Guaranteed Jobs Vs Guaranteed Basic Income in an age of automation

What does the future of jobs mean?

Prelude

During one of my courses (Intro to Employment relations) we were tasked with writing a 12 page comparative essay on the government implementing a Guarenteed Jobs Vs Guaranteed Basic Income. Being a tech guy, I chose to write the essay from an AI perspective and discuss the impact of automation on the comparison. Below is a modified version of the essay (with pictures) and some links to clarify the more academic terms. Enjoy!

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Introduction

With a new generation of Artificial Intelligence and automation (AI) technologies, governments must adapt their policies to keep serving their constituents. Mass unemployment, growing inequality and the changing role of the government are challenges that threaten our very social fabric. This paper will take an Orthodox Pluralist (balancing stake holder objectives) (Godard, 2011) stance on comparing guaranteed jobs (GJ) and basic income guarantee (BIG), through political, social and economic approaches, within the Canadian context.

Definitions

Our conceptualization of BIG will be based on a universal model that would provide all citizens with Low Income Measure equivalent ($22,653) as a supplement to existing social programs (Government of Ontario, 2017). Automation will provide immense productivity gains and impacts all, justifying a universal. The GJ program will be based on the Jefes model described in (Tcherneva, Waye, 2005 ) . The core features of GJ is a counter cyclical model where the government employs workers when the private sector cannot, and connects employees to employers during economic growth. The jobs will be locally determined by municipalities and NGO’s for efficient resource allocation.

Unemployment and Underemployment

Friction within the labour market is inevitable, it is at heart of macroeconomic theory (Ragan, 2014). Unemployment is a common indicator of economic health, skill mismatches in the employment system, and dependence on government for social services (Ragan, 2014). The current rate of 6.6% (Statistics Canada, 2017) is fairly low, but becomes concerning when up to 4 in 10 youth are underemployed (Statistics Canada, 2017) and when visible minority and young unemployment rates are 10.6 % and 12.4% respectively (Statistics Canada, 2017). As society becomes more automated, a mismatch of skills will exacerbate both under and unemployment.

In 2017, Ontario launched a basic income guarantee pilot, planned for three years

Unemployment and underemployment are not only economic issues, as we consider work to be a source of pride, an enabler for our passions, a social contract and an enjoyable task (Godard, 2011). The lack of ability to contribute, and fully utilize personal skills takes a psychological toll on the under and unemployed.

Socially, underemployment and unemployment create anger towards important institutions such as universities and governments for being unable to provide and deliver on promises of higher education, skills, and a paternalistic mandate (Cattaneo, 2016). This anger undermines these institutions and forces them to adopt stances that limit their unique, net social good, such as limiting arts and research funding (Dhariwal, 2017).

It also threatens individuals’ dignity and their role in society, such as being a family provider. These threats to individuals, manifest themselves as social problems by exacerbating social differences and creating a breeding ground for racism, violence and dangerous nationalism (Stephen , Renfro, Esses, Stephan, & Martin, 2005). Recently, populist politicians such Trump and Le Pen have been encouraging this behavior rather than solving the underlying problem.

The framing of work as a social duty marginalizes the unemployed, often resulting in alternative harmful social structures such as gangs (Poutvaara & Priks, 2011). These alternative social structures often drive individuals to socially harmful behavior such as crime, and limits their ability to reintegrate into society. Society also stigmatizes unemployed individuals as lazy or stupid.

The impact of automation

As estimated by Manyika et al. (2016), automation will eliminate 46% of Canadian jobs within the near future. Most of the jobs will be lower skill jobs, removing the issue of underemployment while exacerbating the unemployment level by an order of magnitude. As a result, we will need to reconsider our approach to work, with work eventually becoming an elitist concept; only the most skilled and well connected will have ‘the right’ to work.

