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2nd Place: The Time is Ripe for UBI

Written by Leow Zhen Xiang


Reference: Fair Observer, Socialist people standing with their money, universal basic income concept © Bakhtiar Zein / shutterstock.com

https://www.fairobserver.com/economics/is-universal-basic-income-part-of-a-just-transition/


Introduction


The Covid-19 pandemic is a once-in-a-generation event, with far-reaching consequences for the whole of society, including the economic and social sectors. To ensure Singapore recovers and emerges as a stronger polity from this devasting pandemic, I argue that the Singapore government should implement a universal basic income (i.e., UBI) scheme. In this writing, I will highlight some of the issues brought forth by the pandemic, introduce UBI, elaborate on UBI’s potential benefits, and provide a rebuttal against the key criticism levied on UBI.


Impact of the pandemic: On macroeconomy


Due to the onset of the Covid-19 pandemic, Singapore’s gross domestic product (i.e., GDP) decreased by 0.6% in 1Q20 and a further 1.3% in 2Q20 (Chua & Kuan, 2021). Such decreases in GDP were a result of the severe demand-side and supply-side shocks delivered by the pandemic. In a report detailing the pandemic’s macroeconomic impacts (Saw et al., 2020), it was noted that the pandemic delivered five distinct waves of macroeconomic shock. Firstly, in the initial days of the pandemic, many governments around the world, including the Singapore government, tried to contain the spread of the virus by imposing border restrictions. Such measures led to a rapid decline in tourists arriving in Singapore as well as passengers transiting through Changi Airport. Consequently, demand in a multitude of tourism-related sectors, like air transport and accommodation, plummeted. Secondly, as the pandemic situation gradually worsened, the Singapore government enacted progressively restrictive measures aimed at curbing movements and community transmissions. These measures led to a decline in domestic consumption and travel. Consequently, demand in various consumer-centric sectors, like retail trade, was adversely affected. Thirdly, as aggregate demand across the world weakened, poor business sentiments prevailed, and supply chains disrupted, external demand for Singapore goods and services crumbled. This affected outward-facing sectors, like wholesale trade. Fourthly, as Singapore’s economy slowed down, demand for goods and services in remaining sectors, like real estate, declined as well. Lastly, as the virus rampaged through migrant workers' dormitories, sectors that relied on migrant labourers, like construction, experienced a slowdown due to decreases in labour supply. In summary, the pandemic severely crippled Singapore’s economy by delivering four waves of demand-side shock and one wave of supply side shock.


Impact of the pandemic: On mental health


As the demand-side and supply-side shocks took effect on Singapore’s economy, people grew pessimistic and anxious over their economic situation and future. In a study aimed at evaluating mental health during the pandemic and conducted by the Institute of Mental Health, it was noted that financial loss and unemployment were among the most commonly cited sources of anxiousness in relation to the pandemic (COVID-19 Mental Wellness Taskforce, 2020). Such negative feelings were certainly validated when it was revealed by (Chua & Kuan, 2021) that between 4Q19 and 3Q21 total unemployment had indeed risen by an astonishing figure of 196,400. In the same report, it was noted that such a rise in unemployment was without precedent and eclipsed the peak-to-through employment declines in previous economic crises, like the Asian Financial Crisis of 1997 and the Global Financial Crisis of 2008. To conclude, the sudden arrival of the pandemic and its economic consequences gave many people a feeling of consternation, which negatively affected their mental health.


Impact of the pandemic: On essential workers

As the Covid-19 pandemic raged on, society came to recognise and acknowledge certain blue collar workers as essential workers. In a Straits Times article (‘Essential v Non-Essential Jobs’, 2020), essential workers were defined as workers whose jobs are critical for meeting the survival and well-being of other people. For example, healthcare workers and cleaners. Due to the physical and manual nature of their jobs, during the pandemic, many of these essential workers were unable to shift to remote working and minimise their contacts with the community, unlike their white-collar counterparts. Despite maintaining the proper functioning of the society, as well as exposing themselves to the community and, potentially, the virus, essential workers remain undervalued by the society and underpaid. For example, cleaners’ wages remain stuck at the lowest 5th percentile of gross monthly wages within Singapore’s resident workforce (Yong & Lim, 2020). In a nutshell, the Covid-19 pandemic had shone a light on the valuable contribution of essential workers, as well as their financial situation.


