It is basic economics. A country, any country, needs a significant amount of income redistribution to maintain a robust economy. In the developed world, this guarantee of income redistribution occurs through taxation programmes which serve the overall benefit of society and economic growth; it creates a large consumer market/class that has adequate money to spend on goods.
In developing nations, however, academics tend to agree that these tax obligations imposed upon residents through traditional means (such as property rates, business operating permits, and market tolls) are difficult to monitor. There is a general unwillingness of citizens to fulfil these obligations.
It is important to note that there is a direct correlation between a country’s economic growth and inequality.
The reasoning put forward by the Organisation for Economic Cooperation and Development (OECD) as to why inequality and economic growth are negatively correlated is that more impoverished people invest less in their education and self-improvement. This is why its main anti-inequality prescription is that governments should invest in skills, education and promote better quality jobs.
In Ghana, we have made great strides over recent years in digitising the economy so as to close tax loopholes and encourage citizens to meet taxation and other fiscal obligations. However, there is still a pressing need to address the increasing gap between the rich and poor. The need to address social and economic inequality has become more evident in the past 30 years, as Ghana moved toward increased economic progress.
According to Professor Philip Alston, the United Nations Special Rapporteur on Extreme Poverty and Human Rights, after he visited Ghana in 2018: “The benefits from record levels of economic growth over the past decade have gone overwhelmingly to the wealthy. Inequality is higher than it has ever been in Ghana, while almost one-quarter of the population lives in poverty, and one person in every twelve lives in extreme poverty. As a result, a large number of Ghanaians do not enjoy their basic economic and social human rights”.
Ghana has successfully done much of what the OECD had prescribed in the working paper: ‘Trends in income inequality and its impact on economic growth’ (2014). Government has invested considerably in social intervention programmes, such as Free Secondary School education for all citizens and a National Health Insurance Scheme, in recent years. Yet the reorientation of citizens to invest in their socio-economic development is something that all developing nations, including Ghana, have struggled with.
So, how do we alleviate poverty, bolster economic growth, and encourage the citizenry to invest in their socio-economic status in Ghana? Enter Universal Basic Income (UBI): in short, UBI is an unconditional income that is sufficient to meet a person’s basic needs (at or above the poverty line).
During this COVID-19 pandemic, the debate for a guaranteed basic living allowance has reignited. Governments around the world have been providing support to the most vulnerable in society. Supporters of UBI point to the central fact that a government which fixes the basic income at a level to allow subsistence will not only promote individual economic growth, but also encourage enterprise and effort for the enjoyment of more prosperity. I would agree with the need for a basic living allowance, as it creates sustainable change for Ghanaians to close the income gap as well as promote civic duty and belonging to the social fabric.
This idea of giving Ghanaians a basic income is not so far-fetched from our current reality. Since 2008, the Government of Ghana has been supporting the most vulnerable in society with a cash transfer programme known as the Livelihood Empowerment Alleviation Programme (LEAP). LEAP is designed to alleviate poverty with a conditional cash transfer and eligibility. It is based on having a household member in at least one of three demographic categories: single parents with an orphan or vulnerable child (OVC); the elderly poor; or persons with an extreme disability unable to work (PWD).
This current targetted model excludes a good majority of the impoverished population who fall outside the categories listed above. The working poor is one segment that LEAP does not cover – and the vast majority of the working poor population are employed in the informal sector. They are required by law to pay personal tax but don’t receive any reciprocal social protection benefit.
The working poor generally have a desire to move socio-economic classes. If all Ghanaians are given UBI, the working poor could have the breathing room to improve their socio-economic status sustainably.
Case in point: the average Ghanaian makes 150 Ghana cedis per month (labour department) working in the informal economy – engaged mainly in low-income and low productivity jobs, ranging from household assistance to selling in the streets. The precarious nature of many of these jobs makes them more basic survival undertakings than sources of meaningful livelihoods. By introducing a basic income into the hands of Ghanaians, you are not only improving their economic status but also placing value on their belonging as citizens to this country.
Imagine if the informal sector (wherein 86% of Ghana’s population works) were to be given basic monthly income support, and required to fulfil tax and other civic obligations to continue receiving such payment. Ghanaians overall are generally law-abiding citizens, and if given the autonomy plus the economic incentive, they would be more inclined to fulfil this taxation obligation. This, in turn, could bolster our overall GDP. The UBI could alleviate economic poverty, and also create a mind-shift in the average Ghanaian. Economic progress is associated with better physical and mental health outcomes, a lower likelihood of committing crime and, lastly, better outcomes for children at school.
These are all intuitive; it is generally accepted that having a higher income is associated with better and healthier life outcomes. But given the pervasive and intergenerational aspects of poverty, the viable solution is a steady influx of financial resources and social support that can stop poverty passing from one generation to the next. Thus, in the long-term, alleviating dependence on direct government intervention.
I have begun to draw a picture of how UBI can help increase financial and social inclusion. The problem of financial and social exclusion is most prevalent in the developing world. Economic and social marginalisation occurs when an individual is isolated from accessing some of the essential modern services which support a dignified and autonomous life. Introducing a universal cash transfer system also forces all working-age individuals or older to have at least a registered identification card and a regulated bank account. By doing this, each individual would be obligated to become more financially and technically literate, reducing the very serious problem of financial and social marginalisation. Even individuals in more rural settings who are physically isolated from urban centres will be able to participate in this inclusion exercise.
This shift doesn’t just happen overnight; we need to create a tight web of social protection. The guarantee of basic income for support can be provided through existing social welfare interventions (NHIS, Free SHS) and are important initial interventions. Furthermore, there will need to be a continuous sensitisation of individuals as to what a basic income can help them achieve: investing in their own overall self-improvement – which I believe is the desire of every Ghanaian.