Maintenance Allowance is Feasible and Logical as Compared to Basic Income

Background/Objectives: To demonstrate feasibility and logicality of the ideas of universal maintenance allowance and basic income for ameliorating the global problems of poverty and income-inequality.

Methods/Statistical Analysis: The study is based on secondary data analysis. Expenditure as percent of gross domestic product on implementation of the ideas of universal basic income and maintenance allowance has been analysed. Possible expenditure on the two arrangements has been compared with optimal tax incidence in an economy to show their financial feasibility. Logical comparison has been performed in terms of their effects on work incentive and social welfare measures.

Findings: The idea of universal basic income paid in cash regularly is receiving acceptance all over the world as an instrument for poverty reduction and social justice. Alternatively, maintenance allowance, based on the notion of right to food, provides for cash equivalent to staple food requirement of each person. Basic income should be high enough to ensure comfortable life for an individual, but it might cost more than 18 percent of Gross Domestic Product (GDP) of a country, which is not feasible along with public expenditure on administration, defence and social welfare. Maintenance allowance should cost 3 to 4 percent of GDP. It can be managed within optimum tax incidence of around 20 percent of GDP. Unlike basic income; maintenance allowance should not prove as work disincentive instrument. Also, social welfare expenditure can continue along with the allowance.

Application/Improvements: The arrangement of universal maintenance allowance looks feasible and logical alternative to universal basic income to ameliorate the problem of poverty.