A Robot Tax to Fund Humans?: Analysing Future Prospects of Universal Basic Income
“There would be fewer and fewer jobs that the robot cannot do better.” - Elon Musk
In the world that we are very quickly creating, we are going to see more and more things that look like science fiction and fewer things that look like jobs. A recent study put lawyers and Artificial Intelligence (AI) against each other. Their task was to review non-disclosure agreements. It took AI 26 seconds to finish a task with 94% accuracy. The same task took the human manifestation 92 minutes with 85% accuracy. Hedge funds managed by AI gave an average return of 8% for which the humans could barely manage a 2%. AI could see in X-rays what an experienced doctor could not and was also better at predicting the risk an underlying disease poses to the patient. From supermarket checkout staff to truck drivers, everything is on the verge of getting automated. Thanks to human ingenuity, we no longer interact with the staff at Blockbuster, rather we have Netflix doing the work for us. McKinsey has reported that whether it is repetitive low-skilled labour or high-skilled jobs, both are at risk of automation and as much as 30% of all jobs would be automated by 2030. The reality is that there is no clear limit to what AI can automate.
There’s no doubt that we are going to need lawyers and doctors in the future as there are some key things such as complex decision making and empathy that can’t be automated. Additionally, just because AI performs well in test settings doesn’t mean that it’s ready for the market just yet. We may need fewer humans to do the same amount of work and it’s not just AI we should be concerned about. The problem has gotten so bad that a new term has been coined- the ‘working poor’: people who earn below the poverty line despite actively working. What happens to these people when the basic entry-level jobs become obsolete in the face of reality?
Governments around the world need a narrative that helps people feel that they do belong and that they are being heard. One general solution to this is Universal Basic Income (UBI). That’s one of the ways through which governments can start rebuilding trust. What is it and what would the future of work look like with the implementation of UBI?
The Solution, how UBI can help?
Though UBI may be the most ambitious policy of our times, it’s gaining popularity and momentum around the world fueled by the coronavirus pandemic and a whole legacy of unemployment and poverty that it is leaving behind. The idea of guaranteeing every person with a minimum living wage income is appealing. Andrew Yang, one of the former 2020 Democratic Presidential candidates, has based most of his campaign around the UBI. According to him, “Technology is the oil of the 21st century”.
Nearly 200,000 people in South Korea's Gyeonggi province are a part of a radical experiment in UBI. They receive about $220 every three months. No questions asked. During the coronavirus pandemic, ‘Gyeonggi Pay’ was expanded to 13 million people in the province including new-borns to help people ride out the economic slowdown. There was one catch though, people had to spend the money only in their neighbourhoods to help stimulate the local economy.
The popularity of the local program during the pandemic has now drawn attention at the national level and there's another big reason. South Korea is one of the most automated countries in the world and about 15% of jobs in the country are projected to be automated by 2024. So some politicians, especially in the manufacturing hub of Gyeonggi, want to give all citizens about $430 every month to help prepare for a future with robots. The success of South Korea's experiment could change how other countries think about adopting their own UBI programs.
Right now people can’t decide what UBI is and what it should be. Though UBI in its raw sense is a fairly simple concept, its implementation has several ramifications. There are different schools of thought that pertain to evaluating UBI. While some see it in the setting where all other welfare schemes are scrapped and bureaucracy is eliminated, others demand UBI as an add-on to the existing welfare programs and want to keep UBI so high that work becomes optional.
But what if we hand out enough free money and people just spend it on booze and stop working? Well, that is not true. According to a 2013 World Bank study which specifically examined whether poor people waste their handouts on tobacco and alcohol if they receive it in the form of cash. The clear answer was, no they don't. The opposite is true. Other studies have shown that the richer you are, the more drugs and alcohol you consume. The lazy and drunk poor person is a stereotype rather than a reality.
A test run in Canada in the 1970’s showed that only 1% of the working population stopped working after UBI was rolled out and that too was attributed to child care reasons. On average, Canadians reduced their work time by less than 10% which was then dedicated to looking out for better jobs and going back to school. UBI aims to address that there are more motivations to work than to just cover up the necessities.
But if laziness and drugs are not a huge deal, why don’t our current welfare state programs solve poverty?
Many Strings Attached
The existing welfare schemes have loopholes somewhere. Welfare or unemployment programmes often come with a lot of strings attached, taking part in courses, applying to a certain number of jobs every month, and taking any kind of job offer no matter if it is a good fit or what it pays. Besides the loss of personal freedom, these conditions are often a huge waste of time and only served to make the unemployment statistics seem less bad. Often your time would be much better spent looking for the right job, continuing education or starting a business.
Another unwanted side effect of many welfare programmes is that they trap people in poverty and promote passive behaviour. Imagine a benefit of $1000 every month. In a lot of programs, if you earn a single dollar extra, the whole thing is taken away. If you take a job which is paying $1200, you might not only lose your benefits but because of your taxes and other costs, you might end up having lesser money than before. So if you actively try to improve your situation and your total income is not rising or actually shrinking, welfare can create a ceiling that traps people in poverty and rewards passive behaviour.
A basic income can never be cut and therefore getting a job and additional income would always make your financial situation better. Work is always rewarded. Instead of a ceiling, it creates a floor from which people can lift themselves, and unlike unemployment benefits that run out over time, these payments are a stable flow of income.
But even if UBI is the better model, is it economically feasible?
Where does it come from?
