March 19, 2017    5 minute read

The Universal Basic Income and Automation: Man vs Machine

What the Future Holds    March 19, 2017    5 minute read

The Universal Basic Income and Automation: Man vs Machine

Gone are the days where automation was just an idea in the minds of science fictions writers. Robots are now a prominent asset in the workplace. Jobs ranging from bartending to accounting and medical diagnosis will be lost to automation. Any job that relies heavily on a set of predictable physical activities is highly likely to be automatised.

The findings of a report by McKinsey “Where machines could replace humans—and where they can’t (yet)” are shocking. In the report, the researchers looked at several factors leading to the workplace automation. The main factor was the ‘technical feasibility’ of certain activities.

Based on this factor, some fields are more vulnerable to automation:

  • 59% of manufacturing activities could be automated. Within this field, the researchers say 90% of the activities of welders, cutters, solderers and brazers could be done by a robot;
  • 73% of activities in food services and accommodation could be automated;
  • 53% of retail work could be automated;
  • 47% of the salesperson’s job could be automated;
  • 86% of bookkeepers, accountants and auditing clerks could be automated.

They also included jobs and skills with low potential for automation:

  • Education;
  • Healthcare, especially that which require expertise and direct contact with patients, like dental hygienist;
  • ‘Knowledge work,’ including management jobs. 

The Pluses and Minuses

The cost of this shift towards robots can be an issue in the whole process. The cost of development and deployment compared to the cost of hiring a human workforce is a factor that should be studied. 

This needs to be weighed against the benefits of automation which include higher quantity and quality of output making up for the initial costs.

The Impact

During the elections in the US and Europe, candidates talked about creating jobs, taxes, the economy and trade. Most of the debate was about the effect of immigration on domestic jobs. However, nobody talked about the real threats to domestic jobs in the future: automation and computerisation.

In the US, there are approximately 3.3 million cashier jobs (2% of the total labour force). In supermarkets right now, one can already find self-service checkout kiosks. It is estimated that by 2025, those jobs will be permanently eliminated. This means that roughly 2% of American jobs will be gone forever.

3.3m cashier jobs in the US

Another example is truck drivers. There are approximately three million truck drivers in the US. Daimler expects its self-driving 18-wheeler, now being tested in Nevada, to be ready for the road in a decade.

The robot-to-worker ratio is rising rapidly in factories around the world:

  • South Korea has a ratio of 4.78 robots per 100 workers;
  • Japan has a ratio of 3.14 robots per 100 workers;
  • Germany has a ratio of 2.92 robots per 100 workers;
  • The US has a ratio of 1.64 robots per 100 workers;
  • The global average is 0.66 robots per 100 workers;
  • It is worth noting that the developing world is more at risk of losing jobs to automation;
  • The global average is 57% jobs at risk. India has 69% jobs at risk, China has 77%, and Ethiopia has 88% jobs at risk.

A Potential Solution

To tackle this rising problem, Tesla’s Elon Musk suggests that governments should pay a universal basic income – a fixed amount at the subsistence level for all citizens, irregardless of income or work status.

The most obvious argument for a universal basic income is the elimination of households living below the poverty line. This will provide everyone with a base level of income security. Moreover, many predict that it will cause a boom in creativity and research. Others believe that it is a fair redistribution of the wealth generated by the technological boom.

However, the main case against a universal basic income is that governments might not be able to secure adequate funds to afford one for all citizens. Furthermore, it can act as a hindering factor to creativity as people will be content with what they are earning and that eliminates the incentive to innovate.

Some countries are already testing the feasibility of a universal basic income. Alaska has been implementing the Permanent Fund Dividend. Its value varies every quarter because it is based on the Alaska Permanent Fund which is a diversified assets portfolio. The results are encouraging. Spending and saving increase around the time dividends are distributed. The poverty rate fell from 25% to 19% over ten years.

The Northern Example

The Finnish government currently pays its unemployed citizens a basic monthly income in a trial program. The amount is 560 euros per month, equivalent to 16% of the average income in Finland. The income will still be paid even if the unemployed individual finds a job. If the trial is successful, they will extend it to other low-income groups.

To conclude, automation is no longer a fantasy. It is here and its impact should be part of the political/economical debate. The reality of more than half of a country’s population being unemployed will likely prompt many changes one cannot yet anticipate or be comfortable with. It is important to start the discussion now, before being confronted with more and more people who are out of the labour force because there are simply not enough jobs they can perform.

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