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Universal basic income

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Both are tech billionaires, both are philanthropists and both have sounded dire warnings about job losses. Bill Gates and Mark Zuckerberg are concerned that technology and automation will eliminate millions of jobs around the world in the coming years.

In response, Bill Gates has recommended the introduction of a robot tax to fund other types of employment for those whose jobs are displaced by machines. Gates believes that the owner of a robot that takes your job should pay a robot tax to help retrain you.

Mark Zuckerberg, on the other hand, has recommended the introduction of a universal basic income to combat the rise in jobless workers. Zuckerberg believes that the spread of automation will require some kind of free pay-check from governments - possibly funded by a tax on robots.

Last week, in my post, Robot tax, I argued that requiring robots to pay income tax like any other employee is not a good idea. This week, I’d like to argue that an unconditional income paid by a government to all its citizens - regardless of whether they’re in work - is equally not a good idea.

Let me firstly say that I understand the rising drumbeat of worry about robots taking human jobs. But as I pointed out in a recent post, Robot workers, I believe that the threat has been grossly exaggerated. According to the OECD, only 9 per cent of jobs are at high risk of being replaced by machines by 2020.

Even if the OECD is wrong and many more jobs are lost to automation, providing all citizens with a universal basic income is not the answer. Giving everyone free money - courtesy of the government - will not solve persistent unemployment or under-employment.

Most people want jobs, not handouts. The focus, therefore, should be on helping people adjust to change, just as we have since the Industrial Revolution. This is the very point made by US political commentator, Rob Tracinski. In an opinion piece, he stated:

…helping people to adjust by putting them on a permanent welfare subsidy is the worst and cruelest response, precisely because it pays them not to adapt to the new economy.

Tracinski notes that the transition to the age of automation will not happen overnight. He says that people will have time to adapt as “the future doesn't come that fast”. Workers should be encouraged to seek out the new jobs that will become available as the old ones fade away.

Tracinski acknowledges that the transition may be tough for some workers, adding that:

…it is harsh for those who are unable or unwilling to adapt and develop the new skills required for the new work. And that's precisely why the basic income is such a disastrous idea, because it is a massive disincentive for precisely that kind of adaptation.

Canadian academic, Katharina Nieswandt, takes a similar line to Tracinski. In her paper, Basic income after automation? That’s not how capitalism works! Nieswandt observes that under capitalism, technological progress results in more products, not in more leisure. She states:

Factories that improve their efficiency don’t shut down and send workers home early - workers keep the same hours and crank out more goods….The premise that automation will make human work superfluous flies in the face of all historical evidence. The dream that machines will someday do most work for us is almost as old as mankind.

In 1930, renowned British economist, John Maynard Keynes, wrote:

We are being afflicted with a new disease of which some readers may not yet have heard the name, but of which they will hear a great deal in the years to come - namely, technological unemployment. This means unemployment due to our discovery of means of economizing the use of labor outrunning the pace at which we can find new uses for labor.

These sentiments confirm that our present-day anxiety over jobs being taken over by robots is not dissimilar to the fears of earlier generations. These fears led Keynes to make his now famous predictions that his grandchildren’s generation (present day workers) would only work 15 hours per week.

A universal basic income has become a popular policy proposal, particularly among Silicon Valley luminaries. In addition to Mark Zuckerberg, Tesla and SpaceX CEO, Elon Musk, is also a vocal advocate of cash handouts as a social safety net in the form of a guaranteed monthly income just for being alive.

Call me old fashioned, but I still hold dear to the ideal of working hard to get ahead. Money for nothing is not the solution. Indeed, a stipend paid by the government to everyone smacks of socialism. This would move societies from having pockets of state dependency to all citizens (to varying degrees) relying on welfare.

I’ll leave the final word on this well-intentioned but impractical idea to the Austrian Institute of Economics:

A universal basic income is not the god-sent welfare policy that it initially seems to be. It does not create incentive to work. It won’t help solve unemployment, and it will not alleviate poverty. The truth is that a UBI will exaggerate all of these factors in comparison to what would exist in a more unhampered market. There is even reason to think that it would be worse in the long run than traditional, means-tested welfare systems.

Paul J. Thomas, CEO


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CEO Paul Thomas