Universal Basic Income
Some fear that robots and AI will steal our jobs.
They probably will (in the near-term, at least half of them).
If that happens, what will we do for a living? How will we earn money?
In this blog I’ll be discussing one of the most important proposed solutions to job loss due to automation — the notion of “Universal Basic Income” (sometimes called guaranteed minimum income).
In specific, I want to discuss:
- Predictions on job loss
- What is Universal Basic Income? Who is experimenting with it?
- Does UBI work? What are the implications?
Let’s dive in.
Predictions on Job Loss
In 2013, Dr Carl Benedikt Frey of the Oxford Martin School estimated that 47 percent of jobs in the US are “at risk” of being automated in the next 20 years.
The figure was recently verified recently by McKinsey & Company who suggests that 45 percent of jobs today will be automated by using exponential technologies such as machine learning, artificial intelligence, robotics and 3D printing.
The concept is called technological unemployment, and most careers, from factory workers and farmers to doctors and lawyers, are likely to be impacted.
The impact will likely be even more severe in the developing world.
The expected implications of technological unemployment vary widely.
Individuals like Ray Kurzweil and venture capitalist Marc Andreessen believe that while today’s jobs will perish, new jobs will be created by technology to replace them.
Other experts project that technological unemployment will be massively disruptive to society.
Still others believe that society will adapt, first by constantly demonetizing our cost of living and next by the the widespread deployment of “universal basic income.”
(NOTE: In case you missed it, in a previous blog I covered, in detail, how we are in the process of massively demonetizing the cost of living.)
What is Universal Basic Income? Who is Experimenting?
Universal basic income (UBI) is a policy in which all citizens of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from other means.
UBI’s core motivation — to address social ills by giving people “free” money — is certainly not a new idea.
For some perspective, Thomas Paine outlined a plan in his 1797 essay “Agrarian Justice” to create a national fund making payments of 15 pounds sterling to each adult over 21 years old….
Today, experiments with UBI are spreading across the world, from Finland and the Netherlands to Canada and France.
In France, several members of Parliament have supported running an experiment, and the finance minister is open to it.
In the last decade, over eight countries have formally experimented with UBI. Here are the top three active experiments worth noting:
- Finland: Early next year, the Finnish government will launch an experiment in which a randomly selected group of ~3,000 citizens already on unemployment benefits will begin to receive a monthly basic income of 560 euros (approx. $600). That basic income will replace their existing benefits. The amount is the same as the current guaranteed minimum level of Finnish social security support. The pilot study, running for two years in 2017–2018, aims to assess whether basic income can help reduce poverty, social exclusion and bureaucracy, while increasing the employment rate.
- Netherlands: The local government in the Dutch city of Utrecht is planning to conduct an experiment that would give a guaranteed monthly income to 250 Dutch citizens currently receiving government benefits. A two-year test period is tentatively set to begin in January of next year, and some citizens of Utrecht and some nearby cities will receive a flat sum of €960 per month (about $1,100). The Utrecht proposal — called “Weten Wat Werkt,” or “Know What Works” — includes six test groups, and the members in each will receive slightly different stipends under slightly different conditions. In addition to the group that will receive €960 per month without any work obligations, there is a group that will be given that, plus an additional €150 at the end of the month if they provide volunteer services, such as doing maintenance work on schoolyards.
- India: Over 350 million people (about 30% of the population) remain below the poverty line after two decades of high economic growth. In that context, in 2011 India launched two pilots to test the impact of basic income grants, funded by UNICEF, with SEWA as coordinator. In eight villages in Madhya Pradesh, every man, woman, and child was provided with a monthly payment of, initially, 200 rupees for each adult and 100 rupees for each child paid to the mother or guardian; these were later raised to 300 and 150, respectively. They also operated a similar scheme in a tribal village, where for 12 months every adult was paid 300 rupees a month and every child got 150. Another tribal village was used as a comparison. The money was paid individually, initially as cash and after three months into bank or cooperative accounts.
In January, Sam Altman, the president of Y Combinator, announced that the San Francisco-based startup fund was organizing a basic income study in the U.S.
Does UBI work?
While the implementation of UBI at scale is still in its early days, the results are promising.
Early results in the India experiment show nutrition was improved as measured by the average weight-for-age of young children (World Health Organization z-score), and more so among girls.
In the same study, the UBI grants led to more labor and work, not less, as expected by skeptics.
There was a shift from casual wage labor to more self-employed farming and business activity, with less distress-driven migration out of the region.
Women gained more than men.
That being said, the most compelling study demonstrating how universal basic income could work comes from a small town in Canada.
From 1974 to 1979, the Canadian government partnered with the province of Manitoba to run an experiment on the idea of providing a minimum income to residents called MINCOME.
MINCOME was a guaranteed annual income offered to every eligible family in Dauphin, a prairie town of about 10,000, and smaller numbers of residents in Winnipeg and some rural communities throughout the province.
So what happened to families receiving MINCOME?
- They had fewer hospitalizations
- They had fewer accidents and injuries
- Mental health hospitalizations fell dramatically
- High school graduation rates increased
- Younger adolescent girls were less likely to give birth before age 25, and when they did, they had fewer kids
The program brought most recipients above Canada’s poverty line.
And the employment effects in Dauphin were modest. For primary earners — those with full-time jobs — there was virtually no decline in work.
Essentially, nobody was quitting their jobs.
Cash from the government eased families’ economic anxiety, allowing them to invest in their health and plan over a longer horizon.
MINCOME is now serving as inspiration for basic income’s comeback in Canada.
In its 2016 budget, the provincial government of Ontario announced plans to conduct a basic income pilot this year.
Implications
I’m fairly confident that in the near future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of universal basic income deployed at scale.
While I think the implications of UBI are mostly positive, there are certainly many complexities associated with its rollout.
There are still many questions that remain unanswered — where is the additional money coming from? Taxes?
Will UBI cause problems that we can’t anticipate or create more conflict than it resolves?
Can governments react quickly enough, given the pace of innovation and automation in tech? Is it actually a solution to technological unemployment? Or will we still have to go through a turbulent, violent period as we redistribute our labor in a world of robots and AI?
At minimum, I believe that with decreased costs of living, UBI will be one of many tools empowering self-actualization at scale — more people will be able to follow their passions, be more creative, and spend more time on higher-order, personally fulfilling tasks.
When this happens, we’ll be one step closer to a world of abundance.
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