Poverty — practice question

UBI is a plan under which a government gives a payment to everyone, whatever their personal situation. A scheme like this can assist several groups, including the sick and the old. In 2016, the Indian government was considering UBI as an alternative to its present system of state benefits. A politician in Costa Rica suggested a UBI of $337.5. Finland began a two-year trial of a version of UBI in 2017. A guaranteed minimum income could support some poor people who do not currently receive state benefits and could also lessen 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 comparatively low in Russia and the country has one income tax rate of 13%. One reason for the widening gap between the rich and the poor in Russia has been the impact on prices and profits caused by the privatisation of several state monopolies. Differences in annual average incomes (annual GDP per head) between countries can influence life expectancy as shown in Table 1.1. In Finland, a country with an average monthly income per head of $3500, the trial UBI is $600 per month. This does not meet everyone’s needs in a country with high prices, high tax rates and periods of very cold weather. In India, the average monthly income per head is almost identical to Finland’s UBI. A UBI could support the unemployed, including those who are only temporarily unemployed. Governments welcome lower unemployment because it raises output and allows governments to cut spending on state benefits for the unemployed. Governments could then raise spending in other areas, including education and healthcare.