McKinsiey report on which countries have highest automation potential

Automation may act as a catalyst for the change of social attitudes to work, or it may create significant push back on governments, similar to the attitude of free trade in fields such as manufacturing (Smith, 2016). It is thus difficult to to gauge the direction of social attitude, but automation will exacerbate it and polarize public opinion.

The use of BIG would assist the issues in two ways: allowing job seekers more time to hone their skills and look for a job that best represents their skills without settling due to financial pressure (Tcherneva, Waye, 2005 ), and minimizing social instability by allowing access to desired goods and services with decency. This approach is favoured by Neoliberal and Radical(Marxist) perspectives as it gives autonomy to individuals and allows them to opt out of coercive systems (Godard, 2011).

BIG also gives workers time for self-reflection, allowing individuals to seek help when necessary, without being shamed for unemployment, as BIG becomes part of a cultural norm. It would also limit pressure on educational institutions to be part of the employment system, giving power to a fundamental institution.

Stable well paying jobs from the past are disappearing

GJ would more directly address unemployment by providing jobs to workers. The guaranteed jobs are not claimed to be a perfect substitute for free market jobs, but are a tool to support employees financially, help them find meaning in their work, and give them the skills to re-enter the job market of their own accord. GJ are preferred from a Managerial perspective (Godard, 2011) as it better prepares employees for the job market.

GJ would still continue to enforce a work oriented culture within society, and won’t help those who cannot fully apply their skills. It would help motivated individuals to find temporary work and reorient themselves in the workplace, maintaining income and important skills (Tcherneva, Waye, 2005). As an employer, the government is likely to adopt a Post IR stance (Godard, 2011), with large bureaucratic systems and socially conscious motives.

Moreover, the fundamental difference in the programs is how contingent the government social support. GJ would require residence to work to obtain government support and also be contingent on a higher level bureaucracy to implement compared to BIG. Even with automation and technological improvements resulting in decreased the costs of a Post IR system, GJ would still be acting as a socially connecting program, with expensive in-person operations.

As an employer, local governments would need to offer jobs that allow members to gain evolving skills sets, in order to get an non GJ job in the future, otherwise the government employees would have little mobility, and government corporations would be forced out of business by private entities. Governments are slow movers in terms of innovation (Akin, 2017), limiting their effectiveness as employers in a rapidly changing technological world.

Inequality

Recently, despite society having become more productive, only the top 20% percent (and more specifically the top 1%) have captured these gains (Godard, 2011). Thereby, the standard of living has stalled for many people and decreased for others due to the changes in the economy, e.g. the loss of manufacturing jobs (Tencer, 2015).

The lack of purchasing power compromises one’s ability to access important goods and services such as healthy food, dental care, recreational activities to name a few. From a Liberal reformist and Radical perspective, inequality helps to cement a hierarchy and help exercise control over others, ultimately limiting their future upward mobility (Godard, 2011).

Inequality and Automation

Inequality is rising and will be exacerbated by automation, primarily from the aggregation of knowledge and data as evolve into a knowledge based economy (Acs, de Groot, Nijkamp, 2001). Large companies have thousands of extremely intelligent people to aggregate knowledge attracting them with with exorbitant salaries (Hyde, 2015), harnessing the petabytes of cutting edge data collected. With improvements of AI, the knowledge chasm between the layman and large institutions widens as better data analysis and aggregation techniques are developed (Timson, 2015).

This data manipulates citizens’ ability to make decisions, through forms such as targeted advertisement, (Grassaggeur, Krogerus, 2017). This highlights a fundamental problem with the neoclassical model; people do not have symmetric access to information as large institutions, which harms the free market (Godard, 2011). Automation will significantly increase productivity growth (Manyika et al., 2016), so it becomes a government duty to ensure citizens capture the gains.

Inequality continues to Increase, Source: NPR link below

Solution Comparison: Inequality

BIG would mitigate inequality by providing a minimum standard, allowing residents to access a decent life through their purchases. It also frees up time, allowing people to be aware of injustices, to exercise voting and civil action, and to gain education and skills to access more fruitful jobs, or possibly start their own ventures and become capitalists themselves.

