[The Editors' Verdict] Questions About Basic Income

Basic○○. It is a word heard a lot these days. The word "basic" is often attached to terms like basic income or basic housing. A few years ago, the word "free" was frequently used. Nowadays, since it is election season, the term basic income is often seen on election posters.

While one wonders, "Does basic income really enable people to work more efficiently, and will the funding be well secured?" there is also the simultaneous question, "What if that funding is used for vulnerable groups? Would people want that?"

Basic income is not a recent concept. Minimum livelihood guarantees appeared as early as the 16th century, and in the 18th century, it was discussed in the form of social insurance that could reduce inequality and poverty. This is the minimum livelihood guarantee currently provided to socially vulnerable groups, and in the 19th century, Bismarck introduced old-age pensions and health insurance, forming a system similar to today's four major social insurances.

At that time, as land was reclaimed, the owners of the reclaimed land paid rent, and the funding was secured from this. In the 20th century, proposals for universal basic income such as social dividends, national bonuses, and national dividends were made during the war periods in the UK. In the 1960s, there was some vague support for minimum income guarantees in the US, but Milton Friedman and James Tobin advocated for the introduction of a "negative income tax."

There are also various methods of providing basic income. The negative income tax provides different support depending on income. Of course, this is divided into cases where support is differentiated for households below the tax exemption threshold (Friedman) and cases where tax benefits are given above a certain standard to increase work incentives (Tobin). There is also a universal income system that provides support regardless of income.

What were the results? The negative income tax alleviated income inequality, but the universal income system intensified it. In terms of unemployment, the negative income tax saw the smallest increase in unemployment. The universal income system saw a relatively large increase in unemployment. In terms of economic growth rate, while GDP slightly increased or decreased under the negative income tax, it significantly decreased under the universal income system.

Let's look at the domestic situation. Even before COVID-19, the elderly poverty rate was high, young people could not find jobs, and many self-employed individuals were collapsing due to COVID-19. It does not seem appropriate for funding that should be more intensively used for vulnerable groups to be used broadly.

We also need to consider how to solve asset inequality. Even if there is income, if assets are low, the incentive to work decreases. This means that giving small amounts of cash through basic income is not the answer for them.

From the funding perspective, if a large portion of our country's budget is increased to give a certain amount to all citizens, how many taxpayers would accept that? Probably, the rest of the taxpayers would demand that more support be given to the vulnerable groups.

Basic income should fundamentally be seen as social policy rather than economic policy. One might think economic policy can be easily created by spending money, but that is a temporary phenomenon. Rather, if things continue as they are, in less than 10 years, funding shortages may prevent the creation of planned policies, and international crises may occur. For an idea to be reflected in policy, sufficient simulation, consideration of funding, and other factors must be taken into account.

Kim Sangbong, Professor of Economics, Hansung University

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