5 Reasons Why Universal Basic Income Is a Bad Idea

The Universal Basic Income (UBI) is an unconditional monthly cash payment the government provides to all residents regardless of their employment status or income. This is one of the social development goals of South Africa’s Department of Home Affairs—there has been a consensus that universal basic income makes a vital part of the country’s social impact. The grant provides essential income support to the citizens following the COVID-19 lockdown-induced crisis that saw increased poverty and unemployment rates. With that being said, there are still fiscal risks that the income poses to an already struggling economy. This article discusses some cons explaining why universal basic income may be a bad idea. Read on. 

5 Reasons Why Universal Basic Income Is a Bad Idea

Many countries faced significant social and economic changes brought about by the pandemic. In South Africa, one such change is the introduction of the universal basic income. This grant has been made available to all citizens regardless of financial status. According to the government, the grant will curb the high poverty rates in the country. 

While there are benefits to the rollout of the grant, UBI also poses significant fiscal risks to the country’s fragile economy. Below are five reasons why the universal basic income is a bad idea.

Also Check: R2 090 Grant Payment 2024

Increased consumption

The continual rollout of the Universal basic income as an extension of income to the poor does not address any of the significant constraints facing South Africa’s economy. Instead, the grant will see an increase in consumption, including imports, that will be accompanied by a fall in the country’s investment and savings. 

Damage to the fiscal position of the country 

Another potential risk of the grant is the worsening of South Africa’s fiscal position. This is one of the leading causes of economic stagnation and slow growth. With the high interest rates on government debt, there is a barrier to fixed investment. There is also a continuous rise in debt service costs which is now at 5% of the national income.  

UBI removes the incentive to work 

As a universal grant, the UBI is provided to all citizens regardless of their employment status and income. Those already receiving the income are less motivated to work or look for employment. This results in a less effective economy. 

Also Check: How to Apply for the SASSA R700 Grant Online Application Form

UBI is too expensive 

With the introduction of another R50 billion expenditure commitment to the national budget, the pressures on the same are aggravated, weakening the fiscal policy’s credibility. This goes to say that the cost of implementing UBI is very high. Over time, this implies increased taxes to raise returns for investment projects. 

UBI increases poverty 

Contrary to what many think, the universal basic income indirectly increases poverty. The grant is designed to take money from the poor and give it to everyone—this deprives the poor of much-needed support. Many citizens are poverty-stricken and depend on the existing anti-poverty measures like medical aid and food stamps to see them through some difficulties. On the other hand, UBI programs take the funds designated for these programs for distribution among everyone without considering their level of need. 

Also Check: SASSA Universal Basic Income 2025

Conclusion 

While the universal basic income has been seen to have many benefits, it is important not to ignore some of the cons of the grant. With the enormous numbers that the government will be forced to budget for, this will adversely affect the country’s economy and affect all the citizens.