Why the robot uprising means we need Universal Basic Income

13 March 2018

Increasing automation and the use of artificial intelligence is threatening millions of jobs across the world. Maja Korica, Associate Professor of Management and Organisation, argues the evidence is pointing towards  Universal Basic Income (UBI) as the only solution for society.

Rising automation: countless articles have dissected it, Davos dedicated sessions to it, and industry heavyweights like Elon Musk and Bill Gates have weighed in on it.

Key questions have emerged. Firstly, what might the future of work look like as a result? Secondly, how does it connect to growing wealth inequalities in many Western economies?

Here’s what we know so far. Firstly, research has found rising automation in one location leads to greater job losses and lower pay in the same area.

Secondly, in countries like the US and UK, decreases in the official unemployment rate have matched expansions in the economy, but average salaries remained largely unchanged.

Thirdly, rising economic gains are being disproportionally captured by corporations. As Martin Ford outlined in The Rise of the Robots, in the US, from the mid-1970s, labour’s share of national income began to decline. In 2014, it stood at 58 per cent.

At the same time, corporate share of national income rose to its highest point since 1950. This trend in distribution of economic wealth is also international.

What jobs will be lost to automation and robots?

As The Wall Street Journal noted, the financial crisis was but a temporary setback. Fourthly, growing inequality facilitates access to low-cost workers for companies like Uber and Amazon, who greatly benefit from workers' lack of alternatives. This leads to more precarious work.

Finally, the potential scope of jobs affected by automation goes well beyond ‘blue collar’ jobs. Presently, 35 per cent of UK jobs are at risk of being replaced by automation. The OECD average is 57 per cent. For China, it’s 77 per cent.

Importantly, little of this is new. As Jeremy Rifkin argued in his 1995 book The End of Work, rising technological advancements mean the loss of certain jobs, increases in precarious work, and growing inequalities between those affected and those not. This has economic and political consequences, especially as the middle class continues to shrink as a result.

Suggestions that universal basic income (UBI) is the answer aren’t new either. As Rutger Bregman recounted in Utopia for Realists, almost 50 years ago, the US – the home of much contemporary libertarian thinking – was on the verge of introducing a basic income. It was backed by both political parties and 80 per cent of the public, while 1,200 economists signed a letter to The New York Times in support.

The proposal also followed successful trials in Dauphin, Canada, and US towns like Seattle. These clearly showed that UBI’s usual critiques didn’t stand up to scrutiny.

In particular, giving people a guaranteed basic income above the poverty line did not make them less likely to work, increase costs overall, or mean more government.

Instead, local experiments showed it encouraged proactive re-training and enterprise (with broader economic and well-being gains), decreased costs of bureaucracy from the existing maze of tax credits and deductions, and lessened government’s role in monitoring the jobless. It meant autonomy, as well as security - a win-win for all.

The economic case was there. Rather than economic, the issue of basic income was political. President Nixon’s 1969 proposal was eventually rejected in the Senate because Democrats believed it didn’t go far enough. It was finally dismissed in 1978 over (later disproved) concerns it had increased divorce.

Where is Universal Basic Income being trialled?

Would today be any different? Should it be? There is political will, at least for trialling the idea. In Finland, the Government is paying 550 to 10,000 randomly chosen people, as part of a two-year evaluation.

Meanwhile, 20 Dutch cities are conducting experiments. The UK Government is testing a similar system: universal credit. In a 2016 survey of 10,000 EU citizens, 64 per cent said they would vote in favour.

Arguably, current economic conditions make the case for broader, even universal basic income more pressing than ever. Many tax systems presume stable corporate jobs, and fixed careers, but modern work increasingly features neither for more and more job categories, with personal consequences.

Assumptions that technological advances will continue creating new jobs look increasingly questionable. Austerity policies have made concerns over the cost of government administration acute. UBI could address all these – in ways that don’t perpetuate precariousness, or shrink all state support.

In particular, having a set financial ‘cushion’ gives individuals more flexibility, and enables weathering more frequent job transitions. It would allow people to proactively retrain or create work they want, rather than being forced by their circumstance to take.

It would break the cycle of power disparities between corporations and workers. It may decrease the ballooning cost of government job-related oversight, including poorly done outsourcing of job benefits monitoring.

Of course, universal principles must stand up to local realities. For example, a recent comparison between basic income and universal credit in Finland argued that paradoxically, UBI may in certain cases lead to more inequality. The OECD suggested this for elsewhere too.

However, as the Financial Times analysis acknowledged, the UK’s universal credit implementation has been far from perfect, and Finland has high tax income rates. In other words, how UBI is implemented, and in what specific context, matters too. On-going trails should therefore be joined by others – to evidence local realities toward making it work.

Related course: Distance learning MBA (London)

Some principles are worth remembering though. UBI shouldn’t mean the full dismantling of the welfare state. Universal income matters little if a visit to the doctor, or paying education fees make you effectively bankrupt.

It should also not mean corporations are off the hook. As I’ve argued elsewhere, a dedicated ‘robot tax’ may be needed to ensure corporate gains from rising automation are at least somewhat redistributed to dismissed workers.

Beyond this, a greater focus on corporate tax income, including addressing tax avoidance, would help too, certainly with arguments suggesting UBI would be too expensive. While tax benefits for corporate re-training schemes sound appealing, they give the job decision (and power) to that corporation, not the individual.

One thing is clear. Given current workplace trends and growing inequalities, figuring out how to join principles and practicalities in addressing rising automation is more than a pressing concern. It’s long overdue.

Maja Korica teaches Organisational Behaviour on the Distance learning MBA and Full-time MBA. She also lectures on Critical Issues in Management and Managerial Work and Practice on the Undergraduate programme.