Universal Basic Income: Has COVID-19 finally brought a consensus?

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Universal Basic Income: Has COVID-19 finally brought a consensus?

Gugu Resha

29 Mar 2021

7min min read
  • Economic policy
  • Health

he devastating impacts of COVID-19 have been felt by governments, businesses, households and individuals worldwide. As countries the world over witnessed contractions in economic growth and productivity, economic intervention by governments was quickly acknowledged to be essential and inevitable. Businesses received stimulus packages to keep the economy afloat, while vulnerable citizens were offered relief packages of varying sizes and time periods. Decades of debate about the feasibility and effectiveness of unconditional (non-contribution based) cash transfers were brought to a temporary standstill as a global concession was forced by the unprecedented financial hardship brought on by the pandemic.

The implementation of social protection programs – defined by expert Babken Babajanian as publicly-mandated policies and programmes to address risk and vulnerability among poor and near-poor households – has been long debated by economists, academics and social policy practitioners. These debates have contributed to a rigorous understanding of the multifaceted and cyclical nature of poverty traps (the spiraling mechanism that forces people to remain poor over time) and, consequently, the importance of managing socio-economic vulnerability by promoting resilience, sustainable livelihoods and utilisation of basic services which improve quality of health and education outcomes.

Moreover, following the International Labour Organization’s Social Protection Floors Recommendation 2012, in which it reaffirmed "social protection as a human right" and its commitment to "[extending] of social security measures to provide a basic income to all in need of such protection", the adoption of social protection programs grew in popularity after much skepticism from international financial institutions until as late as the 1990s. In 2016, there were about 130 low- and middle-income countries that had at least one unconditional cash transfer program, which testifies to the pivotal role of social protections in poverty reduction and safeguarding livelihoods during economic precarity.

The coronavirus pandemic has shone light on the vulnerabilities of citizens and the glaring lack of protection or safety nets as many found themselves out of work indefinitely. Realising the inadequacy of their existing unemployment benefits, some governments resolved to provide subsidised furlough schemes that allowed businesses to retain their workers, and offered cash transfers/individual stimulus packages as part of their COVID-19 relief strategies. Although these were helpful in averting further catastrophic effects, there were glaring gaps in the access, eligibility and provision of these packages.

South Africa

A notable example is South Africa’s Unemployment Insurance Fund (UIF) which is a voluntary contributory program usually paid by employers on their employees’ behalf. The UIF is mostly enjoyed by workers in the formal sectors, while it is largely inaccessible or unaffordable for informal workers who are self-employed workers and not registered for income tax or value-added tax. More worryingly, the government’s complementary Temporary Employment Relief Scheme (TERS), which would be extended to informal workers whose employers had not registered them for UIF, still excludes many self-employed and freelance workers. As a result, workers in the informal sector – who are disproportionately women – continue to be sidelined and constrained by red-tape, lack of protection and what some allege to be discriminatory practices by administration officials.

In response to these gaps, the COVID-Relief Grant was introduced to those who were unemployed as an unconditional cash transfer. A fierce campaign, launched by the Basic Income Grant coalition and spearheaded by social justice advocacy organisation Black Sash, is lobbying the National Treasury for the grant to be extended to a permanent Basic Income Support/universal basic income (UBI) for all citizens between the ages of 18 and 59 (who are currently unprovided for by any of the existing social protections).

Latin America and the Caribbean

However, they are not the only campaigners. In May 2020, the Economic Commission for Latin America and the Caribbean (ECLAC) proposed that "governments ensure immediate temporary cash transfers" to help millions to meet their basic needs. Furthermore, anticipating a future where "societies will have to coexist with the coronavirus", ECLAC Executive-Secretary Alecia Bárcena emphasised that this step would pave the way towards a UBI and in turn, guarantee income, access to food and basic services to the most vulnerable people.

A UBI is a periodic cash payment that is unconditionally delivered to all members of a community or population individually, without a means-test (a criteria for eligibility) or work requirement. The proposal by ECLAC is particularly noteworthy because Latin American countries (LAC) are ranked as the continent bearing the highest income inequalities, followed by Africa. However, African governments have expressed less political unity and clarity in their position on working towards UBIs. While there has been demonstrated interest in pilot programmes in smaller communities within Namibia, Nigeria and Kenya (administered and funded mainly by charity/ development organisations and independent research institutions), there has been very little evidence of the long-term effects of UBI globally, and even fewer contextually comparable pilot cases to establishing sufficient political support.

The desirability of UBIs is influenced by globally relevant concerns such as protecting livelihoods in the face of increasing automation, addressing the existing income inequality gaps and tackling the stigma of receiving assistance from the government. Equally, the project is hindered by concerns about the largely unknown long-term effects of a UBI on labour force participation, how to fund it and whether it would replace existing social assistance programs given public spending constraints.

