OPINION: The case for universal basic income during the coronavirus crisis

The ongoing COVID-19 outbreak has paralysed the Thai economy and left the government staring down the barrel at two major economic challenges in its wake. The first will be coping with the effects of major shutdowns and providing immediate aid for those who will lose their jobs as a result. Secondly, a major stimulus will be needed to lift the country out of the 5.3 per cent recession predicted by the Central Bank due to the major cessation of economic activity. Thankfully, the solution to both could lie in one single, bold move – a paycheck to every single Thai citizen to help them through this crisis.

The positive human impact of such a move is undoubted, as it will help people survive the pile-up of rent bills, utility bills, debts, mortgages and any other fees that will continue to tick upwards regardless of the unemployment situation. It will also effectively slow the spread – informal workers will be able to stay off the streets, laid-off workers from the provinces can find temporary accommodation without having to risk carrying the virus home, and those waiting for remittances from Bangkok can receive cash without relying on a carrier that may also be bringing something more malignant back with them.

However, it is the economic side of this argument that is certainly going to need more legwork. A massive government handout intuitively sounds like poor economics, especially in our contemporary market culture. However, a major demand-side stimulus may be the best (and possibly only sufficient) way to rescue the overall economy from the crises that are set to befall it.

First, it is worth noting that a big stimulus package is inevitable for the contracting economy, and the government has virtually exhausted all of its ‘supply-side’ options (policies to increase business activity and investment). For a start, the Bank of Thailand’s interest rate of 0.75 per cent is already among the lowest in the world, and this has still struggled to spark investment spending. The Bank’s ‘Private Investment Index’ shows a long-running deterioration in business confidence, which they claim has reached its lowest point since the 2011 floods. Given that the boost will need to come from increasing the overall level of consumption in the economy, why not prepare a stimulus which also helps everyday working people through the current crisis?

Even the notoriously pro-market United States is weighing up a potential Universal Basic Income to help those facing a hard landing due to the coronavirus crisis. These moves were likely inspired, at least in-part, by the presidential run of businessman Andrew Yang, who promised every American US$1,000 a month in a program he entitled the ‘Freedom Dividend,’ aiming to make every citizen a ‘shareholder’ in the richest country in the world.

So, how much should Thailand dish out for the program? Using the proposal in the United States’ as a starting point, their GDP Per Capita (effectively ‘economic output per person’ for the uninitiated) stood at US$67,430 in 2019, compared to Thailand’s US$8,190, according to the International Monetary Fund. As such, the American ‘dividend’ of US$1,000 returns about 1.5 per cent of output per person back into the citizens hands. Following the same proportion as the United States, Thailand’s ‘dividend’ would amount to US$122 (3,977 baht) per person, or 4,000 baht for simplicity.

Even if every one of Thailand’s 69.7 million registered citizens was to receive the dividend, likely an overestimate due to potential age limits on the final policy, the program would cost 279 billion baht. For context, this would make up just 0.3 per cent of Thailand’s total government spending of 2.7 trillion baht according to the IMF’s International Financial Statistics.

Many skeptics may argue that a universal transfer would be wasteful, providing money for the rich and many who don’t need it. Firstly, the paucity of time makes a means-testing system difficult, and secondly, using 2019 income as a basis to give coronavirus aid could be futile given the drastic change in the economic situation that could result from the shutdown. For those worried about the potential ‘wastefulness’ of the program, it is worth remembering that only 4 million Thais (5.7 per cent of the total population) even qualified for the lowest marginal income tax rate in 2019, according to the Bangkok Post. Thus, when the program is eventually paid for, possibly by tax hikes after the recession is over, wealthier members of society will undoubtedly end up being net contributors to the program.

To lift itself from the brink of crisis, the Thai government should consider a 4,000 baht direct cash transfer to every National ID card holding Thai citizens, or at least limited to those over the age of 18. Assuming the shutdown does not last more than 30 days, a one-time payment should suffice, but a second may be needed if the crisis prolongs into late April and early May. For a country that has not seen growth rates exceeding 4 per cent in the last half-decade and expecting another big hit due to the ongoing crisis, it is a bold move that is looking more and more necessary by the day.

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