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Mainstream, VOL LIX No 42, New Delhi, October 2, 2021

Shielding the unshielded: How UBI can make a difference to workers’ lives | Sandeep Kaur, Nandlal Mishra

Friday 1 October 2021


by Sandeep Kaur, Nandlal Mishra*

Abstract: The recent migrant crisis has revealed the weaknesses of system and the vulnerabilities of Indian workers. The pandemic has affected the lives and livelihoods of workers like never before. For some workers, these changes were temporary. However, some were uprooted permanently and were forced to accept the sub-par employment opportunities. Moreover, the fear of a third wave looms large. Due to the informal nature of the majority of economic activities undertaken in India, workers are left to fend for themselves in times of such crisis. This article explores the possibility of introduction of a quasi-universal basic income which can provide the much required protection and safety to workers and address the susceptibility of the system. It explores the benefits and addresses the shortcomings of such program through its effect on the worker’s lives. 

The recent exodus of migrants out of distress has unfolded the vulnerabilities of the system and how easy it is for the present infrastructure to collapse. The pandemic has deeply affected the lives and livelihoods of workers. Approximately 90 per cent of India’s economic activities are supported by the informal sector. [1] Despite the varying degrees of informality, the key feature of informal work is the absence of formal oversight due to which workers are left on their own. It would not be fair to confine ourselves to the binary of formal and informal activities as there is evidence of informalisation in the formal sector as well. Due to the informal nature of the majority of economic activities undertaken in India, workers are left to fend for themselves. A quasi-universal basic income can provide the much-required protection and safety to workers and address the susceptibility of the system.

A universal basic income can be interpreted as a fixed amount of money credited to an individual’s bank account every month by the government to all its citizens. Basic Income Earth Network (BIEN) defines UBI as ‘a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement’. As Economic Survey 2016-17 points out, universality and unconditionality are the basic components of UBI. However, given the constraints, the time is ripe to roll out a quasi UBI for the most vulnerable groups amongst the informal sector workers, especially migrant men and women. The recent report tabled by The Standing Committee on Labour in the Parliament also recommends that there is a need for cash transfers to address the plight of urban poor. [2]

Economic Survey 2016-17 estimated an interstate migrant population of 60 million. A study conducted by Keshri and Bhagat in 2013 indicates that 21 out of 1000 migrants can be classified as temporary and seasonal migrants in 2007-08. [3] They also observed that a major proportion of these migrants hail from marginalized sections and lower-income groups. Since a large number of these migrants are engaged in informal sector employment, they are deprived of basic rights at the workplace and form the most vulnerable groups in the country. The State of Working India 2021 report by Azim Premji University reveals that around 15 million workers remained out of work after the first lockdown was imposed. [4] Those who did return to work had to settle for even lower wages. There is also evidence of a shift towards informal employment, either as self-employed, casual wage workers or informal salaried workers. A universal basic income, in this context, can serve as a means to eliminate the impact of work-related uncertainties and provide them with a consistent cash flow sufficient enough to sustain themselves and provide them with the bare minimum that is required for survival.

As far as women migrant workers are concerned, they are seen more as mothers (caregivers) and less as workers. The time poverty of women workers stays out of the discussion. Women are seen as the primary caregivers in the patriarchal framework. The care work as well as unpaid non-care work such as collecting fuel, fodder etc. goes unrecognized. Women have to juggle between their jobs and domestic responsibilities. The work of home based workers is seen as supplementary because of its invisibility and informal nature. Domestic workers also remain outside the institutional framework which excludes them from job safety and any kind of social security. A universal basic income is required to protect these workers and lend them a sense of economic security in the midst of chaos and exploitation. In terms of justice, it can be a minimum compensation for all the unpaid care work that these women do. It can also work as a safety net for those women who do not work because of lack of gender sensitive infrastructure and safety concerns.

UBI will also offer flexibility to the workers on two levels: employment and expenditure. When a worker has a sense of minimum economic security, he/she is less likely to accept exploitative working conditions and underpaid work assignments. This enhances the bargaining power of workers. Moreover, in the informal sector, jobs are not permanent in nature. The most marginalized group of workers is engaged in jobs which do not offer job security. UBI can protect the workers during the days of unemployment. UBI will also let workers spend this money according to their needs. Cash transfers under UBI are not tied to any specific commodity or service and hence impart the flexibility of spending it on the most pressing needs of the households.

