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The Gyeonggi Pay Model

With the German Pilot Project set to begin early next year, it's time for Europe to consider UBI as a guarantor of social security and sustainable economic growth.

If flattening the COVID-19 curve is our concern now, what will linger even beyond New Year’s Eve is another pro-longed struggle for economic recovery. Everybody agrees that an inclusive and sustainable solution must be brought to the fore. With millions losing their jobs and with it, their livelihoods, and several others receiving downsized incomes, the demand in the economic network has sunk. Workers now have to focus on re-skilling and the transition thus required will not come with ease, unless there’s a cushion to lie back on. While most solutions and economic stimuli announced by different countries focus on supply chain boosts, they tend to keep the issue of ‘demand’ for a later period. However, it does not take much to learn that efforts need to be conjoined to focus on both demand and supply simultaneously. It is here that the Gyeonggi Pay model comes into play.

The South Korean Province employs a method of quarterly cash pay-outs to its residents in what is known as Gyeonggi Pay – it’s based on the concept of Universal Basic Income. It initially catered to about 200,000 people but was expanded to cover 30 million when the pandemic struck. Gyeonggi Pay was implemented as an experiment to reduce inequality and poverty in the region. For South Korea’s pace of automation and Gyeonggi’s stature as a manufacturing hub, this provision was of particular importance to facilitate the gradual transition to automated jobs. The cash pay-outs also helped students who were finding it difficult to balance their part-time jobs with the completion of their degrees.

Gyeonggi Pay comes with a condition – the beneficiaries are to spend the money their receive for each quarter in their neighbourhoods. These cannot go to businesses in other cities or to fast-food chains. While one may assume that dictating the terms of expenditure might turn out to be counterproductive for the administration, in Gyeonggi it has been observed that this led to a 45% increase in sales for local business (as per the Gyeonggi Research Institute’s study). Comparing this figure with the earlier drop of 90% in sales, we can see how well the cash pay-outs have brought in a trickle-down effect.

It benefits both individual consumers and small businesses that bore the severe brunt of the economic slump. Riding on the success of the Gyeonggi Pay, the Province’s Governor, Lee Jae-myung plans to expand it to a pan-South Korea programme if he does manage to win the 2022 Presidential Elections. Nevertheless, Gyeonggi’s success in implementing the UBI and the subsequent economic effects that have been noticed, further urges regions like Europe to proceed beyond mere rumination of the idea.

This evidence can also be coupled with an earlier study conducted in Finland whereby 2000 unemployed people were given €560 each on a monthly basis. This substituted the unemployment allowance. This set of people were compared to a control group that continued to receive the unemployment allowance. The results show that UBI helped increased employment and well-being of the recipients. Now a new project in Germany seeks to study the effects of UBI in a highly detailed manner by comparing statistical twins too, thus paying attention to even minute variations. The growing interest for analysing the efficiency of UBI is welcome given the dearth of information or evidence there is in terms of literature. If one were to support or negate the cause of the UBI, there wasn’t any relevant data to rely on earlier. But with such studies, there could be a change – the initial observations certainly point towards the potential of UBI as a guarantor of social security. The German Pilot Project is expected to push the need for UBI in Europe further ahead. It’s charted to begin early next year and there couldn’t have been a better time, given the need for a robust recovery now. Several welfare programmes, depending on the individual states, can be subsumed under the UBI. In that case, an escalation in government expenditure wouldn’t surface either. Gyeonggi’s Governor even suggests a ‘robot’ tax in future for financing his Province’s cash pay-out – this would be levied on industrial entities that make use of automation.

When jobs become a luxury and re-skilling the necessity, UBI can step in to ensure proper well-being and overall productivity – this might be surprising for those who opine that unconditional cash pay-outs simply encourage laziness. But, as the Finnish study pointed out, there’s proof against that probability. Soon enough support for this programme may not be restricted to America’s Silicon Valley alone. It’s time to garner momentum for it here in Europe as well. We might as well take up the lessons that Gyeonggi provides.



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