Transition


Having recognised the pandemic’s impact on the macroeconomy, mental well-being of individuals, and essential workers, I posit that the implementation of a UBI policy in Singapore will be able to redress those issues and ensure Singapore emerges from the pandemic as a stronger nation-state.


UBI: Introduction


At its core, UBI is a policy where a government provides every one of its citizens with a regular flow of money without any strings attached (Samuel, 2020). While UBI sounds radical, it has many credible advocates, including Milton Friedman, and had been implemented in certain areas (Samuel, 2020). For example, since 1982, the state government in Alaska had been providing a yearly check for its citizens without any terms and conditions. Likewise, in North Carolina, the Eastern Band of Cherokee Indians had been providing every tribal member with an annual check ranging between $4,000 and $6,000, since 1997. Within Singapore, UBI has also been gaining ground and gathering supporters. In fact, during the height of the pandemic, Nominated Member of Parliament Walter Theseira proposed a limited and temporary UBI policy in parliament, to help Singaporeans through the pandemic (Lim, 2020). To summarise,


UBI provides free money to each citizen and represents a credible policy worthy of examination and consideration.


UBI: Benefits


While it is a simple idea, UBI promises to bring about a myriad of benefits that could redress the impacts of the pandemic and allow Singapore to emerge stronger. Firstly, together with current policies, UBI can propel Singapore’s economic recovery following the pandemic. By providing money to every citizen, UBI will increase an individual’s disposable income. With an increased disposable income, each citizen will have more money to spend on personal consumption. On a national scale, this means that aggregate demand will increase and the aforementioned domestic-related demand-side shocks will be redressed. Secondly, UBI can improve the mental health of its beneficiaries. Through its provision of free money, every citizen will be ensured a foundational standard of living and a sense of financial security. Hence, when externalities occur, like the pandemic, citizens will be less concerned about the financial implications of those externalities. This particular benefit of UBI had been documented in studies examining the UBI established by the Eastern Band of Cherokee Indians, as well as in a UBI trial set up by the Finnish government (Samuel, 2020). Thirdly, UBI can support essential workers. Through its supply of free money, UBI will help to improve the financial situation of essential workers. It will also serve to represent a whole-of-society effort to accredit essential workers with the fair value they deserved. Lastly, UBI can ensure Singapore emerges from the pandemic as a stronger polity, in terms of having a nimbler public sector and a greater sense of solidarity. As a universal programme, the implementation of UBI is done without any means-testing. Hence, if implemented as a replacement to some of the existing welfare measures, UBI promises to reduce the time and effort spent by civil servants in administering welfare policies (Ong & Theseira, 2020). It also promises to reduce administration costs (Desai, 2017; Ong & Theseira, 2020). Consequently, this will ease the burden on Singapore’s state apparatus and ensure it can deal with other matters. Furthermore, as a universal programme that benefits every citizen, UBI will help to enhance solidarity among Singaporeans (Low & Vadaketh, 2014). This is contrasted with means-tested programmes, which segregate Singaporeans into categories and has the spin-off effect of accentuating class divisions (Low & Vadaketh, 2014). In conclusion, UBI’s benefits promise to tackle the pandemic’s impacts and build a stronger Singapore.