Although a Universal Basic Income contributes to the vitalisation of the consumer economy and increases small business revenue, it has its dark enemy: inflation. While demand props up and everything is rosy, prices inflate leaving everything just as it was before.
For the inflation problem and how to tackle it since the money is not being created by magic or printers, it needs to be transferred from somewhere. It is more of a shift of funds than the creation of new ones. Hence, no inflation. But how do we pay for it? There's no right answer here because the world is too diverse. How well-off the country is, what the local values are, are things like high taxes or cutting the defence budget politically acceptable or not? How much welfare state is already in place and is it effective? Each country has its own individual path to UBI. The easiest way to pay for UBI is to end all existing welfare and use the free funds to finance it. Not only would this make several government agencies disappear, which in itself saves money, it would also eliminate a lot of bureaucracy on the other hand.
On the other hand, cutting them could leave many people worse off than before. If the goal is to have a foundation for everybody there still needs to be a program of some sort because just like countries, all people are not the same.
The second way to finance UBI is by imposing higher taxes especially on the very wealthy and rich. The tax is to avenge the wealthy for reaping the most benefits of economic growth. The wealth gap is rapidly widening and many argue that it might be time to distribute the spoils more evenly to preserve social peace. Top percentiles get wealthier while the rest of the population stagnates. Inequality is increasingly getting skewed. There could be taxes on financial transactions, capital, land value, carbon or even robots.
So, UBI is not necessarily expensive. It can be balanced out with GDP growth as more spending stimulates the demand side of the economy. According to a recent study, a UBI of $1000 per month in the US could grow the GDP by 12% over eight years because it would enable poor people to spend more and increase overall demand. What about the people who do the dirty work? Who will work in the fields, crawl through sewers or lift bricks and stones? If you don't need to for survival, will people still do hard, boring and unfulfilling labour? UBI might give them enough leverage to demand better pay and working conditions.
A study calculated that every extra dollar going to wage earners would add about $1.21 to the national economy, while every extra dollar going to high-income Americans would add only 39 cents. Making poor citizens better off could be a smart economic tactic.
For those who demand enough UBI to cover all their costs and do no work, I have a problem. For me, the concept of work itself not being essential for survival is appalling. It would be unfair to portray work as just a chore. Work gives us something to do. It challenges us, it motivates us to improve, it forces us to engage. Many find friends or partners at work. We work for social status, wealth and for our place in the world. We're looking for something to do with our lives, and for many people work gives them meaning. Money alone wouldn't be enough to make people live a happy life. People need a differentiated and delineated purpose and simply giving people money without that purpose is a wrong solution.
Apart from this, there are other concerns associated with UBI too. If all welfare programs were exchanged for one single payment, this gives the government a lot of leverage. Individual programs are easier to attack or cut than a multitude. Populists might promise drastic changes to the UBI to get into power and a universal basic income does not tackle all problems when it comes to equality. For example, rents. While $1000 might be great in the countryside, it's not a lot for expensive metropolitan areas which could lead to poor people moving outwards and the difference between rich and poor becoming even more extreme.
Remember the catch? South Korean people had to spend locally. That they can’t spend it in a McDonalds? Telling people where they can spend money sounds like an efficient way to boost local consumption but this policy has a loophole. Money is fungible and that what people can spend locally means they're saving on whatever other money they have. That other money was earlier being spent on non-local or non-eligible types of goods and services.
There is one grave concern of governments using Universal Basic Income to practice political influence. The huge chunks of personal data collected about the preferences and choices of the consumer could lead to a massive data breach to achieve self-motivated interests. Although the South Korean government claims that it only analyses aggregate demand and not the individual data points, there’s still much obscurity. Governor Lee of the Gyeonggi province is using the success of Gyeonggi Pay as a pitch for the 2022 Presidential election and he's now leading in the polls. He plans to partly fund the UBI scheme through what he calls a ‘Robot Tax’, essentially a levy on factories that have automated their production.
So, is UBI a good idea? The honest answer is that we don't know yet. There needs to be a lot more research and bigger test runs. We need to think about what kind of UBI we want and what we're prepared to give up to pay for it. The potential is huge. It might be the most promising model to sustainably eliminate poverty. It might seriously reduce the amount of desperation in the world and make us all much less stressed out. There would still be very rich and poor people but we could eliminate fear, suffering and existential panic for a significant part of the population. A recent pilot program in Finland found that UBI didn't help in getting people who were unemployed into jobs but it did make them happier and less stressed. About 50% of participants reported being healthier and having better overall well-being while the rest remained the same.
Human nature has an inherent desire to be productive and to contribute something meaningful to the world. Sure, a lot of people do complain about their work and they dream of winning the lottery and never having to work again, perhaps these people may be happy for the first few months of not working but a few years down the road they may get the feeling of a life without purpose. When it comes to UBI, people often flippantly say that now everyone is free to pursue their passion but they forget the empathetic angle- everyone isn't them. There are also a lot many people in this world without passions or hobbies. It can be said that curiosity is the start of a passion. Follow the trail of what you're curious about and then develop that into a passion. Others still might even find that hard to do. So what happens to them? If technology does replace their jobs and they're unable to retrain, then what meaning will they find in life? That's personal to them and only they can solve that problem.
So automation is on the way. Advances in technology are too great to ignore. The people at the bottom of the workforce are going to start being replaced. UBI may be able to solve the issue of how everyone will be able to feed themselves in this future but what about that more burning question of purpose? Now that might be harder to solve.
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