The crisis brought about by Covid-19 has prompted many economists and policymakers to rethink their stance on universal basic income (UBI). Once a hot topic for academic debates, the concept is now fast earning a place at the forefront of politicians’ minds. With soaring unemployment rates around the world, it may be prudent to take a closer look at the results of small-scale UBI trials undertaken in Finland and in the Canadian province of Manitoba.
IZA World of Labor contributor Ugo Colombino has explored the subject of whether unconditional basic income is a viable alternative to other social welfare measures. In his article, he writes that:
Colombino then analyzes the impact the most recent recession had on the economy:
Many OECD countries have been suffering from high unemployment and job insecurity since the Great Recession in the late 2000s. [...] The post-2008 recession inflated the number of people in need of assistance and, in turn, the volume and complexities of social protection.
Economic reasoning and empirical evidence suggest that, under certain conditions, unconditional basic income might be an important policy innovation for redistributing gains from automation and globalization, building a buffer against shocks and systemic risks, and generating positive labor supply incentives among the poor.
While such a policy is simple and transparent, financing it might require higher taxes or cuts of other transfers, with efficiency and equality losses. Therefore, careful redesign of taxes and transfers is needed to obtain a net benefit from unconditional basic income.