[ANALYSIS] Free money for every Filipino, at least during emergencies

JC Punongbayan
[ANALYSIS] Free money for every Filipino, at least during emergencies
'Through universal basic income, every citizen above a certain age will be entitled to cash aid. That’s as straightforward a solution to poverty as one could get.'

Economists like to say there’s no such thing as a free lunch. But this is the closest thing to it — and we may very well need it.

To quell the spread of COVID-19, the Duterte government shut down big chunks of the Philippine economy, in the process erasing thousands — if not millions — of jobs and livelihoods. That is why the government, at the same time, doled out aid through its emergency subsidy program (ESP).

The ESP is arguably the biggest aid distribution program in Philippine history, covering nearly 18 million (or about 3 in 4) Filipino households. 

The cash aid per household is not terribly big: just ranging from P5,000 to P8,000 a month, depending on where a household is. 

But the sheer scale of the program is unprecedented. In fact, you might argue further that this is the closest thing we’ve come to so-called universal basic income or UBI, which gives free money to everyone — no questions asked, no strings attached. 

The failings of the ESP, especially its cumbersome and uneven targeting, make a strong case for the establishment of UBI in the Philippines — at least during large-scale emergencies like this pandemic.

The ESP’s failures

There’s a lot to be said about the ESP and where it went wrong: the fact that government twice missed its due date for the completion of the first tranche; the throngs of people that congregated and failed to observe social distancing at distribution centers; and the local government officials who split between themselves and pocketed aid supposed to go to their constituents. (READ: Duterte’s coronavirus aid: Too little, too slow, too politicized)

But all these are in fact threaded by the biggest problem of all: targeting.

For some reason it was the Department of Finance (DOF) that originally formulated the 18 million target of low-income households. This number eventually found its way to the Bayanihan to Heal as One Act that authorized the emergency subsidy.

How did the DOF come up with 18 million? They say they worked with the 2015 Listahanan, a roster of 15 million households from which government identifies poor beneficiaries of many other programs. Considering that the Philippine population grew since 2015, they simply added 3 million households to this master list. 

However, 3 million households translates to about 12 to 15 million Filipinos — well in excess of the 8 million projected to be added to our population from 2015 to 2020.

Moreover, the DOF also set target ESP beneficiaries for each local government unit (LGU), in effect creating a “quota system” which local officials have had to grapple with.

The number of qualified families on the ground rarely jibed with these quotas. In some LGUs, there were far more families than could be accommodated by the ESP; in others, there were far fewer.

Rife inconsistencies led to a torrent of complaints from citizens saying that their names didn’t appear in the final lists, or they didn’t receive any aid even if their neighbors did.

In early April the League of Municipalities wrote to the cabinet to air their grievances. Metro Manila mayors decried their quota reductions, and some even took to social media to rant. Barangay officials, most of all, served as lightning rods of their constituents’ hate. 

Doing away with targeting

In large-scale emergencies like this pandemic, nearly everyone — save, say, the richest 1% — needs some form of assistance to survive. Targeting aid will be largely futile, snail-paced, and frankly a waste of energy. So we might do well to push instead for untargeted aid. 

Enter UBI. 

UBI is hardly new and was gaining traction worldwide right before the pandemic. Many countries — from Finland to Kenya to India — have tested pilot projects. The pandemic has only convinced more people of UBI’s merits. 

Even Pope Francis hailed UBI in his Easter letter this year. He said to the faithful, “This may be the time to consider a universal basic wage which would acknowledge and dignify the noble, essential tasks you carry out. It would ensure and concretely achieve the ideal, at once so human and so Christian, of no worker without rights.”

The primary advantage of UBI is that it involves minimal to no targeting. Every citizen above a certain age will be entitled to cash aid. That’s as straightforward a solution to poverty as one could get. We also need not worry that the middle class isn’t getting any help.

UBI also crucially does away with discretion in handing out aid, which paves the way for patronage and corruption.

UBI could also streamline and harmonize the hodgepodge of social protection programs currently out there. (For COVID-19, for instance, we have an alphabet soup of interventions apart from the ESP, including CAMP, CAMP-AKAP, TUPAD, and FSRF.)

UBI can also serve as a fiscal stimulus during crises, spurring economic activity where it can. 

Finally, UBI is in keeping with the Philippine government’s thrust for “universal and transformative social protection for all Filipinos.”

Can we afford UBI?

But UBI will be obviously costly. 

A straightforward model by social protection specialist Aura Sevilla and colleagues shows that a one-time UBI payment of P5,000 for all Filipinos aged 10 and above could easily cost P436 billion. 

That’s about 2% of our nation’s income last year and more than fourfold the monthly budget for the ESP. A P10,000 one-time payout, closer to the 2018 poverty lines, will cost twice that.

These figures may seem huge, but they must be weighed against the costs of targeting, which could be considerable as the ESP showed us. They include, among others, the bureaucracy of drawing up a list of beneficiaries, the exclusion of poor households, and the confusion and stress of it all. 

Universality could ultimately prove more efficient

If UBI is too costly to be a permanent fixture in the country’s social protection system, perhaps at least it can be activated during times of national crisis such as a pandemic — or in localized calamities such as province- or region-wide destruction during typhoons.

Alternatively, owing to financing constraints, government can opt for universal “ultra basic” income (UUBI) of, say, P2,000 per person per month for everyone aged 20 and above. Such a one-off payment will cost less than 1% of our nation’s income.

Another common concern with UBI is that it supposedly makes people lazy and overly reliant on government doles. 

But even before COVID-19 there’s little evidence to support this claim. During pandemics most people also can’t go to the office and work even if they wanted to, so the supposed disincentive to work is much less concerning.

Time to take UBI seriously

Despite growing voices in support of UBI, pilot tests and studies have yet to be done in the Philippines. 

Filipino policymakers also haven’t caught the UBI wave. Lawmakers may be understandably wary of the politics of it, since UBI might mean slashing funds for some of their pet projects, raising taxes, or both.

At any rate, it could take many more years for UBI to see the light of day in the Philippines. But the case for UBI is clearer now, more than ever, and advocates must seize this moment. – Rappler.com

The author is a PhD candidate and teaching fellow at the UP School of Economics. His views are independent of the views of his affiliations. Thanks to Aura Sevilla for useful suggestions. Follow JC on Twitter (@jcpunongbayan) and Usapang Econ (usapangecon.com). 

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JC Punongbayan

Jan Carlo “JC” Punongbayan, PhD is an assistant professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for Rappler.com. He is also co-founder of UsapangEcon.com and co-host of Usapang Econ Podcast.