GJ would limit the absolute worst of inequality, but do little to allow upwards mobility. Moreover, the role of governments as an employer is likely to be threatened by automation and the government’s lack of innovation (Akin, 2017). Governments will also be subsidizing training and recruitment costs for employers by providing a job-ready pool of applicants, raising profits for capitalist classes. Workers will still have to dedicate their time to corporate needs, limiting their ability compete with harmful data and capital aggregation.

Inflation

One of the claims against BIG is the inflationary pressure it will create by reducing the work to income ratio for members (Tcherneva, Wray, 2005). The resulting argument is that inequality will rise, as only the rich would possess the tools to hedge against inflation (Tcherneva, Wray, 2005).

Consumption is also likely to rise, as we become more productive. Lower variable prices will increase production and continuation of production. Citizens will also be engaged in their own recreational activities, thus creating an implicit connection between prosocial engaging activity, and money ‘earned’. People will also continue to work, so the potential inflationary pressure would only come from those whose jobs have been automated.

Moreover, the value of currency will not change as money supply will not be changing (Ragan, 2014), meaning consumers will still be able to buy the same number of goods with their income. The potential increase of consumption happening due to automation occurs regardless of BIG or GJ, since productivity increases would lower prices, leading to demand driven inflation. Regardless, an inflation adjusted system is possible for BIG, adjusting income based on productivity gains or the Canadian Price Index.

Power shifts of demographics and nation states

As baby boomers age, government programs such as OHIP, CPP, OAS will experience extensive strain due to the aging population (Kennedy, 2012). The ratio of retired seniors to workers, will shift from 27:100 to 1:2, putting pressure on government revenues, further destabilizing Canadian governments’ financial situations (Statistics Canada, 2014). Governments will either need to cut back on programs, innovate, raise taxes or find alternate sources of fund the programs.

Canada’s stability and cooler climate make it an attractive location for data centres

Along with government financial pressures, the power of nation states, including Canada, continues to erode. Transnational capital has massive influences over individuals’ lives (Robinson, Harris, 2000) and when analyzed from a Radical and Liberal Reformist perspective on the governments’ themselves (Godard, 2011). CEO’s, such as Mark Zuckerberg, have direct access to more people than most or all nation states (Facebook, 2016), creating an alternative model of governance and thus forcing nation states to change their roles. Key government roles, such as free speech moderation, are now controlled by companies like Facebook, as compared to governments in the past (Taranto, 2016). Governments are also fighting battles of tax evasion (Sakir, 2016) due to companies abilities to incorporate in tax havens and to threaten to leave nation states if they don’t receive tax breaks (Sakir, 2016). As corporate tax amounted to 36.6 Billion in revenue in 2014 (Department of Finance Canada, 2014), a loss of potential revenue gives corporations significant power.

Mark Zuckerburg is among the most vocal about the positive impact of AI

This transition of power, and demographic shifts, have weakened governments’ ability to balance objectives, thus threatening the orthodox pluralist governance approach (Godard, 2011). This limits the governments’ ability to provide for its citizens with reduced social services due to, with lesser financial means and the ceding of power to corporations. The reduced power also limits citizens and unions ability to self advocate, due to governments passing pro corporate fiscal, employment and labour law (Godard, 2011). Compared to governments (Benabou, Tirole, 2009), corporations have fewer prosocial incentives to provide accessible, socially beneficial services such as healthcare and infrastructure, due to a profit motive threatening these services. In the current system, neither BIG nor GJ would resolve this issue as they place greater financial and social burdens on governments and don’t deal with corporate power.

Elon Musk on the other hand is quite pessimistic

Automation context and Comparison

The rise of automation has the potential to resolve both of the linked issues. First, with automation increasing, companies become less reliant on human capital as component of production. This results in increasing the power of unions by reducing the overall percentage cost of employees (Godard, 2011). Canada also has strong educational institutions and a skills based immigration program (Hammer, 2012), further incentivizing for corporations to reside within Canadian borders.

