UN on sustainable COVID-19 recovery and Temporary Basic Income

Posted on July 26, 2020

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This week UN agencies published two reports related to social protection.

The UN Department of Economic and Social Affairs (UN DESA) published seven expert-written essays from members of the United Nations High-level Advisory Board on Economic and Social Affairs (HLAB) on how to rebuild societies after COVID-19 in a fairer, more inclusive way.

The last chapter written by Alicia Bárcena, has a focus on equality and its interaction with global structural change. The author states in contrast to some traditional economists that economic efficiency and equality strengthen each other. A new multilateral governance model is proposed which provides global public goods such as technology transfers; international labour and social protection standards; agreements over carbon emissions; and regulations for financial capital flows. International standards for labour and social protection are needed to protect all economies from engaging in a “race to the bottom” type of competition.

The second report focuses on Temporary Basic Income (TBI) to provide social protection to the poor and vulnerable people in 132 developing countries during the COVID-19 economic crisis. These are an estimated 2.78 billion people which is equivalent to 44 per cent of the developing world’s total population. These people often make a living through informal work, are either already poor or live on the brink of poverty. The COVID-19 pandemic and the containment measures have caused earning contractions of up to 82 per cent among this group.

The two authors George Gray Molina and Eduardo Ortiz-Juarez propose a minimum guaranteed income above the poverty line for 9-12 months. They point out that such a temporary measure for the whole population has already been introduced in the small Pacific island state of Tuvalu with about 11,000 inhabitants. They further explain that the world has seen an expansion of social protection measures during the COVID-19 crisis. However, most of these interventions have been taken in high income countries and low and middle-income countries (mostly classified as developing countries) only account for 13 per cent of the total spending.

The report proposes three intervention options:

a) top-ups of existing incomes to a certain protective threshold,

b) lump-sum transfers dependent on country differences in median standard of living.

c) uniform lump-sum transfers where people in poorest countries would benefit most.

The authors calculate the coverage of these interventions in different regions of the world, the absolute monetary costs and the costs in terms of per cent of Gross Domestic Product (GDP) in these countries and the whole world. The most expensive intervention for a 9-month period would be equivalent to 3.1 % of the world’s GDP and can be judged as affordable. Under the simple uniform lump-sum transfer of $5.50 a day the monthly amount per person equals $167.30.

The authors also discuss three of the hardest implementation challenges of TBI for the poor and near-poor population in developing countries. These are different from the systemic challenges of a Universal Basic Income.

The first challenge is administrative targeting and payment questions, as these poor and near-poor people are currently invisible to existing administrative registry and payment systems.

The second challenge concerns fiscal space and funding.  As this is a temporary measure, the report excludes additional taxation and proposes instead three options:

a) temporary cancellation of external debt payment,

b) repurposing energy subsidies,

c) self-funding through potential multiplier effects of these cash transfers through direct and indirect taxation

which need to be combined in these countries.

The third implementation challenge is political and probably the most important one. The middle classes may be concerned that the sources of funding or the target of expenditures are not credible. There may be concerns about corruption and how to stop the programme after the COVID-19 emergency.

However, the paper concludes on an optimistic note that TBA is feasible and can induce a wider global conversation about how to build comprehensive social protection systems that make the poor and near-poor more resilient to the economic and climate crises of our common future.