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[Editorial] No panacea

Introducing universal basic income would be insensible without credible funding plans

Political parties are becoming increasingly active and positive toward the controversial issue of introducing a universal basic income system in the country.

Universal basic income refers to money evenly distributed to all individuals to support their livelihoods, regardless of their wealth level or job status.

The liberal ruling Democratic Party of Korea is preparing to submit a bill on the introduction of the scheme to the next National assembly that begins its four-year term Saturday.

The conservative opposition United Future Party is showing signs of shifting from its cautious stance on the idea.

What is worrisome is that the rival parties seem to be taking a populist approach to adopting the system. They have made little mention of concrete funding plans, which might require unpopular measures such as increasing taxes and forfeiting existing welfare benefits.

This reckless approach will hamper a constructive and serious debate.

In recent years, there have been on-and-off discussion on whether the idea is appropriate for South Korea.

Giving a fresh impetus to the debate is the measure taken earlier this month by President Moon Jae-in’s administration to provide up to 1 million won ($808) in relief funds to all households to help them get through difficulties caused by the novel coronavirus pandemic.

The promise of the one-off relief payout helped the ruling party secure a dominant majority in last month’s parliamentary election. It is no wonder that both of the main political parties are setting their sights on the idea of a basic income paid on a permanent basis as a key instrument for expanding voter support in the next presidential election in 2022.

An intensified populist competition between them will likely lead to implementing the scheme in an unviable way that pays little heed to its financial sustainability.

It is necessary to exclude political impatience from debates on whether and how to put it in practice. A thorough review should be made by experts of the usefulness and costs of introducing the system. Based on such work, public consensus should be sought on the issue.

Over the past years, the universal basic income system has been implemented on a limited trial basis in some parts of the world as a way to guarantee living standards for people and shore up the economy amid the new industrial revolution that comes with automated work.

In a 2016 paper, Robert Skidelsky, a professor of political economy at the University of Warwick in the UK, said “credible estimates suggest it will be technically possible to automate between a quarter and a third of all current jobs in the western world within 20 years.” The coronavirus pandemic is expected to further accelerate the trend.

Proponents of universal basic income argue that it would not only better protect people from the effect of automation but also could be more efficient and equitable than traditional welfare systems.

It is attractive to the left-wing as a means to reduce poverty and to the right-wing as a way to cut the massive costs involved in administering increasingly complex welfare systems.

The results of experiments with the scheme so far have been far from positive.

Finland launched the world’s first trial of the idea on Jan. 1, 2017, by paying a basic income of 560 euros a month to 2,000 randomly selected unemployed people, which replaced existing social benefits and were paid even if they found work. It decided to terminate the pilot program two years later, not expanding it as it had originally hoped.

Experiments that followed in France, the Netherlands and India have not brought about encouraging results, either.

Financial constraints pose a major stumbling block to introducing the scheme here.

It is estimated to take 184 trillion won a year to give each Korean citizen a monthly basic income of 300,000 won. The country simply cannot afford to raise the additional funds. It currently collects only about 150 trillion won in corporate, income and value-added taxes combined.

This makes it inevitable for the introduction of universal basic income benefits to be accompanied by the abolishment and reduction of existing social benefits, which the main political parties seem reluctant to consider.

Some left-leaning politicians suggest covering the cost by collecting more taxes from high-income earners and large corporations. This would prompt resistance from taxpayers and further dampen corporate investment.

Political parties should refrain from promoting universal basic income as a panacea to cure difficulties facing people without suggesting credible plans for how to fund it.

It would be wiser for lawmakers to focus on strengthening social safety nets for the poor and lifting regulatory barriers to innovative businesses that could create more jobs.
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