Advantages and drawbacks of a ‘universal basic income’

Published 8:12 am Tuesday, October 3, 2017


Guest columnist

Many who worry about automation tout universal basic income (UBI) as a way to make up for jobs lost to artificial intelligence (AI) and robotics. In this concept, all citizens who are too young for Social Security would receive a flat annual payment from the federal government. It’s a trendy idea in Silicon Valley where it’s seen as a way to hedge against automation-induced job losses.  According to former Treasury Secretary Lawrence Summers, it would cost about $5 trillion annually or about $4 trillion more than the country’s annual income tax revenue, to pay each American adult $25,000 a year.  Summers believes that it is unaffordable!

Email newsletter signup

Three key variables characterize a UBI: its size, its rate of phase-out, and its source of funding. Proponents like to describe a UBI in which each person receives a benefit adequate to live on, the benefit phases out very gradually at very high income levels (or else not at all), and the total cost is covered by replacement of existing safety-net programs. In this segment of the series, we will explore the argument for and against a Universal Basic Income.  

There’s no question that our economy will become less labor-intensive. Over the years, the amount of time spent at work has declined dramatically — from almost 60 hours per week in 1900, to 50.6 hours per week in 1930, to around 41 hours per week today. John Maynard Keynes thought the work week would shorten to 15 hours due to “our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor.” Artificial intelligence might finally be realizing this dream of increased productivity and leisure time.

UBI is not a novel idea. Thomas Paine first proposed it in the late 19th century, when he suggested that big landowners should be taxed and the dividends redistributed to every young man in America. Paine felt the owners of producing assets gain from the work of those who use these assets to produce goods and services. He argued that this gain is a rent because the owners do not participate in production.

That concept is in play today in high-tech companies’ business model. Think of digital platforms, or the cloud, or Office or Photoshop or XaaS (“everything as a service”) models. In our highly automated economy, Facebook, Amazon, Netflix and Google (now Alphabet, Inc.) will be akin to Paine’s big landowners. So why not tax them and redistribute the money to the rest of us?

Over the past century, our politicians have shifted many responsibilities from family and community to the federal government. The elderly and disabled now receive regular cash payments and health coverage. For a time, single mothers received cash support as well, though welfare reform significantly curtailed that assistance. Most low-income households can receive a variety of in-kind benefits, such as food stamps, housing vouchers, and Medicaid.

Some argue that a UBI, unlike bureaucratic and often flawed assistance programs, could theoretically level the playing field. Opportunities like education, career advancement and self-betterment that are often only afforded to the wealthy could become accessible to much larger populations. Bill Gates suggests a “robot tax” and Elon Musk advocates UBI; a conservative think tank led by notable Republicans such as James Baker and Henry Paulson suggested a carbon tax for financing basic income.  

However, if we accept the idea of UBI we must ask ourselves: are we ready to become even more financially dependent on the federal government? Especially since the federal government is already financially dependent on the owners of automation technologies? And a UBI would redefine the relationship between individuals, families, communities and the state by giving government the role of provider. It would make work optional and render self-reliance moot. Work by definition would become optional, and consumption would become an entitlement disconnected from production. Stripped of its essential role as the way to earn a living, work would instead be an activity one engaged in by choice, for enjoyment, or to afford nicer things.  

Shifting responsibility to Washington, even if it works, will not solve the social problems that come from loss of people’s purpose in life and of their social stature and identity — which jobs provide. And the politicians in Washington who are already working to curtail basic benefits such as health care and food stamps plainly won’t be able to address the solution to its long term social impacts.

We are already seeing increasing anger of the electorate from both the right and the left in U.S. elections. The same thing is happening in Europe now. As technology advances and changes everything about the way we live and work, this social unrest will get much worse.  

The next article in this series, will explore other alternatives to the Universal Basic Income. Maybe

government shouldn’t provide the jobs or training, but should offer tax incentives and insurance; facilitate job mobility; and reform occupational licensing. Displaced employees could be encouraged to gain new skills by offering “career loan accounts” — with repayment linked to future earnings.  

Other possibilities include a voluntary military and civilian national service program for young people to help alleviate the social disruption and provide improvements of public spaces such as parks and playgrounds.

Dave Fairchild is president of Fairchild Associates. He lives in Danville. This is the second of three columns on the transformational power of technology.