Considerations in Africa

For African countries, the stakes are higher particularly because of the severity of income inequality and widespread poverty. A UBI can have a huge impact on issues that are more pronounced on the continent, such as decreasing school drop-out rates where children are forced to seek informal employment and subjected to child-marriage in order to ease the household financial burden. It can allow otherwise destitute rural dwellers to invest in income-generating assets such as livestock or land for small-scale farming to sustain their livelihoods. In these contexts, a regular income can alleviate chronic poverty, and tackle other long-standing structural barriers such as financial exclusion – as seen through the harnessing of mobile money services like M-Pesa, which was developed to reach the unbanked and underbanked rural communities in Kenya. Similar gains can be found in numerous unconditional cash transfer programs across Africa, suggesting that comparable results may be expected from the implementation of a UBI.

On the other hand, the historical reluctance of international financial institutions to support the UBI as a viable option in their mandatory Poverty Reduction Strategy Papers (PSRPs) – which are conditional for debt relief or monetary aid – has set little scope for African countries to pursue UBI programs autonomously. Amidst general concerns about the fiscal capacity for a UBI given low revenue mobilisation from taxes, ideological concerns about creating dependency, as well as political concerns about getting value for spending, some argue that guaranteeing universal access to basic services is more effective than a UBI. This would focus on ensuring access and improving the quality of services like education, health care, social housing, transport and other essential provisions that should be available to all. Moreover, a UBI might undercut the funding that would otherwise be allocated to these services or other existing social protection programmes.

"The jury may still be out on the UBI since less than 20 countries have attempted to implement one; however, we do know that among its many virtues and vices, UBIs can reduce poverty and improve citizens' quality of life."

As a result of these tensions, most African countries that already have some kind of social protection programme could be expected to lean towards targeted cash transfers for which beneficiaries would be means-tested. This approach focuses on providing financial assistance to only those living in poverty rather than to the whole population. However, it is worth noting that targeted cash transfers are not a quick solution to the huge financial burden of a UBI. For what the targeting approach saves by catering to a smaller demographic, it rakes huge administrative costs in formulating eligibility (means-testing) criteria, screening applicants, targeting errors, rolling-out payments, including the financial, bureaucratic and information technology capacity to monitor and evaluate the programme. It is clear that the final trade-offs are not clear cut and countries have to ultimately decide which are more worthwhile to them.

While policymakers may still be far from a consensus on the provision of a UBI, , the fact that such social protections are guaranteed and recognised as a human right sets us far ahead in the movement to secure safety nets for vulnerable and at-risk populations. Given the unpredictability of other equally, if not more, destabilising crises in future – including but not limited to health, environmental, political or economic crises – the lessons learned about the importance of income support during this pandemic can improve long-term resilience for households and individuals regardless of their socio-economic standing.

The pandemic has demonstrated just how vulnerable so many people and industries are. It has shifted the conversation about social protection programs from the narrow focus on those living in extreme poverty to the millions who straddle precarity of economic shocks without protective or emergency assistance. Acknowledging the fundamental role of government intervention in keeping entire industries afloat undoubtedly makes the case for the importance of assistance to households and individuals during similar unprecedented hardship.

Through a gradual approach, countries that already have some form of cash transfer program, such as a child grant or a state pension scheme, can incrementally provide basic income support that can form social protection floor which ensures that citizens have access to some form of social security throughout their life cycle. Not only could this be instrumental for facilitating social inclusion and cohesion through difficult times, but it can also address the gender- and youth-specific vulnerabilities that are exacerbated and often underrepresented by existing policy interventions. The jury may still be out on the UBI since less than 20 countries have attempted to implement one; however, we do know that among its many virtues and vices, UBIs can reduce poverty and improve citizens' quality of life. More importantly, they can deliver what we need most during economic crises: increase consumption and domestic economic growth. Hopefully, we will see some of the most successful COVID-19 Relief Strategies crystalise into sustainable and effective policy practices that leave us better protected than the so-called pre-pandemic normal.

The opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of SAIIA.

(Main image: A person with a face mask seen at a South African Social Security Agency (SASSA) building on 12 May 2020 in Cape Town, South Africa. The South African goverment announced that a R350 grant to help unemployed people not receiving any form of subsidy or grant during the Covid-19 pandemic would be paid from May to October. It will be open to South Africans, refugees and permanent residents already in the Department of Home Affairs' system and those residing within the borders of South Africa. – Nardus Engelbrecht/Gallo Images via Getty Images)