraja, who runs the UNDP’s Asia-Pacific bureau when she said that with a large number of jobs becoming vulnerable due to the pandemic and a large proportion of people working in the informal sector, without a contract, insurance or any kind of job security, it was essential to bring back, the discussion about universal basic income, and to make it a central part of the fiscal stimulus packages. 

In the Asia Pacific, about 60 percent of people do not have any form of social protection, and they cannot afford to join some of the defined contributory social security options that are currently available. The dollars invested in making sure that people do have some kind of safety net is much cheaper than the huge investments that are now needed to bail out entire economies or pay for fossil fuel subsidies. With most countries in this region having a low tax to GDP ratio, and most of the public money coming from regressive, indirect taxes, it’s the poor who are being disproportionately taxed. And this has to change. Although, UBI is not the solution to the region’s economic problems, it will save people from falling off the edge, she said.[i]

Subsidies and UBI cannot co-exist

An estimate made in India in the Economic Survey 2016-17 puts the cost of running a scheme on UBI at 4.9 percent of the GDP to ensure that 75 percent of India's population gets an annual income of Rs 7620 (Chapter 9 Economic Survey). This estimate needs to be juxtaposed with 2.07 percent of GDP in 2014-15 for subsidies towards fertiliser, petroleum, and food and 1.38 percent of GDP as the cost of major welfare schemes. Here lies the major dilemma of introducing UBI in India: Is India prepared to give up subsidies and move towards UBI?

There is no unanimity on the question of giving up subsidies or even introducing UBI on the following major grounds :

* Influential lobbies would prevail upon politicians not to scrap the subsidies

* Poor targeting of beneficiaries who would get UBI

* Encouraging idle workers in society

* If subsidies cannot be abolished, UBI cannot be introduced

The edifice of the Indian polity depends on the influence of the various lobbies and pressure groups, and the most influential being the farm lobby, which determines not only the pricing of agricultural inputs but also support prices. Hence, subsidies will be difficult to get rid of.

Targeting of beneficiaries is an age-old problem. Exclusion of vulnerable groups from the state BPL list, despite they being eligible to take advantage of various government programmes are quite common. Exclusions occur in many cases for want of proper documentation to support their resident status. Such instances are very common among communities which have a migratory nature of existence.

The problem of UBI encouraging idle workers is sometimes over-exaggerated.  Studies have shown that people would want to work not just for monetary reasons but for a sense of purpose, belonging, and dignity in what they do for a living. What the UBI does is it gives the individual confidence to face uncertainties of incomes and livelihood as the money which they get under UBI would give them a fallback option if nothing comes their way. Such instances would be quite common in times of the pandemic, with prospects of jobs, livelihood, and other uncertainties looming large. 

It is true that both subsidies and UBI cannot co-exist in a strained budgetary situation. One will have to be at the cost of the other. At present, the balance of advantage seems to be in maintaining a status quo in the form of subsidies rather than facing the uncertainties of sustaining a UBI.

Better targeting of beneficiaries of UBI can be planned if there is a will to do so through the gram sabhas under the Panchayati Raj System where the village community meets and decides transparently the list of individuals that should receive the UBI.[ii] 

Social crisis looms

A much-quoted International Labour Organization (ILO) study has shown that about 400 million workers in India would get affected by the pandemic and about 195 million jobs would be lost. These jobs are mostly in the informal sector. The study mentions that “in India, with a share of almost 90 percent of people working in the informal economy, about 400 million workers in the informal economy are at risk of falling deeper into poverty during the crisis. The current lockdown measures in India, which are at the high end of the University of Oxford’s COVID-19 Government Response Stringency Index, have impacted these workers significantly, forcing many of them to return to rural areas.”[iii] 
The social problem, therefore, looms large. The UBI would be a step worth considering if this problem is to be averted. Better compliance of direct tax laws, better coverage of citizens paying direct taxes, lower rates of direct and indirect taxes, and reduction of all subsidies should be seen as steps towards a stronger push for UBI in this country.

(The writer is a retired Indian Economic Service officer who worked in the labour ministry. The views expressed are personal. He can be contacted at ppmitra56@gmail.com)


[i] 6 May 2020

Economic Development

The COVID-19 pandemic is not only a health crisis, but it is also proving to be an economic disaster for huge numbers of people worldwide. A senior UN official with the UN Development Programme (UNDP) is calling for countries to provide citizens with a universal basic income, to help the millions who have lost their jobs, because of measures to curb the virus, combined with increasing levels of inequality.

Kanni Wignaraja, who runs the UNDP’s Asia-Pacific bureau, spoke to UN News and started by explaining why the idea of universal basic income (where governments give a minimum sum of money to all citizens, based on work status or income) is starting to gain traction.https://news.un.org/en/story/2020/05/1063312

[ii] A good discussion on the subject is available in the bookAbhijit.V,Banerjee and Esther Dufflo, Good Economics for Hard times.juggernaut,india,2019,pp277-322

[iii] X ILO Monitor: COVID-19 and the world of work. Second edition Updated estimates and analysis,https://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/briefingnote/wcms_740877.pdf

Newsletter Subscription

The subscriber's email address.
Stay informed - subscribe to our newsletter.
Tweets about SAMonitor
SAM Facebook

DMM Thank you