Universal Basic Income: Will this help with the Welsh welfare system?

The unemployment rate in Wales has risen sharply during the coronavirus pandemic. UBI Lab Wales thinks it’s time for Wales to try universal basic income in order to provide financial security and boost the Welsh economy.

“The Senedd has already passed a motion calling for a UBI pilot in Wales.” said UBI Lab Wales (Image: Rufei Ou)

With Welsh Parliament elections coming, people are calling to start universal basic income in Wales: a scheme that provides a regular and unconditional cash payment to everyone.

UBI Lab is a group that advocates for universal basic income. According to their current mission statement: “The pandemic has shown that our welfare system is not fit for purpose. Families across Wales are facing poverty and hardship for the first time.”

“I think that what’s important about a UBI is that it’s a foundation upon which we can all build up from.” said Jonathan Rhys Williams, founder of UBI Lab Wales. “It’s a 21st century solution to 21st century problems and I think that is a good place to start.”

What is universal basic income?

Universal basic income (UBI) is a public program where each citizen receives a set amount of money to meet their basic needs. The intention of a basic income system is to provide financial security and to alleviate poverty.

Different programs outline who exactly receives the income—some state that all citizens would get it regardless of what they make, while other programs may only give it to those who fall below the poverty line.

During the COVID-19 lockdown, regions across the world such as Hong Kong, Catalonia, and California tried out similar proposals such as helicopter money and cash transfer.

Why does Wales need universal basic income?

Workers on a low-wage income or in those in poverty are most affected as the pandemic has had a dramatic impact on employment and financial security.

The proportion of workers who are in poverty (in-work poverty) in Wales stands at 14% for 2016/17 to 2018/19. However, compared to other nations and regions in the UK, it is one of the highest in-work poverty rates, other than London (17%). Workers in food, wholesale, and retail faced amongst the highest in-work poverty rates by industry.

According to BBC in December last year, Wales experienced the sharpest rise in poverty rate between August and October at 4.6%, and 4.9% across the UK as a whole. This is making it clear that a growing number of people are locked in poverty.

The pandemic has had a profound impact on the hospitality and food sectors. (Image: Rufei Ou)

“I started to speak about UBI mainly because of the huge shifts in our economy. I think UBI could help with that and move forward, allowing people the opportunity to progress and upskill,” said Jack Sargeant, a Welsh Labour candidate.

A study reveals that in the first quarter of 2020, median hourly pay in Wales is among the lowest in the world, at £10.73. Across the UK, workers in hospitality and retail receive lower pay than other sectors and are more likely to be underemployed.

Rhianon Passmore, a candidate of Labour & Co-op said: “We have, in a sense, a system that is no longer a safety net for the weakest and most vulnerable in our society. We need a fairer system across the UK specifically, obviously, in Wales.”

Will it help with the welfare system?

Supporters believe that a universal regular payment could make it easier for people to receive financial assistance who are in need but not eligible for other government programs. A UBI represents a more comprehensive safety net which delivers regular wages for lower income brackets.

Welsh Labour Senedd Candidate Mick Antoniw said that the necessity of a minimum income is the way to guarantee people are out of poverty.

Professor Matthew Smith from University of Strathclyde points out that a universal basic income could reduce social exclusion by shifting our focus from economic growth to social and emotional growth. It would allow people to reassess what matters most to them and give them a platform to live more meaningful lives.

However, this approach to eliminate poverty would be too expensive.

“The only problem is that it’s quite expensive, it’s a lot of work, and it’s a long period of time, and you’re still stuck with the fact that the majority of people are outside of that system,” said Mick Antoniw.

Moreover, this is likely to trigger inflation because of the increase in demand for goods and services. For those living in poverty, they would not be able to afford basics soon after the increase of goods. Therefore, their standard of living would not raise by a set amount of money from the government.

“This isn’t a silver bullet. It’s one area of policy that needs to be implemented with many other areas of policy, but it does give people that springboard as well. The UBI falls into support of those people who’ve had a difficult life to give them that support they might need,” said Jack Sargeant.