[The Editors' Verdict] Basic Income: Not Ready for Implementation

Basic income has recently become a political, economic, and social issue. While the purpose of introducing the basic income system currently under discussion is understandable, sufficient verification is necessary because its effects can vary depending on the timing and design method.

The history of basic income dates back to the 16th century, discussed as a form of minimum livelihood guarantee and social insurance. In the 19th century, it was debated in Europe under names such as minimum income or land dividends, and in the 20th century, discussions on universal basic income took place in the UK under terms like social dividends, national bonuses, and national dividends. In the 1960s, discussions on universal basic income were active in the United States. Some vaguely supported guaranteeing a certain minimum income, while Milton Friedman (1962) and Tobin (1966) introduced the Negative Income Tax. In the 1980s, discussions on basic income were active in Northwestern Europe, and until recently, evaluations of the impact of basic income on employment and quality of life have been ongoing.

So, when should the introduction timing be? Production requires labor, capital, and technology. It is considered to be the point when productivity from technological advancement and capital input overwhelms productivity from labor input, meaning less work is needed or unemployment rises. Is South Korea currently at a level where technological advancement significantly replaces people? Due to the Fourth Industrial Revolution and COVID-19, working hours in some industries have decreased, but it is difficult to say that the reduction in the number of employed persons is due to technological advancement. Also, various design methods have not been sufficiently verified. Recent basic income experiments in Northern Europe have shown improvements in quality of life, health status, and trust in social systems, but no employment effects have been observed.

From a methodological perspective, basic income is broadly divided into the Negative Income Tax, which provides differentiated support by income, and the Universal Basic Income, which provides support regardless of income. Friedman's Negative Income Tax targets households below the tax exemption income level and provides support differentiated by income, whereas Tobin's Negative Income Tax differs in that it offers tax benefits to households above the baseline income to increase work incentives. In the case of Universal Basic Income, Murray's UBI in the United States provides income equivalent to 50% of the median income to those aged 21 and over, while Spain's UBI provides support at about half the median income to citizens aged 18 and over. Murray's UBI applies a special surtax to those with income above the median before providing support, whereas Spain's assumes abolishing all income taxes and reorganizing into a single tax system.

In terms of income redistribution, the Negative Income Tax alleviates income inequality, but Universal Basic Income exacerbates it. Analysis shows that Friedman's and Tobin's Negative Income Tax reduced the Gini coefficient, thereby mitigating income inequality. On the other hand, introducing Murray's and Spain's Universal Basic Income increases the Gini coefficient, potentially worsening income inequality. Regarding unemployment, the economically inactive population and unemployed increase the least under Tobin's Negative Income Tax, followed by Friedman's Negative Income Tax, Murray's Universal Basic Income, and Spain's Universal Basic Income. Introducing the Negative Income Tax results in GDP increasing or slightly decreasing, but Murray's and Spain's Universal Basic Income cause a significant decrease.

Finally, the issue of funding remains. Introducing Universal Basic Income is expected to require more resources than the Negative Income Tax. The order of required funding from smallest to largest is Tobin's Negative Income Tax, Friedman's Negative Income Tax, Murray's Universal Basic Income, and Spain's Universal Basic Income. Even if only 100,000 KRW per person per month is paid under the current Universal Basic Income discussions, an annual budget of 60 trillion KRW is needed. Unless more taxes are collected and spent, existing welfare must be reduced, but even this is insufficient as funding. Therefore, while basic income can be discussed, it seems difficult to implement immediately.

Kim Sangbong, Professor of Economics, Hansung University

This content was produced with the assistance of AI translation services.