Why the UBI is not the solution to our welfare system. (Aaliyan Azeem BUSH 04)

The idea of a Universal Basic Income (UBI) has been gaining traction in the media over the past few months, especially with its endorsement by Democrat Andrew Yang in his candidacy for the democratic nomination.

A UBI is a government guarantee that every citizen of a country receives a minimum amount of money each month. The purpose of UBI is to provide every citizen with a level playing field, with everyone receiving an equal amount of money each month.

The most publicised model of the UBI has been the “freedom dividend“, as proposed by Andrew Yang in his campaign for the democratic nomination. Under his proposal, every American citizen would get $1000/month, regardless of economic status.

The UBI idea has gained a lot of popularity, with some arguing its benefits to lessening the economic inequality in our society, crating more investment through greater disposable income, and more financial freedom to those looking to innovate in our society.

Although this may sound like an amazing thing for the Australian economy, there are some key reasons why the UBI may not necessarily be a good idea:

• It is far too expensive
• It will shortchange those who need welfare the most

It is Too Expensive

Australia currently has approximately 20 million residents that are above the age of 18. These are all the people that are eligible to receive the UBI, if the universal model is followed. At a rate of $1000 a month, this scheme would cost over $200 BILLION to maintain just a years worth of UBI. That figure equates to approximately 14% of Australia’s GDP, and is approximately 75% of the ENTIRE welfare and healthcare budget in Australia.

That would mean to fund a UBI, we would need to shift resources away from other welfare schemes, and directly into the UBI, which is a system that can never work. If we were to move to a point outside the possibility curve (that is, funding UBI without shifting valuable resources from welfare) we would have to raise an extra $150-200 billion dollars. This would require a 50% increase in tax revenue, which seems highly unlikely, especially at a point where the Australian economy has slowed down and the government cannot dare take away the valuable disposable income required to stimulate the economy.

It will shortchange poor families

The implementation of a UBI will almost certainly have to cut resources from other welfare programs or healthcare programs. This would mean the UBI becomes punitive, resulting in a vast amount of important government initiatives being cut in order to make funding. Some UBI exponents recommend that they replace all social security programs.

This would mean no access to rent assistance, the family tax benefit and all centrelink assistance payments. Poorer families eligible for many of these schemes would be left with significantly less than what they started with, effectively nullifying some of the benefits of the UBI. some families, according to projections may end up with $15000 a year less than they had under the status quo.

This begs the question, is it worthwhile having a UBI if its isn’t achieving its main prerogatives of reducing poverty, and giving more access to those in lower socioeconomic situations?

Conclusion

Overall, a UBI is simply not the solution to our current welfare crisis, as it is too expensive and shortchanges those who need it most. Australia should start looking at alternative solutions as a mix of different ideas, as the fix for our welfare system.