The difference between UBI and UGI – and why it matters

What’s the difference?

UBI – Universal Basic Income

UGI – Universal Guaranteed Income

In short, with UBI, to paraphrase Oprah, “You get an income, she gets an income, he gets an income – EVERYONE gets an income!”

Every person in the country gets the same get government sponsored income – regardless of whether they are employed, unemployed,, old, young, rich , poor, whatever. It’s all very equitable. But it has some down-sides. Take South Africa, for example. The country has a GDP of approx 280 billion rand. It also has a population of around 56 million. This means that even if the country was to distribute its ENTIRE GDP as a UBI  (which is obviously not possible in reality, what ,when the country has a 50 billion budget deficit to pay off, and you know, things like infrastructure, security, education and healthcare  – public-goods-kinds-of things – to account for – not to mention the pesky private sector that owns most of that wealth and will not relinquish its without a fight) every person would get five thousand rand. A year. That’s all. Yey.

You get five thousand rand, you get five thousand rand – you ALL get five thousand rand!”

OK, So that’s probably not going to work out any time soon. Definitely not in the long run.

Then we get to UGI. This is different. This system basically replaces all existing social grant schemes with a tax credit system. How it works is if your income drops below a specific pre-determined living-wage level, you get a text credit from the government to top up your income (or lack thereof) to the living wage level. In other words you are a net tax recipient. If you earn exactly the base level income, you are a net zero tax payer. If you earn over the basic guaranteed income level, you pay tax. The tax you pay subsidies the tax credits for poorer people and is also used to fund public goods and governance. This system makes a whole lot more sense than UBI.

The economist in me likes how the poor just get CASH as a lump sum rather than expensive social grants and subsidy schemes which inevitably bring unacceptable dead weight loss (and tempt government corruption).

The libertarian in me is irked that anyone gets a free ride from actual real-life tax-payers. (The libertarian in me is also irked about compulsory tax in general. That libertarian is irked about a lot of things.)

The realist in me thinks this might just actually work.

And even if it doesn’t actually work in real life, expect to hear and read a whole lot more about these equality-enhancing liberal economic ideas in 2018. The people are getting impatient.

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