UBI is a system in which the government gives every person a payment, no matter what their circumstances are. A scheme like this can support several groups, including the sick and the old. In 2016, the Indian government was considering UBI as a replacement for its current state benefits system. A politician in Costa Rica suggested a UBI of $337.5. Finland launched a two-year trial of a version of UBI in 2017.
A guaranteed minimum income may help some poor people who currently receive no state benefits and may also cut inequality. In many countries, income and wealth inequality is rising. For example, in Russia 16% of the population live below the official poverty line and 10% of the population own 87% of the country’s wealth. State benefits are relatively low in Russia and the country has one income tax rate of 13%. One reason for the growing gap between rich and poor in Russia has been the impact on prices and profits caused by the privatisation of several state monopolies.
Variations in annual average incomes (annual GDP per head) between countries can influence life expectancy, as shown in Table 1.1.
In Finland, where average monthly income per head is $3500, the trial UBI is $600 per month. In a country with high prices, high taxes and periods of very cold weather, this does not meet everyone’s needs. In India, the average monthly income per head is almost the same as Finland’s UBI.
A UBI could support unemployed people, including those who are only unemployed for a short time. Governments welcome lower unemployment. This is because output rises and governments can spend less on state benefits for the unemployed. They could then raise spending in other areas such as education and healthcare.
(a)[2]
Identify, from the extract, two causes of a person having a low income.
(b)[2]
Explain, using information from the extract, whether Russia has a progressive, proportional, or regressive income tax system.
(c)[2]
Calculate, from Table 1.1, what percentage of annual average income in Costa Rica would be received by a person getting UBI of $337.5 a month.
(d)[5]
Analyse, using Table 1.1, the link between annual GDP per head and life expectancy.
(e)[4]
Explain, with reference to the extract, one example of opportunity cost.
(f)[5]
Discuss whether a monopoly will, or will not, set high prices.
(g)[4]
Explain, using the extract, two reasons why a person in India earning the same as someone in Finland may have a higher standard of living.
(h)[6]
Discuss whether paying higher state benefits to unemployed people will reduce unemployment.