The hidden cost of free basic income
The war against poverty and income inequality wages on yet yielding intangible
results. The income disparity between the rich and the poor is ever-growing while poverty
claims millions of innocent lives, whom unfortunately suffered because their external
circumstances dictated their lives to be as such. It should be of no surprise that new policies
are currently being explored. Free basic income(FBI), more commonly known as universal
basic income(UBI), is gaining traction in recent years. FBI is a model which provides all the
citizens with a given sum of money, regardless of their income, resources or employment
status with the intention of alleviating poverty while simultaneously increasing equality
among the citizens(Michael, 2019). It is based on the belief that survivability is a human
right, therefore the provision of FBI would cover the cost of living and offer financial
security in times of crisis. Despite the utopian ideology of FBI, it is extremely impractical
and unrealistic to attain(Alyssa, n.d.). As the old adage goes, “there is no such thing as a free
lunch”. This implies that it is impossible to get something for nothing. The cost is not
incurred by the beneficiaries, who derived maximum benefits from the policy, but borne onto
society as a whole with drastic drawbacks in the long run; the dwindling desire to seek
employment, exacerbating government spending, worsening quality of life(QOL) and does
little to curtail inequality(Rachel, n.d.). In spite of the potential short term success of
improving the lives of the unfortunates, it is also riddled with conceivable detrimental
ramifications affecting countless lives.
FBI disincentivizes the unemployed to find a job. In the piloted test conducted in
Finland, 2000 unemployed individuals received an unconditional monthly payment of $634
instead of their usual unemployment benefits with the intention to see if it bolsters
employment. The result showed positive impact on an individual’s health and wellbeing but
no signs of improvement in work status(Varghese, 2019). The provision of FBI allows basic
needs to be taken care of, mitigating anxiety and stressfulness of having to find a job to
ensure survival(Varghese, 2019). However, it can be argued that the best form of motivation
to seek out employment is the drive to survive. According to Instinct theory, humans are
biologically programmed to survive, all our behaviours and motivations stems from
biological programming. Thus, we will engage in behaviours that will aid in survival(Cherry,
2019). In today’s society, survival is intrinsically tied to employment. The provision of FBI
reduces the incentives to seek out employment since it does not contribute to survival. In the
context of Singapore, the government believes that the best way to assist individuals who are
retrenched or unemployed is to help them seek reemployment instead of handing out
financial support such as unemployment benefits. This equips the people with the necessary
and valuable skillsets that is required and sought for in the current economy, improving the
productivity and therefore stimulating economic growth(MOM, 2019). The United States
operates in different fashion, whereby unemployment compensation is paid by the states to
the unemployed workers who have lost their jobs due to layoffs or retrenchment. It is meant
to act as a source of income for jobless workers until they can find employment for the
maximum duration of 6 months(Kagan, 2018). The criteria for acceptance is that the
individual had worked for a minimum stipulated period and is actively looking for
employment(Kagan, 2018). This prevents people from exploiting the system while
concomitantly acts as an impetus for unemployed to actively seek out employment
opportunities. To curtail the problem of unemployment, Singapore and the United States
chose to operate in different fashion yet functions on similar basis that the individuals should
be responsible for their own life. The government’s role is to ensure that the citizens’
wellbeing are taken care off by providing them quintessential items and services so that their
social and basic needs are met. As stated, the provision of FBI did not result in a change in
working status. This therefore implies that the unemployed were not actively seeking out
employment opportunities but instead relied on the FBI for survival. The provision of FBI
encourages such behaviour, allowing the habit of reliance to be cultivated. Evidently, free
basic income is undermining the foundations of democracy as it transforms citizen’s freedom
to citizen’s dependency.
FBI does not alleviate income inequality neither does bolster employability. There are
a myriad of factors that resulted in the widening gap between the rich and the poor. Firstly,
wages functions as the market price of skills required for a job in a free market, determined
by labour market demand and supply. “If a large number of workers are willing and able to
offer that skill but only a few employers need it, the wage decreases. On the contrary, when
there is low supply but high demand for the skill, the wage increases.”(Leung, 2015).
Secondly, the level of education. It is often proportional to the level of competency. Capable
individuals are rewarded with high wages for their outstanding contribution(Leung, 2015).
