Sunday, February 05, 2017
Basic income, an old idea whose time has not come - until the robots take over
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

robots.jpg

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Sometimes ideas that have been around for a long time suddenly build up a he
ad of steam. So it is with one such idea at the moment, that of a universal basic income, an unconditional payment to every individual in the country, regardless of their circumstances.

A universal basic income (UBI) was last week endorsed by the Indian government’s 2016-17 economic survey, as “a powerful idea …. whose time is ripe for serious discussion” and which would be more effective than the existing system of state benefits.

A trial of the system began at the start of this year in Finland, and there are plans for similar trials in Fife and Glasgow in Scotland. It is part of the policy platform of Benoit Hamon, the French Socialist presidential candidate, admittedly a very long shot for the Elysee Palace. It was part of the Green party’s manifesto in the 2015 general election. Groups like the Citizen’s Income Trust have been advocating it for years.

UBI attracts some strange bedfellows. Though usually associated these days with the political left, it has sparked the interest of Silicon Valley tech entrepreneurs. In the 1960s both Milton Friedman and Martin Luther King advocated versions of it as, more recently, has the libertarian Charles Murray, who has written extensively for this newspaper. Friedrich von Hayek, beloved of Margaret Thatcher, though this was one of his ideas she did not take up, also favoured a guaranteed minimum income.

Why is the basic income idea, sometimes known as a guaranteed or citizen’s income, having been around a very long time, gaining new interest now? There are two main reasons.

One is the rise of what Professor Guy Standing of SOAS (The School of Oriental and African Studies) has described as the rise of the “precariat”. Standing, who presented his arguments at this year’s Davos world economic forum, describes the precariat as the “many millions of people experiencing a precarious existence, in temporary jobs, doing short-time labour, linked strangely to employment agencies, and so on, most without any assurance of state benefits or the perks being received by the salariat or the core.”

His precariat is not the same as Theresa May’s “just about managing” families but is in similar territory, and speaks strongly to the idea of swathes of people being left behind by globalisation, a phenomenon on both sides of the Atlantic.

The second reason for the UBI’s revival, which has particular resonance in Silicon Valley, is the rise of the robots. If robots are indeed set to make serious inroads into employment, as some predict, one estimate suggests that 47% of jobs in America will be automated over the next 20 years, then providing people with a stigma-free alternative income courtesy of the government might be the way to go.

There is a pretty good chance we end up with a universal basic income, or something like that, due to automation,” the tech entrepreneur Elon Musk, responsible for Tesla cars and SpaceX, said recently.

Another argument favoured by advocates of UBI is that it offers the opportunity of radically simplifying current highly complex systems of welfare benefits, tax credits and taxes. A simple handout would replace the current confusing system.

So why not? Many people instinctively smell a rat about basic income, and they are right to do so. Though an unconditional handout would not prevent people from working, and for most would be in addition to their existing earned income, the risk of paying people to be idle, the “why work?” syndrome, would increase.

The flaw in a UBI also comes down to simple maths. If you pay everybody a fixed amount, including the very many who currently receive nothing from the government, the cost of the policy, could be enormous.

As the economist John Kay wrote recently, if you set the basic income at 30% of average incomes, the public spending cost will equate to roughly 30% of gross domestic product, or 50% if it was set at half of average income. Before Swiss voters rejected a basic income in a referendum last summer, their government told them that it would double welfare spending.

To get around these difficulties, proponents often pitch it at a very low level. In Finland, a country of high prices, the experiment is with a basic income of €560 (£480) a month. A proposal for this country by the Royal Society of Arts envisages a basic income for adults of some £3,692 a year at 2012-13 prices.

The problem with this is that it would not cover anybody’s needs, and you would still need a system of welfare arrangements to provide for those with disabilities, caring responsibilities, the long-term unemployed and other additional needs catered for by the benefits system. Welfare is more complicated than it should be, but it is complicated for a reason. People’s needs are complex and varied.

There is no easy way around these problems. A UBI means giving money to people who do not currently get it, and who do not really need it, with the only way of making it affordable being to reduce the benefits going to those who are in genuine need. If that was politically unacceptable, as it would be, then the consequence would be higher overall spending, and significantly higher taxes to pay for it, neither of which we need.

The intriguing aspect to the current debate is, however, the link to automation, and the rise of the robots. I have taken a generally sceptical view of this phenomenon. There will be jobs created in coming years of a kind and in activities that we are currently unaware of. Previous predictions of the death of the job as a result of new technology have been wide of the mark.

Suppose, however, this time is different and the rise of the robot resulted in a dramatic fall in employment, and a dramatic rise in the profits of companies using the new technology. In such circumstances, but probably only in such circumstances, there would be a case for taxing those profits much more heavily and using it to guarantee people a basic income. Which is why this idea, far from going away, will probably , despite its flaws, increase in popularity.