Economy and Universal Basic Income
In previous article, we have discussed how the Universal Basic Income can be a solution for the job displacements caused by automation. In this article let’s look into how economy will behave with Universal Basic Income (UBI).
Who will get UBI?
UBI is “Universal”. No matter, how rich or poor you are UBI will be therefore you. It looks like it is not fair for the poor person, because rich will get richer because of the free money.In intuitively we feel, it is more logical if we just give the money to the poor person. There is a reason not to do that. Let’s take an example.
The government in imaginary nation of “MangoLand” decided to give 1000 MangoLand Dollars(MD) a month for those who does not have a job. Then there is two people, George who work at Cotton Candy Factory earns 1500 MD a month and Phillip who does not have a job. Because of Phillip does not have a job, Phillip will get qualified for UBI and he will receive, 1000MD a month.With that Philip’s income will rise to 1000MD, meanwhile George’s income will still remains at 1500MD. One day at a drink they discuss their situation. George may think ,
“Why would I do this job for extra 500MD, when I can just lie in couch and watch movies”
and Philip will also think the same.
Most of the government welfare work like this. If the person is working, he is not eligible for any government benefit. which will discourage people to work. And UBI doesn’t do that? Yes and No, With UBI George will have the option to go to work meanwhile earning 1000MD extra income from UBI or Do nothing and earn 1000MD. If he choose to do nothing, someone else will take his position at Cotton Candy Factory and will earn 2500MD income. In a sense, UBI will push you to earn more if you can.
UBI is a compensation for being replaced with machines at work and it is not a welfare. If you are still not replaced by a machine,Luck You! you can earn extra, with UBI. With that people who lost jobs might get encourage to learn new skills to find a work. UBI gives that wiggle room for take the risks.
Making Money out of Thin Air to Pay UBI
“There is no such thing as a free lunch”, somebody has to pay for it. Even in government welfare, it’s done by the money which was collected as taxes from almost every citizen of a country. In theory UBI is the opposite of tax, people are paid by government for doing nothing. If the government collect the tax from the citizen of a country and pay it back as a UBI, it feels like government is doing extremely risky thing, with cash flow.
How can a government to be sure, they have enough money to pay back as UBI?By Printing Money???
Printing Money is never a option. Money has it’s nominal value, as it’s scarcity. If everybody has 1 Million Dollars in their bank account, Having 1 Million Dollars is a common thing and a Dollar loose it’s value since it is not scare anymore. Therefore, in order to sustain an UBI based economy, a government should have better tax policy.
Sources of Funds
A government should impose new taxes to pay the citizens UBI. One way to do is getting the people what they owed due to automation, back from highly automated companies. For an example, if a machine replaced 10 people at a factory, where each person paid $10/hour and if a person work 40 hours a week, $10 x 40 x 10 = $4000 were saved for the company by automation. If we deduct $1000 from that, to depreciation of the machine and for the maintenance cost. The company has gained $3000 extra. Government can ask half of that as a Tax of Automation. This is a really simple example. In actual situation Math might be really complex. however, there is a possibility to gain income for the government this way.
The Future with UBI
With time, the proportion of automated work places will be increased and the jobs that a human can do will be limited. Some of people will change their profession by learning new things. But for some it might be difficult to learn a new thing or there will be no source of income during the period of their time of transformation. UBI, gives you a chance to take a risk and try something different or take a rest and enjoy life while machines do your job! UBI also give a new meaning to “work for living, not living for work.”
In next article let’s discuss what will be the possible futures with UBI and Automation.
See You Again :)