Lastly, personal factors. “the rich get richer, the poor get poorer” is not just a cliché. It is
based on the theory of wealth concentration. The rich has the financial capabilities to invest
and leverage on the accumulated wealth(Leung, 2015). Moreover, the effects of wealth
concentration may extend to future generations. The type of socio-economic backgrounds
affects the upbringing and education of the child and consequently better opportunities to
high paying job. Proponents of UBI often raises the point that the distribution of free money
allows for the freedom of choice when it comes to the selection of jobs since their livelihood
is not dependent on securing a job.(Piper, 2019) However, from the Finland experiment, FBI
has little to no impact on working status (Varghese, 2019). This evidently shows that
employability is not a matter of choice. Rather, the selection is determined by the skills,
attributes and performance capabilities the individual possess which best serve the demand of
the job. Singapore has already rejected a minimum wage policy because they believe that it
will compromise on the principles of preserving a strong work ethic and culture of selfreliance. Instead, Singapore adopts a progressive wage model to help increase the wages of
the workers through skills enhancement programmes to improve productivity and standards
in certain sectors.(MOM, 2019) Consequently, higher productivity translates to bigger profit
margin for the employers; service buyers would also benefit from better service standards and
quality. Thereby, improving the standard of living of the nation as a whole. Despite
Singapore’s geographical constraints coupled with the lack of natural resources, this
macroeconomic approach has contributed to Singapore becoming one of the most high-tech
economies in the world and also the 2nd freest economy in the world according to the 2017
edition of the heritage foundation’s index of economic freedom. The provision of FBI will
most certainly go against principles of meritocracy ascribed to by the Singapore
government(Stanislaus, 2019). In a meritocratic system, everyone is given equal opportunity
to succeed. It is a system that recognises talent and ability over wealth and circumstances of
birth. This approach promotes social mobility between classes, allowing people from lower
socioeconomic status groups to gain upward mobility while developing a sense of selfreliance instead of dependency on the government to provide(Stanislaus, 2019). FBI will not
only discourage people from working hard but also increase dependency on the governing
body to provide and safeguard their well-being, exhausting the already finite resources
government has to work with. While the intention behind FBI is respectable, the social and
geographical factors along with the priorities of the country could limit the effectiveness of
the policy.
The provision of FBI will invariably worsen the income inequality, affecting the
QOL. FBI aims to replace current existing welfare programmes, with the assumption that
people will be better off(Piper, 2019). The resources are better managed and effectively
delegated to people of needs. Advocates of UBI claims that the UBI costs less than the
existing policies because it does not incur heavy bureaucratic costs. Such claims are
formulated on baseless assumptions and profoundly misguided. It is estimated to sustain
living, a figure of $1000 dollars has to be provided every month. The United States has a
population of over 300 million individuals, the cumulative cost would amount to three trillion
a year. “This single-year figure equals to more than three-fourths of the entire yearly federal
budget and double the entire budget outside social security, Medicare, Defence and interest
payment.”(Robert, 2019, para. 4). While UBI certainly did optimise the distribution of
income, it has also ironically lead to the increase in costs. The funding of FBI would come
from taxes. In the United States, they adopt progressive tax rates. It embodies the concept
that those with higher income should pay more of their income in taxes because of their
greater ability to pay without critical sacrifices. The opportunity costs tend to be associated
more with luxuries rather than basic necessities that are essential for survival(Investopedia,
2019). In order to sustain a comparatively costlier programme, there must be a commensurate
increase in taxes. This further compounds misery onto the dejected taxpayers; especially
individuals from the middle income group who are already struggling to make ends meet.
The idealistic narrative championed by proponents remains unseen since citizens in their
model are no better off. The provision of FBI equips individuals with the financial capacity to
purchase goods and services which temporarily elevates QOL because their basic needs are
now taken care of. However, with the rise in demand for commodities, it inevitably drives up
prices due to demand-pull inflation, which is a scenario where the demand exceeds the
supply(Chen, 2019). As price rises, the value of currency diminishes resulting in less goods
purchased. This loss of purchasing power impacts the general cost of living for the common
public which ultimately means the income obtained from UBI programme will be insufficient
to sustain living(Scott, 2019). As a result, there arises a need to re-evaluate and decide on the
new provisional level. Consequently, a hike in taxes to accommodate to the cost of the
programme. This is a perpetual game of tag which consistently lower the QOL for the
citizens. The current welfare system offers targeted programs which transfers wealth
disproportionately to those who needs it the most. FBI, on the other hand, transfer wealth to
everyone resulting in a comparative benefit for the rich(Annunziata, 2019). Moreover, the
admission of FBI is with the intention of replacing all current welfare programmes, this
includes healthcare benefits. With the escalating healthcare cost, it will place tremendous
financial and emotional strain on the individuals, since basic income cannot possibly cover
the cost of hospitalisation and treatment(Probasco, 2018). It begs the question: “Is this truly
the life worth living? Forsaking all welfare programmes in exchange of basic income for
living, only to live in constant trepidation and anxiousness to not fall ill.”
It is the role of the government to enforce social and civic rights, provide essential
items and services for the citizens and regulate the economy. They bear the responsibility to
assess both feasibility and reliability of the policy before implementing them. The
consequences of such decisions permeate through society, influencing the lives of many. The
adopted sets of policies may not have been effective in eliminating poverty and income
inequality but it ensures that tax revenue are allocated optimally; catering to specific area of
needs, motivating individuals to seek out employment and ensuring a certain level of QOL is
achieved. It is something the current iteration of FBI fails to accomplish in spite of the short
term benefits which citizens are able to derive. Perhaps, the day when FBI is successfully
able to attenuate the psychological and social problems associated with the long term
progress, will it no longer be a pipe dream but a utopian reality.