April 15, 2016

Is a universal basic income the solution to the rise of the robot?

In January we reported on the World Economic Forum’s The Future of Jobs report which details an imminent “fourth industrial revolution” that will transform labor markets, leading to a net loss of just over five million jobs in 15 major developed and emerging economies.

The report describes how developments in robotics, artificial intelligence (AI), 3D printing, and other areas of technology will contribute to a total loss of 7.1 million jobs across all industries, but particularly “routine white-collar office functions”—only partially offset by the creation of two million alternative jobs in areas linked to computing, mathematics, and engineering.

But, how will society cope if many of the workers displaced by automation in the coming decades cannot find new jobs? A leading AI expert from Rice University in Texas, Dr Moshe Vardi, believes that societies may have to consider issuing a basic income to all citizens, in order to combat the threat to jobs posed by increased automation in the workplace.

The universal basic income (UBI) is not a new idea; there have been UBI-style policies and experiments in India, Brazil, and the Netherlands. In the UK, the Green Party and members of the opposition Labour Party have also expressed interest in a “guaranteed social wage.”

Whilst opponents argue that a UBI removes the incentive to work and benefits the “undeserving,” existing policies suggest that it might instead increase people’s inclination to work, by adding to their sense of stability, and making childcare and transport more accessible.

In his IZA World of Labor article investigating whether UBI is a viable alternative to other social welfare measures, Ugo Colombino observes that “[UBI] appears to be an especially sound approach for redistributing the gains from automation and globalization, by building an efficient and transparent buffer against global volatility and systemic risks, generating positive incentives, and avoiding recurrent risks of falling into poverty.”

He warns, however, of the potential costs of such a policy and the distortions that might be introduced by raising taxes to cover those costs. He recommends investigating alternatives to progressive income taxation, e.g. a flat tax, wealth tax, consumption taxes, or environmental taxes. He also notes that there may be room to combine unconditional and conditional benefits: “cash transfers conditional on recipients taking certain education or health steps might represent an interesting and less extreme version of unconditional basic income.”

Alternatively, Richard B. Freeman has written for IZA World of Labor about the ownership of robots and AI technologies. He notes that as “companies substitute machines and computers for human activity, workers need to own part of the capital stock that substitutes for them to benefit from these new ‘robot’ technologies.” He suggests that “[w]orkers could own shares of the firm, hold stock options, or be paid in part from the profits,” as “[w]ithout ownership stakes, workers will become serfs working on behalf of the robots’ overlords.”

Related articles:
Who owns the robots rules the world, by Richard B. Freeman
Is unconditional basic income a viable alternative to other social welfare measures?, by Ugo Colombino