Simple but not easy
It looks like I may have been on to something with one of my recent blog entries (I know, I couldn’t believe it either).
I hypothesised that while
historical job losses as a result of technological progress and automation have
consistently been more than offset by job gains in other/ the same sectors, in
the future these job gains may not be sufficient to offset continued job
losses, especially if machines become sophisticated enough to replace not just administrative
and routine manual labour tasks but also tasks involving creative thinking.
Consequently, a larger and larger social safety net will be required to support
these structurally unemployed individuals – maybe permanently.
But this need not be
unsustainable, as long as a sufficient share of the benefits from automation
are taken by the government in the form of taxation and redistributed to the
newly redundant ex-workers, rather than just absorbed by the owners of this
automation in the form of profits. As I mentioned in my previous blog entry:
“The point of technology and automation was
never to replace humans and leave those humans with nothing – it was to find a
way to complete the task without the need for humans. But the humans
that were replaced by technology should still be supported by the wealth
generated by those machines, unless and until they can reasonably find
alternative work”
However, sufficient
profits would still need to be allowed to provide business and industry with
incentives to invest in such efficiency-improving technology and automation in
the first place. Alternatively, if business and industry aren't allowed to sufficiently profit directly by replacing labour with technology, then this technology must at least provide the capacity for additional profits via expansion of operations.
And now it seems Finland, in response to such
forces, is trialling a universal basic income (UBI), whereby 2,000 of its unemployed/
already-welfare-supported citizens are guaranteed a minimum income.
Furthermore, individuals won’t lose this social safety net the moment they
re-enter employment – this will maintain the incentive to work (or study, start
a business, volunteer, care for others, etc.) without creating the fear and
desperation associated with potential hunger and homelessness that can just
result in desperate people accepting whatever low paying and insecure jobs they
can find, not necessarily the most satisfying or productive job. Consequently,
a UBI could be beneficial not just to the individual, but also the community
and broader economy. It wouldn’t just be ‘money for nothing’.
There is also the
benefit that a UBI is potentially much easier and cheaper to administer than
the endless rules, regulations and bureaucracies associated with many current social
welfare programs,
without necessarily requiring any additional cost to the taxpayer. This is important to note – a UBI need not
increase the size of the welfare state by itself in order to enjoy these efficiency
gains from a simpler system. But for countries with relatively small social
safety nets and high inequality, a UBI in addition to a generally larger
welfare state is indeed likely to not only improve social outcomes, but also
economic ones by helping the lower end of the socio-economic spectrum become
productive members of society, not get locked in an endless cycle of
disadvantage and dependency. The IMF itself highlights this positive link between income equality
and economic growth.
With a UBI, we may
also be able to do away entirely with the idea of a minimum wage – how stoked
would business and industry be about that. Of course, for the government to
cover the difference (to compensate the workers being paid below minimum wage),
additional taxes would have to be collected from business and industry, at
least partially offsetting some of these benefits. But by allowing the free
market to entirely determine the level of wages, rather than forcing a minimum
wage upon it, additional efficiency gains would be generated that may offset
these additional taxes. For example, if McDonalds were able to pay its
burger-flippers less than minimum wage, they may be inclined to hire more
burger-flippers during busy times/ in busier branches – maybe even open
entirely new branches. And the workers would be no worse off because the
difference would be covered by the government.
And it’s not just
Finland. Elsewhere in the world:
·
High costs
of living and concerns about automation resulted in Switzerland having a referendum last year
on a proposed UBI (though it was defeated, with only 23% supporting it)
·
California is trialling a $20 million UBI this year
·
Scotland in trialling a UBI this year in Fife and Glasgow in light of, among
other things, increasing employment insecurity in the ‘gig economy’, as well as
health inequality in Glasgow, and generally stagnant living standards
·
The Canadian
province of Ontario is proposing its own $25m pilot project, scheduled to be formally launched
early this year. This trial is in light of:
o
High child
poverty rates across Canada
o
The
success of a mid-1970s basic income policy for seniors in the province in reducing
senior poverty from over 30% to 5%, improving food security, longevity and
independence from the health care system, which was consequently spread to
seniors countrywide
o
The
success of a basic income experiment in Dauphin, Manitoba in the 1970s in reducing
hospitalisations, accidents, injuries and mental health issues, with minimal
reductions in work incentives (except some extended maternity leave uptake and
high school retention rates) before the program was cut short due to budget
tightening
·
The Indian government may be
endorsing a UBI soon, with two pilot schemes already launched in Madhya Pradesh
in 2010, and one other in West Delhi. As a result, “welfare improved
dramatically in the villages, particularly in nutrition among the children,
healthcare, sanitation, and school attendance and performance”, as well as
improved emancipation of women, and individual debt reduction
·
Uganda and
Kenya are also trialling their own programs
This possibly reflects
an increasingly held belief that society as a whole has the capacity to support
all its members – no questions asked – without destroying incentives to
generate wealth. Perhaps society always had this capacity and we’re only just
now coming around to the idea.
I hope the results of
these trials are definitive – one way or the other. And if these programs prove
to be a successful means of improving the government’s income redistribution
role, the full benefits of globalisation can be enjoyed more fairly within nations – not just at the top end – without
the need to succumb to the desires of rising right wing nationalists to retreat and isolate one’s
self from the rest of the world.
