ADAPTING TO AN ABSENCE OF WORK

We can make this work for humans

In an earlier blog post I explained why I think jobs are disappearing and concluded with the idea that this is a good thing. The only bad part about it is that, the way things are set up now, we need the majority of our adult population to be employed in order to feed and house themselves. If we can produce the things that people need to survive without requiring their labor, we can come up with an economic system that affords them access to those things without being contingent upon their labor.

Basic Income

Wikipedia describes Basic Income as “a proposed system of social security that regularly provides each citizen with a sum of money unconditionally.” The purpose of this, according to the US Basic Income Guarantee (USBIG) Network, is to ensure that “no one is destitute but everyone has the positive incentive to work.” That same organization goes on to describe Basic Income as “an efficient, effective, and equitable solution to poverty that promotes individual freedom and leaves the beneficial aspects of a market economy in place.”

The idea is simple: everyone gets a payment from the government that is sufficient for them to have access to “a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services.” This is something we’ve acknowledged to be a human right, in fact the language comes directly from Article 25 of the Universal Declaration of Human Rights.

If an individual wants to purchase luxury goods like a smartphone, a fancy car, designer clothes, etc. then they would need to seek employment to earn the money to buy those things. Her earnings and her consumption would, of course, be taxed — with every smartphone she buys she helps ensure the well-being of her fellow citizens and her society.

Political Viability

One objection to the idea of Basic Income is that it is simply not politically viable. The European Citizens’ Initiative for an Unconditional Basic Income is actively seeking signatures to make Basic Income a reality in the EU (I recommend their YouTube video for further explanation). But in the United States, a modified form of this idea may be necessary to be initially viable.

Let’s start with what the US already has and see how it could be modified to be more like Basic Income. One of the most effective anti-poverty programs in the United States is the Earned Income Tax Credit (EITC) which provides a cash transfer to the working poor which tapers off as they earn more, thereby providing an incentive to increase earnings. (Here is an excellent Planet Money podcast about the EITC.)

The problem with the EITC is that you have to be working to be eligible for it and if, as I’ve asserted previously, the jobs are going away, that’s going to be harder and harder for people to do. This leaves the unemployed destitute. To fix this we can make a small change and switch from the EITC to a Negative Income Tax (NIT).

The Negative Income Tax is an idea that’s been championed by Milton Friedman and more recently in a Bloomberg Businessweek article by Chris Farrell. Essentially the NIT is the same thing as the EITC but it also provides for those who are unemployed: as your earnings increase, starting from $0, your overall income increases but the proportion from the government steadily declines. Farrell asserts that it is “simpler to administer and offers a slightly greater reward for work” than the EITC.

If this idea still seems like it’s not politically viable because of a concern that “welfare queens” would rather take the minimum payment and never work then there are ways of varying the program to accommodate such pessimistic perspectives on human nature.

The program could be designed like a “Sabbatical Account” wherein the payment to an individual earning no money would be available for, say, two years at a time, after which the individual would either have to start earning money or all cash transfers would be stopped. They would then be eligible once again for a cash transfer when they have no income after a period of, say, one year. This would act as an additional incentive for people to seek employment, knowing that their income will go away eventually if they do not.

Basic Income would require less bureaucracy than a Negative Income Tax with a Sabbatical Account component and be less open to discrimination and abuse since everyone would receive the same payment regardless of their circumstances. However, as noted, the political viability of the latter approach seems greater.

Funding

Another objection to Basic Income or similar solutions is that we cannot fund them. However, according to a report from the Cato Institute (PDF), a Libertarian think tank: “In total, the United States spends nearly $1 trillion every year to fight poverty. That amounts to $20,610 for every poor person in America, or $61,830 per poor family of three.” In 2012, the same year as the report, the poverty level for a family of four in the US was set at $23,050.

So we do have the funds to lift everyone out of poverty, we just spend it on inefficient bureaucracy when we should simply be giving those funds directly to the people who need them.

Direct Giving

Current welfare systems generally rely on some sort of “means testing” to determine eligibility for assistance from the government (such as whether the person has been looking for work). Then once eligibility has been determined, the assistance may come in a less flexible form than cash such as food stamps or government housing.

Means testing and conditional giving have many flaws. They open the door to discrimination. They are paternalistic and derogatory to the recipients. And they are simply inefficient because it requires a costly bureaucracy to administer and prevents the recipients from applying the assistance as effectively as only they can.

The idea that poor people don’t know how best to help themselves is both condescending and unfounded. The idea of letting recipients spend money as they see fit is gaining traction because of increasing evidence that it is efficient and effective. There is even an organization called Give Directly which gives funds directly to poor households in Kenya, the positive initial results of which are discussed in another Planet Money podcast.

We need to start making the transition

As I said in my earlier blog post, I believe the jobs are going away. It will be a long time before the amount of work we need to sustain our needs and wants is negligible, but it’s coming. In the meantime, researchers at Oxford say that 45% of our jobs will be automated by 2033. We need to start making the transition from a world of scarcity in which an absence of jobs is a problem to a world of abundance in which an absence of work is a blessing; in which our freedom to pursue art and learning and compassion is a gift inherited from our ancestors who bequeathed us a better world; in which we can… play!

The goal of the future is full unemployment, so we can play. That’s why we have to destroy the present politico-economic system. - Arthur C. Clarke