impact of universal basic income on economy in Latvia

Context: The possibility of implementing a Universal Basic

Income

in

Latvia

in response to increasing automation threatening unemployment and social inequality is studied.

This

hypothesis will be investigated by analyzing existing studies on Universal Basic

Income

, developing models for its

implementation

, and determining its costs and possible ways of financing it. The objective is to find out whether the

implementation

of Universal Basic

Income

could contribute to

Latvia

's economic growth. Universal Basic

Income

(

UBI

): is a cash payment unconditionally given to all

citizens

, with no means test or work requirement. The main idea is to provide a minimum

income

to all

citizens

, regardless of their social status, employment, or other indicators. Proponents argue that it is better than current welfare systems, but its

implementation

requires resources and political will. Studies have examined the details in several countries including the U.S., U.K., Finland, Sweden, Australia, and New Zealand. Government transition programs appropriate for the XXI century include demands for

UBI

that improve the lives of workers and help convince people. In the case of

Latvia

, a social benefit called GMI is offered to guarantee a minimum level of

income

for its

citizens

. It is scheduled to increase to EUR 64 per person per month from January 2020.

This

resembles the Universal Basic

Income

, which is proposed as a measure to reduce inequality. The value of the full minimum

subsistence

basket was

last

calculated in 2013 and was EUR 253 per month. The authors attempt to calculate future values of the minimum

subsistence

basket using the relationship between it and inflation or

GDP

. The possibility of implementing a Universal Basic

Income

in

Latvia

, concluded that the calculated value of

UBI

per person per month would be 150.92 EUR, which is 43.90 % lower than the necessary

subsistence

minimum. 6 financing scenarios (budget deficit or tax increase) were made to assess the macroeconomic

effects

of the

implementation

of the

UBI

, which showed

GDP

growth in the first scenario and increased tax revenues in the fourth scenario, but with increasing unemployment if

citizens

do not look for work. Inflation would increase in the first scenario and there would be no significant change in the others.

Finally

, research on Universal Basic

Income

in

Latvia

has shown that,

although

it is not feasible to implement it at the

subsistence

level, its

implementation

could stimulate the economic development of the country. The results of indicators

such

as Gross Domestic Product (

GDP

), inflation and consumer prices showed low correlation between them, so it was not possible to use the linear regression model for the full calculation of the minimum

subsistence

basket. To improve the study of the

UBI

, the impact of other variables affecting

GDP

should be considered and the social

effects

of the

UBI

should be examined. Opinion: The final decision is the right one, as several financing scenarios are presented to evaluate the

effects

of

UBI

implementation

, but it requires sufficient capital,

although

the

UBI

could contribute to

Latvia

's economic development, other variables need to be considered and social

effects

examined.