Canada’s political and social stability (Kaufmann, Kraay, Mastruzzi, 2010) are also appealing for corporations, as stability is very important to protecting capital investments, which will only increase with automation. The cold climate also incentivizes building data centers (Stoller, 2012) to power all the technology and automations. These factors will increase the concentration of companies within Canada and return power to Canadian governments’.

With the return of companies, BIG and GJ become a mechanism to help maintain government leverage over companies. BIG provides income for residence, limiting incentives for crime and antisocial behavior (Payne, 2011), resulting in increased stability (Lacy, 2017). GJ would provide this benefit, but also would occupy citizens and reinforcing existing social structures of work being a core and mandated part of our lives (Uggen, Shannon, 2014).

Jobs require close interpersonal interaction leading to communities forming

Implicitly, BIG forces corporations to be more prosocial, as they now almost exclusively have to focus on consumer experience. In a previous work focused world, corporations had opposing forces to balance, supply side (worker) satisfaction with good working conditions and reasonable pay, with demand side satisfaction of low prices and high availability (Kramer, Porter 2011). GJ keeps this paradigm by enforcing current work structures, as compared to BIG which does not interfere with the labour market, and thus allows companies for fully automate. As (Widerquist 2004) puts it: “…BIG offers the freedom to say ‘no’ to undignified forms of employment…”. Automation also incentivizes difficult, low paying, exploitative work to be done by robots (cite). Given consumption driven economies are likely to stay (The Economist, 2016), the benefits of good demand side relations will still benefit citizens.

BIG and automation change corporate and government calculus, allowing governments’ to better balance objectives and care for their citizens . As governments are assumed to be unique prosocial actors under this identified problem, limiting corporate power and empowering citizens become a priority. BIG better achieves this objective through empowering citizens with social structure choice and non contingent payment, and allowing companies to focus on the demand side benefits, leading to more pro consumer outcomes.

Final Recommendation

The GJ and BIG intend to give citizens a decent life with two key differences; the degree of government involvement, and the contingency of social assistance. In the wake of automation, governments should adopt a BIG program, allowing greater individual agency.

Automation will make it very difficult for the government to create jobs that are prosocial or productive; robots will be able accomplish these tasks regardless. Governments should transition to a BIG system and give citizens avenues to engage in prosocial activities or start their own businesses. This allows for social mobility while allowing individuals to choose their life priorities, empowering individuals. Government assisted or provided activities can mirror those of guaranteed jobs; recreational sports leagues, enhanced access to education, volunteer societies, designed for enjoyment and productivity, but not contingent on work. Citizens could also self organize and treat these recreational activities as their avenue for passion, social commitment and identity.

Financially speaking, both programs will be costly. GJ would incur similar costs as BIG, since corporations will have a decreased need for human labour (Manyika et al., 2017), forcing governments to almost fully subsidize work programs. GJ programs also have organizational and procedural overhead, which is minimal for BIG. Cheaper programs result in greater political will to implement such programs, allowing better and quicker implementations.

Financing BIG with the rise of automation can be done by taxing robots as human equivalents, but at a significantly lower rate than income tax, given productivity gains. (Delaney, 2017). While this may discourage automation, the difference in human and robot variable costs still incentivize automation development. Moreover, automation is a huge market (Feldman, 2016) for companies to make money, thus creating a race regardless of taxation. BIG would allow governments to focus on negotiating with companies on taxes, rather than guaranteeing jobs.

Conclusion

To successfully implement a new program, the governments of Canada must pitch BIG and its associated social programs very carefully. Changing a single word, such as estate tax to death tax (Birney, Graetz, Shapiro, 2006), resulted in a massive public opinion swing, showing the power of perspective in policy. Given how important work is to our daily lives, governments must correctly plan and pitch a universal income guarantee in order to adapt to a new, automated world.

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