Focus on UBI in the age of automation

Universal Basic Income (UBI) scheme has been drawing a lot of attention of the economists and policymakers in relation to people's welfare. UBI may crucially be one of the innovative macroeconomic indicators that may have a significant role to play in the upturn of financial deepening. As a result, the effect of financial deepening may help lead to gross domestic product (GDP) growth of a country. UBI is concerned with individual credit attainment from the welfare fund of the government. Government hands over the fund to the poor people via bank accounts that UBI receivers must have. The fiscal policy is determined by the inclusion of UBI in government's welfare fund through banking transactions that reach the poor people directly.
UBI is the idea of providing all legal residents of a country a standard amount of cash unconnected to work. Notably, governments have large amounts in welfare fund, which are used to subsidise or donate to the success of myriads of welfare programmes and projects.
In most cases, welfare funds are misused by the actors related to the process of executing welfare programmes and projects. Hence, developing countries may introduce the UBI scheme under which such funds would be transferred to all adult poor people through individual bank accounts. This would curb misuse of public fund.
Philosopher Thomas More advocated the policy of universal basic income way back in the sixteenth century and many others, including Milton Friedman on the right and John Kenneth Galbraith on the left, promoted the idea. It has lately gained more attention, with some regarding it as a solution to today's technology-driven economic disruptions.
Technology-driven automation is the great killer of jobs throughout the developed world for the past two decades - computer-controlled machines replacing human workers. Like many countries of the world, in Bangladesh, hundreds of ATMs (Automated Teller Machines) have replaced hundreds of human bank tellers. For instance, seven million industrial jobs in the United States have been eliminated in the past 35 years by automation, while factory production has actually doubled. With the likely effect of digitisation, Bangladesh is currently experiencing 'jobless growth' in which technological expansion might be responsible in the some way. For example, the postal service of the country is almost going to be stagnant owing to the extensive and massive use of mobile phones. Halting the operation of income generating sector may lead the policy makers to introduce UBI schemes for all unemployed and poor residents of the country.
UBI scheme may gear up financial deepening by making increased provision of financial services of a wider choice reached to all levels of society. Financial deepening basically means an increased ratio of money supply to GDP or some price index. It also indicates spreading money to all strata of the society including the unbanked and underbanked communities. Unprivileged people, whether literate or illiterate, must have bank accounts to receive the fruits of UBI and thus unbanked people will be involved in the banking system.
For Bangladesh, it will not be difficult. By this time, all mobile phone users have submitted relevant information through biometric SIM registration process and all of them have national identity cards. Well over 1.0 billion Indians now have biometric identification cards, known as Aadhaar to transfer UBI to the people's respective bank accounts.
The fund for welfare programmes of Bangladesh is not big enough to cover all adult poor citizens of the country who might be taken under UBI scheme.
Financial deepening encompasses the development of financial markets, increasing the number of financial institutions and diversity in financial instruments. Introduction of UBI may be one of the financial instruments that would influence financial deepening. UBI may also enhance liquidity of the banks. It is true that the more liquid money is available in an economy, greater are the opportunities for continued GDP growth.
Financial deepening spurred by UBI may play an important role in reducing risk and vulnerability for unemployed and disadvantaged groups, and increase the ability of individual households to access basic services like health and education. This would have a direct impact on poverty alleviation.
Brooking Institute Report 2017 said that 25 countries, including Bangladesh and Nigeria, could afford to introduce a universal basic income scheme if they were willing to spend between 1.0 and 5.0 per cent of their GDP on it.
There are no silver bullets to increase financial deepening for GDP growth; but cash transfers under UBI scheme might be a powerful weapon in the arsenal.

The author is an Assistant Professor, Bangladesh Institute of Governance and Management (BIGM), Affiliated to University of Dhaka.
monirul.islam@bigm.edu.bd