Universal basic income: The answer to the automation of our labour market?

The question of universal basic income looms large. || Denis Balibouse, Reuters.

The world is facing a fundamental threat to the labour market, and therefore to the livelihood of nearly every individual in society. While technology advancements are praised for increasing productivity, that very increase provides incentives for employers to switch from human labour to technological capital, potentially creating mass structural unemployment. The unemployment would not be limited to low-skilled positions because any routine job has a risk of being automated. Of 702 examined occupations, 47% of jobs face risk of elimination in the United States, but the implications of automation extend beyond national borders to a global scale. For example, an estimated 35% of the British workforce and 49% of the Japanese workforce are also at risk of job loss. If this is the future we face, how can we ensure that the gains from increased production are not only profiting business leaders at the expense of the common worker? There is a possible economic solution currently taking centre stage: universal basic income.

Universal basic income is a cash payment made to each and every individual on a predetermined and periodic basis. The payment has no strings attached and can be either an individual’s sole source of income or a supplementation to a pre-existing income. While the size of the transfer has not reached a consensus, it is agreed that it should be able to cover each individual’s basic needs to secure equal opportunity, albeit not equal outcome. The appeal of universal basic income is only strengthened considering technological advancements benefit few and threaten the livelihood of many.

This revolutionary economic policy is openly supported by both the political right and left. As a primary goal, universal basic income would help reduce economic inequalities and relieve the financial stress of the poor within society. Ideally, the magnitude of the payments would lead to a fairer redistribution of the gains from technological advancements. In addition, a universal basic income would contribute to better working conditions; when workers are given a universal basic income, they will have the ability to challenge working conditions that are degrading, dangerous, or unfair. Furthermore, right-wing advocates support the streamlining of a welfare state. Bureaucratic cost would be drastically cut when each and every citizen receives a flat payment. The policy would reduce the government’s role and increase individual autonomy. Both Friedrich Hayek and Milton Friedman, classical liberal and laissez-faire economists, supported the idea of a universal basic income—although Friedman preferred to call it a negative income tax. Hayek wrote in the third volume of Law Legislation and Liberty that an “assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall… is a necessary part of the Great Society”. Similarly, Friedman proposed a negative income tax in his book Capitalism and Freedom, which would replace a bureaucratic welfare system with a streamlined policy that ensures a basic income.

Even though universal basic income has received a wide range of support, its recent attention has also brought its fair share of critics. Some studies argue that a universal basic income is not necessary because technological advancements do not only destroy jobs; technological advancements also happen to create different jobs as others become obsolete. A 2017 study by the International Federation of Robotics has found that while there has been a decrease in mid-income and mid-skilled jobs, technological advancements are increasing the demand for high-skilled work which provides a higher income. Robotics tends to complement and augment labour, allowing for individuals to focus on the higher-skilled jobs. It would not be accurate to only focus on the destruction of jobs, but rather focus should be kept on the change in the nature of work available to the labour market. Another strong argument is that a universal basic income will always be out of reach because of the immense cost of such a program. A study by James Tobin in 1970 states that if a tax of 25% on national income was needed by the government to maintain public services, then raising the basic income to 10% of the national average would require the taxation rate to rise 35%. Likewise, a universal basic income worth 20% of the national average would require the taxation rate to be 45%. It was concluded that this would make a universal basic income “basically unaffordable”. Additionally, looking beyond the practical application to the social implications is necessary to fully understand the policy as a whole. A person’s job and income is integral to their sense of self-worth and with a universal basic income, people are not required to work at all to sustain their basic needs. While arguably, the purpose of life for people is not necessarily work, there is value in the feeling of accomplishment at the end of the day. To a degree, the paternalism within a welfare state, that is not included in a universal basic income, is vital to guide the actions of those who may be living idle on border-line poverty into a fulfilling and meaningful life.

Former President Barack Obama has spoken up in favour of a universal basic income. || Mandel Ngan, Getty Images.

Although the idea of universal basic income is not new, having been first proposed in 1797 by Thomas Paine, an American founding father, it has once again resurfaced in popular debate. Former President of the United States, Barack Obama, and tech giant, Elon Musk, have both spoken up in favour of a universal basic income. Obama has confirmed that he believes that the concept of universal basic income will become increasingly important in the near future. During his February 2016 economic report, he notified Congress of the increasing role of robotics in the workforce and the critical implications it has on American jobs. He spoke on the need to re-evaluate how the current system pays certain jobs when the nature of work is changing, because "teachers, nurses, caregivers, moms or dads who stay at home, artists, all the things that are incredibly valuable to us right now don't rank high on the pay totem pole”. Correspondingly, Elon Musk is one among many tech executives who openly supports a universal basic income. At the World Government Summit in Dubai, Musk stated that “there will be fewer and fewer jobs that a robot cannot do better.” He goes further to argue that “with automation, there will come abundance.” Although Musk sees universal basic income as a possible solution to the structural unemployment resulting from automation, he has reservations about what the policy might do to an individual’s purpose or sense of self-worth.

While the idea of universal basic income may seem more achievable in the future, the future starts in the present. As of now, experiments on the policy are taking place in countries around the world, including Finland, Canada and the United States. At the beginning of 2017, Kela, the Social Insurance Institution of Finland launched a nationwide pilot study of universal basic income. The pilot study consists of 2 000 Finns between the ages of 25 and 58 who were receiving unemployment assistance immediately before the study. Each individual receives monthly the equivalent of approximately $664 USD unconditionally instead of their previous unemployment assistance. The experiment is set to continue until the end of 2018 and the anticipated results will be soon to follow. Similarly, pilots are set to launch or have launched in various cities in Ontario, Canada. Cities participating in the pilot include Hamilton, Brantford, Brant County, Thunder Bay and Lindsey. An annual $16 989 (CAD) cash will be given to single participants in lieu of unemployment assistance. To address the social implications of the policy, the Ontario study will be followed by a questionnaire that asks questions regarding the participants mental health and self-esteem. Due to the nature of these experiments in both Finland and Canada, the entirety of universal basic income cannot be tested due to the restricted pool of individuals that they choose to include in the pilots. In addition, due to the simultaneous workings of the welfare state, a policy noted for its simplicity has not been as easy to implement as hoped. Moving beyond pilot studies, in some places, universal basic income has already been successfully implemented. Alaskan residents currently enjoy up to $2 072 (USD) per person or $8 288 (USD) per family of four annually from the Alaska Permanent Fund. The state fund collects its revenue from Alaskan oil and mineral leases. In a 2017 poll, only 36% of Alaskans agreed that they would prefer to end the payments if it meant raising taxes. More simply, 64% would keep their universal basic income despite needing to raise taxes to keep the system. Although the prospect of a universal basic income can seem out of reach, the policy has been implemented and has even seen positive results in the present.

History has the tendency to repeat itself and so, in the decades to come, it may become evident that our concerns of mass job loss due to automation are as empty as those of the Luddites during the industrial revolution. To this day, these sorts of concerns have always proven misguided; the elimination of rural farm jobs led to more opportunities in urban factories. But if our modern exponential increase in technology is different, could a universal basic income become commonplace in the near future?