Scholars' Blog

16 June 2019
Sharon Chau
Sharon Chau

“The Universal Basic Income is the best solution to handle the large scale displacement of labour due to automation in the coming years.” Do you agree?

“The robots are coming”. Originally an ironic quote poking fun at our irrational fear of robots taking over, it is now an ominous prophecy about the destructive rise of automation. Automation will lead to a disastrous displacement of labour for developed and developing countries alike. 47% of all current jobs in the U.S. might be fully automated by 20331, while a staggering 85% of jobs in Ethiopia are “at risk”2. Automation also entrenches inequality through boosting the advantage of wealth over labour; causing relative declines in the share of lower-skilled employment3; weakening labour institutions and eroding the tax base, which diminishes the state’s capacity to redistribute4. This will lead to the 1% rolling in wealth while the middle and lower classes languish in poverty cycles, structurally unemployed. Given this unprecedented problem that threatens the economic wellbeing and fabric of our society, we need a radical solution.

A Universal Basic Income (henceforth “UBI”) might just be what we need. Originally proposed by philosophers Thomas Paine5 and J.S. Mill6, it is a regular, equal financial payment for all adults without any conditions, including income level and employment status. The amount is sufficient to cover basic needs and enable a person to participate in social life7. It has been promisingly implemented in numerous pilot schemes around the globe. In India, UNICEF carried out an 18-month programme of UBI in eight villages in Madhya Pradesh in 20118. The results demonstrated that UBI improved child nutrition, increased productive work, and raised investment in education, particularly for girls. A similar unconditional grant to a large part of the population in Brazil, South Africa, Mexico and India does not rule out working to augment income, co-existing with informal work. This allows evolution in a shifting economic climate, which is especially crucial when many in developing countries live under the informal “gig economy”. Back in 1974-1979, Canada’s Mincome Programme paid a monthly supplemental income to 1000 poor families in Dauphin, Manitoba9. Poverty virtually disappeared, high-school completion rates rose and hospitalisation rates fell. Interestingly, productivity also increased. The work rate fell only among new mothers, who spent more time with their children, and teenagers, who gave up part-time jobs for schooling. These tangible results demonstrate the likelihood of a UBI’s success and its potential optimistic outcomes.

Many criticise UBI as an unrealistic utopia which would heavily burden governmental finances. However, multiple studies have demonstrated its feasibility. In the U.K., introducing a modest UBI scheme is projected to cost around £200bn10, while government expenditure and the welfare bill in 2017 was £814bn11 and £153bn12 respectively. As UBI would be a complete replacement of the current welfare system, it would only require a small rise in taxes and a streamlining of governmental bureaucracy. Hence, UBI is a highly feasible program with minimal increase in public spending.

UBI brings a plethora of benefits for multiple stakeholders, especially the most vulnerable. Firstly, it reduces the coercive aspects of capitalism. Currently, workers have to take up employment because they lack alternative means of subsistence. UBI provides a baseline capacity for sustenance, allowing people to refuse exploitative labour. This makes work much less coercive and also increases wages for unpleasant work, which leads to higher compensation and an incentive for employers to eliminate such tasks. UBI further liberates people from working or seeking work due to the unconditional cash grant13, which creates a society no longer hostage to the rule, “No matter how it dulls the senses and breaks the spirit, one must work”14. The grant thus challenges an anchoring principle of capitalism that tethers social citizenship to waged labour15. Additionally, UBI increases workers’ collective power. Unions can use it as an unlimited strike fund to bargain against conditions, compared to limited funds from members that would run out rapidly in a prolonged strike. In addition, UBI grants citizens more autonomy16. The reduced labour time17 creates room for autonomous activities and production which is not subordinated to the goal of maximising profit18. Lastly, UBI provides enough security to enable retraining and job-seeking. Hence, UBI has radical emancipatory potential for the most vulnerable in the capitalist system.

Secondly, insecurity would decrease. UBI provides a dependable, unconditional stream of revenue which many can factor into their worst expectations. It massively reduces stress when one knows that money would appear in their bank account every week if they ever have a rainy day. This security also means additional incentives for individuals to invest in themselves through education, vocational courses or products to increase their productivity. Many people currently save up to prepare themselves in case of financial hardship, but this would be unnecessary if there existed UBI. Increased security additionally improves people’s mental health. Generous unemployment benefits have been shown to offset suicide from losing jobs19, and life satisfaction among the long-term unemployed increases significantly when they retire and the social expectation of employment is lifted20. Both effects are achieved through UBI, which offers an immediate safety net for anyone if they go through unexpected hardships, and removes the expectation of employment. Hence UBI ensures financial security, insulating us from financial shocks, increasing our investments and productivity and improving our mental health.

