Winston Churchill once famously remarked to ‘never waste a good crisis’. In the case of 2020, Economists and subsequent governments around the world certainly have not been shy of trying new ideas out. The coronavirus pandemic sent shock waves pulsating through our governing institutions, sparking sleepy bureaucrats to uncomfortable positions of crisis management. As a result, it jumps started dormant economic theories, like that of the Universal Basic Income (UBI) and the Job Retention Schemes (JRS). Uncle Sam opted for implementing UBI, allowing for US citizens to receive payments of $1200, whilst much of Europe adopted JRS, resulting in governments stepping up to pay a portion of someone’s wage. In both cases, this intervention was necessary to prevent an economic fallout that would ravage the security and survival of families across the world. However, the question remains which has been the most effective of the economic interventions? Just like the grand Emperors of Rome exerting their judgement on the survival of gladiators through ‘Pollice Verso’ (with a turn of a thumb), economic data is also smiling favourably on UBI.
Universal Basic Income is not a new phenomenon, in fact Rutger Bregman writes in Utopia for Realists that even Nixon flirted with the idea himself in the late 60’s . However, despite a few isolated trials and limited political enthusiasm, it was never able to take off. That was until the US congress pass a stimulus bill worth hundreds of billions of US dollars in March, effectively creating a nation-wide universal basic income for all Americans. As well as protecting millions of US citizens from economic devastation, it has yielded some dazzling results. The US is enjoying a period of market euphoria and a boom in optimistic start-ups. For instance, there has been a 90% increase in sole traders, of which the majority are those on a gross household income of $35,000 . This suggests, that UBI is in fact encouraging individuals to become entrepreneurs and has given the financial security for individuals to take risks. This presents the case that the US economy is experiencing greater levels of creative destruction and is cultivating a new generation of driven entrepreneurs ready to challenge dinosaur industries. The future does look bright for UBI, it has fended off the worse effects of the pandemic and opened the door to fresh ideas. Additionally, with the momentous march of automation in industries and the louder calls to challenge rampant inequality, UBI offers a strong set of cards. Before the pandemic, the strongest proponents for UBI were technocrats and social warriors, it seems they may have a boarder appeal now. However, if UBI were to stay, the age-old question still remains; how are we to pay for it?
The Job Retention schemes implemented were and are just as essential as UBI in preventing the economic costs of the pandemic crushing millions of families into economic abyss. However, whilst UBI has led to huge growth in US start-ups and improved the financial situation of lower income recipients, JRS seems to have done the reverse. It has created the zombification of the labour market and has resulted in governments propping up jobs which may not be viable in a post coronavirus economy. We are in danger of spending hundreds of billions of taxpayers money to preserve jobs which will likely fail as soon as government support ends. This is the issue with job retention being the primary objective, as it does not allow for the market to readjust and artificially prohibits unemployment. Therefore, JRS is acting like black holes, indefinitely eating up government cheques whilst providing no light at the end of the tunnel. It discourages entrepreneurship, paralyses creative destruction and is holding back a wave of unemployment. On the record, preventing unemployment is important but only if those jobs are still viable without extensive government support. It is on this note, I believe that Job Retention schemes have successfully prevented some of the worst economic effects of the pandemic but in doing so has doomed future generations to years of economic wilderness and mountains of debt.
To conclude, both UBI and JRS are extremely important to preventing the mist of economic misery rising from the pandemic. However, UBI provides a stronger alternative to JRS as it empowers individuals to take great leaps in starting new enterprise and does not artificially preserve employment. The future of UBI is still up to speculation as it is stalked with the shadow of debt. Do you agree that UBI is a stronger alternative to JRS? Do you believe that UBI is worth continuing despite its cost? Just like the Emperors of Rome, it will be up to us to pass the final judgement.