UBI: Rebuttal against criticism


As with any ambitious idea, UBI had received its fair share of criticisms. One of the most persistent criticisms is the argument that UBI, with its provision of free money without any strings attached, promotes its beneficiaries to stop working and start living off the free money. However, this fictional scenario has largely not panned out in places where UBI was either trialled or enacted (Matthews, 2017). This is primarily because the money provided by most UBI schemes is only sufficient to satisfy an individual’s basic needs. Hence, if we are to believe one of economics’ core mantras, “an individual has insatiable desires”, then it is only logically coherent to assume that most beneficiaries of UBI will not be content meeting only their basic needs. They will choose to remain working, earn additional income, and attempt to meet their “insatiable desires”. A secondary reason is that most people do enjoy the sense of purpose provided by their jobs (Matthews, 2017). Hence, even after becoming a recipient of UBI, they remain working. In summary, one of the primary and most persistent criticisms against UBI is thoroughly debunked by studies and economic logic.


Conclusion


As mentioned in the introduction, the Covid-19 pandemic is a once-in-a-generation event. Its arrival had impacted Singapore’s economy, individuals’ mental health, Singapore’s essential workers, and much more. However, I also see it as a once-in-a-generation opportunity to enact ambitious policy ideas and secure Singapore’s emergence from the pandemic as a stronger polity. Therefore, with one eye aimed at redressing the pandemic’s impacts and another targeted at ensuring Singapore emerges as a stronger nation-state, I argue for the consideration and implementation of a UBI scheme in Singapore.



References


Chua, C., & Kuan, M. L. (2021). Employment Trends During The COVID-19 Pandemic (p. 7). Ministry of Trade and Industry. https://www.mti.gov.sg/Resources/feature articles/2021/Employment-Trends-During-The-COVID-19-Pandemic


COVID-19 Mental Wellness Taskforce. (2020). COVID-19 Mental Wellness Taskforce Report (p. 31). https://www.moh.gov.sg/docs/librariesprovider5/covid-19- report/comwt-report.pdf


Desai, R. M. (2017, May 31). Rethinking the universalism versus targeting debate. Future Development. https://www.brookings.edu/blog/futuredevelopment/2017/05/31/rethinking-the-universalism-versus-targeting-debate/


Essential v non-essential jobs: How the survey was conducted. (2020, June 16). The Straits Times.

https://www.straitstimes.com/singapore/how-the-survey-was-conducted Lim, J. (2020, April 7).


Increase taxes temporarily to fund a universal basic income scheme during Covid-19 pandemic, says NMP Walter Theseira. TODAY.

https://www.todayonline.com/singapore/increase-taxes-temporarily-fund-universal basic-income-scheme-during-covid-19-pandemic


Low, D., & Vadaketh, S. T. (2014). Hard Choices: Challenging the Singapore Consensus. NUS Press Pte Ltd. http://muse.jhu.edu/book/31014


Matthews, D. (2017, July 20). The 2 most popular critiques of basic income are both wrong—Vox. Vox. https://www.vox.com/policy-andpolitics/2017/7/20/15821560/basic-income-critiques-cost-work-negative-income-tax


Ong, Q., & Theseira, W. (2020). Policy Paper on the Majulah Universal Basic Income Scheme (MUBI) Version dated 7 April 2020. National University of Singapore. https://fass.nus.edu.sg/ssr/wp-content/uploads/sites/8/2020/06/Policy-Paper-on Majulah-Universal-Basic-Inocme-7-Apr-2020-Ong-Qiyan-and-Walter-Theseira.pdf


Samuel, S. (2020, October 20). Everywhere basic income has been tried, in one map. Vox. https://www.vox.com/future-perfect/2020/2/19/21112570/universal-basic-income-ubi map


Saw, C., Lin, J., & Wong, Y. J. (2020). Impact of the COVID-19 Pandemic on the Singapore Economy (p. 9). Ministry of Trade and Industry.

https://www.mti.gov.sg/Resources/feature-articles/2020/Impact-of-the-COVID-19- Pandemic-on-the-Singapore-Economy


Yong, J. Y., & Lim, J. (2020, June 22). The Big Read: Undervalued and underpaid, Singapore’s essential services workers deserve better. TODAY.

https://www.todayonline.com/big-read/big-read-singapores-under-valued-essential services-workers-how-pay-them-what-they-deserve



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