Universal Basic Income has the potential to generate a multiplier effect associated with it. When the marginalized and most vulnerable groups of society are protected, those workers are more likely to allow their children to attend schools rather than engage in paid work to supplement family’s income. In this way, UBI can serve as a great incentive to put children in schools and reduce child labour. UBI can also enhance production through the multiplier effect. When people have more money in their hands, they tend to spend more. Now, this consumption is someone’s income and this way the first round of income is generated. This higher level of income further fuels more spending. This paves the way for a second round of income generation and so on. This also facilitates production. The other multiplier effects associated with UBI, as suggested by results of the pilot surveys conducted across continents include improvements in investment in education, assets, livestock and improved agricultural inputs along with improvement in hopes, aspirations and self-efficacy. [5]

Critics of UBI point out that if workers are given cash transfers without doing any work, they will lose their incentive to work. This notion has been challenged empirically by the likes of Abhijeet Banerjee who found that there is no relationship between cash transfers and reduced incentive to work. [6] In economic theory, we find that the labour supply curve starts to bend backward (when incentive to work starts reducing even when higher wages are being offered) only after a certain income level (which is very high in absolute terms) beyond which a person chooses luxury over working more. We cannot expect to attain this level of freedom of choice with the nominal amount of UBI to the marginalized of individuals.

It is equally important to address the aspect of financial inclusion for UBI to reach all the potential beneficiaries. In fact, for a developing country like India, financial inclusion plays a pivotal role in defining the success of welfare schemes. Jan Dhan Yojana has been a success and it has given a much needed push to financial inclusion. During the first year alone, 17.9 crore bank accounts were opened. However, both the state and central governments need to step in and play an active role in this regard so that more and more beneficiaries are brought on board. Conversely, if a scheme like UBI is launched, it would encourage more people to open up their bank accounts to avail the benefits and hence would spur financial inclusion.

The major concern for a UBI remains the fiscal constraint on budget to sustain such a scheme. Estimates made by NIPFP suggest that 5% of GDP goes towards non-merit subsidies. The central budget also shows ‘foregone revenue’ (basically tax concessions given to companies) coming to about 6% of GDP. Economic Survey 2016-17 also talks in depth of the fiscal space available for sustaining a UBI amounting to approximately 5% of GDP. It is also argued that India’s tax-to-GDP ratio is substantially lower as compared to its counterparts such as China and Brazil. This could be another potential area of fiscal space. Similarly, Jean Dreze has suggested that a tax on the richest 0.1% could fund the minimum income guarantee scheme. [7] This, however, is another view of discussion which takes into consideration the intricacies of its implementation.

Basic Income, however, with all its merits and demerits considered, should not replace some of the existing welfare schemes. The targeted public distribution system is riddled with flaws. However, it has also fed a number of vulnerable households, including the migrant workers during the pandemic. Some UTs like Chandigarh, Puducherry and Dadra and Haveli have opted for direct transfers in lieu of subsidized food and it has worked well in these territories. But we cannot expect the same results in all the states such as Jharkhand, Orissa, and Bihar etc. because of regional disparities. State-to-state differences in the number of people living below the poverty line, levels of malnutrition among children and adults, and various other factors should be taken into consideration before replacing the existing schemes. Similarly, over 10 million more households worked in MGNREGA in 2020-21 as compared to the previous year. The schemes such as Mid-day meal and Integrated Child Development Schemes (ICDS) are very crucial for India, given our 96th rank in Global Hunger Index.

Universal Basic Income cannot become a one stop solution for all aspects of human development. However, it can impart a sense of economic security and certainty during these uncertain times. It can lend a sense of dignity of labour and fairness in the system where workers are seen as a means of making more profits.

* (Authors: Sandeep Kaur is postgraduate (in economics) from Panjab University. Nandlal Mishra is a senior research fellow (in population studies) at IIPS Mumbai.

[1Rajan, S. Irudaya, P. Sivakumar, Aditya Sinivasan. 2020. The COVID 19 Pandemic and Internal Labour Migration in India: A ‘Crisis of Mobility’. The Indian Journal of Labour Economic 63: 1021-1039.

[2Standing Committee on Labour. 2021. Impact of Covid-19 on Rising Unemployment and Loss of Jobs/Livelihoods in Organised and Unorganised Sector.

[3Keshri, Kunal, and R.B. Bhagat. 2013. Socioeconomic determinants of temporary labour migration in India: A regional analysis. Asian Population Studies 9(2): 175—195.

[4Banerjee, Abhijit & Hanna, Rema & Kreindler, Gabriel & Olken, Benjamin. 2017. Debunking the Stereotype of the Lazy Welfare Recipient: Evidence from Cash Transfer Programs. World Bank Research Observer. 32. 155-184. 10.1093/wbro/lkx002.

[5Banerjee, Abhijit & Niehaus, Paul & Suri, Tavneet. 2019. Universal Basic Income in the Developing World. Annual Review of Economics. 11. 10.1146/annurev-economics-080218-030229.

[6Banerjee, Abhijit & Hanna, Rema & Kreindler, Gabriel & Olken, Benjamin. 2017. Debunking the Stereotype of the Lazy Welfare Recipient: Evidence from Cash Transfer Programs. World Bank Research Observer. 32. 155-184. 10.1093/wbro/lkx002.

[7Dreze, Jean. 2019. Minimum Income, Maximum Gamble: The Big Questions Over Government’s NYAY Promise.

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