Thirdly, UBI leads to socially desirable outcomes. Empirically, it has led to higher school attendance in poor households, improved child health and greater financial independence for women. This has been achieved through giving previously unpaid housewives a sum of money every week for children’s healthcare and individual investments, such as opening up their own bank accounts instead of relying on joint ones with husbands. It also subsidises and encourages socially utile activities, including unpaid caregiving within families and volunteering21. The social economy, a system which serves members on principles of democracy and solidarity instead of obtaining a return on investment, is also subsidised. UBI provides a decent standard of living to volunteers and aids the integration of the social economy into the mainstream system. Economically, UBI follows the Keynesian idea that downward redistribution of wealth increases consumer demand, fueling economic growth and job creation. UBI also decreases inequality and poverty. Evidence from Scandinavian countries indicates that large-scale, universal provision of decommodified services tends to be more successful in these crucial macroeconomic aims22. Hence UBI leads to socially desirable outcomes, aids the social economy, increases growth and decreases poverty.

UBI is especially beneficial when compared to conditional welfare, an alternative solution to the spectre of automation. There are many problems with conditional systems. Firstly, the bureaucracy. In the U.S., there are at least 126 federal assistance schemes23; in the UK, individuals have had until recently to be assessed for unemployment, ill-health etc. Each conditional scheme generates a bureaucracy of assessment and the need for constant eligibility monitoring, at vast expense24. Worse, some eligible recipients do not receive much-needed money due to blips in the system. In the UK, one in five Universal Credit applications are rejected because of procedural errors, leading to many weeks with no income25. Compare this to the all-encompassing UBI, where the money is universally guaranteed and spent on the people instead of on bureaucracy. Secondly, the conditional system creates a welfare cliff for those who were just well-off enough to lose conditional benefits, but still financially constrained. They now receive UBI. Thirdly, conditions create financial disincentives for the unemployed to take casual work or workers to increase their hours, which would have rendered them ineligible for conditional welfare.

UBI removes these perverse incentives. This is a strong rebuttal against the anti-UBI argument that people would not work when given unconditional grants. Additionally, there will likely be more political support without clearly-defined net contributors or beneficiaries. Many on the left support UBI due to its liberation of the working class, while many on the right support it as it allows massive downsizing of governmental bureaucracy. To take an example, minimum wage legislation could be abolished as UBI reduces the coercive aspects of capitalism. This political support is important to ensure that UBI would last throughout different administrations. Hence UBI is a much better solution to displacement of labour by automation compared to conditional welfare.

In conclusion, UBI is definitely the best solution to handle the large scale displacement of labour due to automation in the coming years. Those who lose their jobs are ensured financial security, knowing they receive a steady stream of income even if they take up a job or decide to take time off work for upskilling. Workers are more able to refuse demeaning, exploitative jobs or demand higher wages through increased union power. Free time is increased for people to retrain for new jobs in the digitalised economy or spend more time with children. Higher school attendance, decreased inequality and increased economic growth through the stimulation of consumer demand are additional unintended benefits. Let us imagine a world where a mother does not have to worry about losing her conditional benefits; a world where sixteen year-olds can stop part-time jobs and focus on school; a world where the universal basic income is a universal basic right.

 

About the author
Sharon Chau, Kwok Scholar 2020, is a student at Westminster School, she will be reading Philosophy, Politics and Economics at the University of Oxford.

 

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12 Information from: https://visual.ons.gov.uk/welfare-spending/

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20 Hetschko, C.; Knabe, A.; Schöb, R. (2013). Changing Identity: Retiring from unemployment.

21 Nettle, D. (2018). Getting your head around the Universal Basic Income. Hanging on to the Edges: Essays on Science, Society and the Academic Life (pp. 163-180).

22 Huber, E.; Stephens, J. (2012). Democracy and the Left: Social Policy and Inequality in Latin America. Chicago, IL: University of Chicago Press; Korpi, W.; Palme, J. (1998). The paradox of redistribution and strategies of equality: Welfare state institutions inequality and poverty in the Western countries. American Sociological Review, 63 (5): 661–687.

23Standing, G. (2017). Basic Income: And How We Can Make it Happen. London: Penguin.

24 Marais, H. (2018). The Employment Crisis, Just Transition and the Universal Basic Income Grant. The Climate Crisis: South African and Global Democratic Eco-Socialist Alternatives (pp. 70-106). Johannesburg: Wits University Press.

25 The Guardian (2018). Complex rules for universal credit see one in five claims fail. https://www.theguardian.com/society/2018/may/12/one-in-five--turned-down-for-universal-credit-rules-too-complex