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It’s Raining Cash: Hawaii Suggests Implementing a Universal Basic Income

 9 min read / 

Hawaii has made ripples this week with the announcement that the state is one step closer to implementing a Universal Income (UI). The plan, in which the ‘government would regularly send everyone in each country/state/city money just for being alive,’ is being discussed and methods of implementing and sustaining the project are being devised. What is Universal Income (UI)? What is its purpose? What is it fighting?

Definition and Aim

UI is ‘a periodic cash payment unconditionally delivered to all on an individual basis, without a means test or work requirement.’ Under a UI program, citizens would be guaranteed an income independent of their status or circumstance. Whilst the idea is not new, as former US President Richard Nixon pondered upon a similar scheme in 1969, it has gained traction recently in the wake of disruption by existing and proposed jobs losses resulting from technological unemployment.

Technological entrepreneurs, including Elon Musk and Mark Zuckerberg, have voiced support for the scheme. The programme could alleviate poverty, stimulate productivity, reduce crime, improve health care, raise education standards and the total amount of individuals educated.

Compared to welfare and benefits, which also provides the necessities, from access to food, shelter and water, UI goes further by allowing an individual to participate in the economy, providing the person with more power to direct their future and with less bureaucratic and paternalistic oversight due to using food stamps, preloaded cards or registering transactions. Furthermore, one could also submit that rather than penalising work, like needs based welfare does, a basic income does not affect those who are working as working will still yield the same value.

Necessary to Fight Automation

Throughout history, humans have been finding new, more efficient methods to produce goods and work, from replacing horses with cars to creating agriculture and cultivating livestock rather than hunting. The most poignant example is the replacement of cashiers with self-service machines, reducing the human capital of say 15 workers on minimum wage, with 1 human overseeing 15 machines.

The issue with intelligent machines replacing humans is that no human can compete with the machine for the job. Whilst this currently does not include emotional intelligence and is limited to routine and low-level jobs, machines in these positions need no holidays, suffer no sickness with no personal nor family issues warranting time away from employment. The rise of the automated workers is strengthened by the efficiency they bring, ultimately trickling value to shareholders.

The shareholder primacy principle, that a company is predicated on creating economic value for its investors, promotes hastily adoption of new automation, since replacing workers is different than companies simply streamlining by way of redundancy. Instead it is a way of eliminating jobs without depleting a firm’s capacity to deliver economic value over time as there is no downtime between restructuring and restarting production.

This joblessness also creates a further issue; a difficulty with retraining, particularly with older workers. Especially with the pace of technological innovation, those left unemployed and replaced by the automated machinery will find it difficult to find work within the same sector/skill level. As a result, they will be compelled to acquire new skills. Even if one would continue working alongside these machines, employers could experience a skills-gap, as workers lack the necessary knowledge to be able to work efficiently with the new machines, potentially undoing the expected efficiency boost as workers slow down the entire process by inefficiently using the machines.

Ultimately there has been a paradigm shift, despite machines replacing more workers, the world economy is continuing to grow, shifting the work from a human labour force to an automated one. This could have the effect of concentrating more money in a smaller, wealthier section of society as only a small percentage has a significant equity hold in the large companies utilising and developing this technology. The profits generated from the efficient use of machines will go to an ever-decreasing proportion of society, perpetuating a cycle as these wealthy investors put their money into more technology-based investments, eventually leading to the majority of goods and services being created and serviced by machines.

Funding

When UI is raised as a talking point, a fixation of the observers is funding the program, which at current estimates, would add $2tn to the US federal budget. Where does the money come from? How is it distributed? One novel suggestion is taxing automation and the increasing advances of technology, since humans cannot compete with robots.

Bill Gates promotes this idea, basing his arguments on the fact that a human worker is taxed for the income they make from producing work for a company, thus questioning why a robot that produces the same work should not be taxed at the same level. Further, the tax from the worker goes to funding other work, from government to public projects to welfare schemes, and automation essentially depletes the pool from which the government take tax from. This is exacerbated by robots which replace multiple workers or who change the type of work.

Yet, there are several difficulties with this suggestion.

Taxing automation to slow down adoption and stifle automation growth has negative effects – slowing adoption, for example in healthcare sectors, in order to promote the adoption of human workers, whilst noble, would sacrifice advances in the sector that could promote more benefits for society as a whole, such as faster and better services, more efficient work, reducing cost and even ensuring more people are serviced by the sector. Taxing automation and thus essentially forcing adoption of human workers could make healthcare costs rise as prices soak up wages. Deliberately inhibiting the growth of a technology that can save labour, service more people and facilitate greater economic capacity is absurd.

Secondly, should the US implement an automation tax, in order to promote the adoption of US workers, what would be the response from firms if another, first-world nation, does not impose a tax (or even actively offers subsidies)? What if different nations have different rules or non-implementation? One nation refusing to tax could create competition issues between firms and labour forces. This risks harming the economy more than automation would help. Further, even if the robots are taxed, the amount would have to be significant enough to deter using automation, particularly if automation completely surpasses human workers. Even so, automation and AI have not had the ‘apocalyptical’ impact they are professed to have just yet, in fact, Erik Brynjolfsson, a researcher at MIT’s Sloan School of Management, opines that, ‘The idea of a basic income is a good one in a world where robots do most of the work, but we probably won’t be there for 30 to 50 years. While automation is replacing many jobs, it’s also creating new ones.’

Moreover, should one tax robots, where does one draw the line? Is the condition taxing procedures and processes that eliminate jobs? If so, vaccines, self-service kiosks and soon, self-driving cars, will need to be taxed too. This presents a very slippery slope.

On UI, Bill Gates opines that nations are not ‘rich enough,’ to finance such an operation, since countries simply cannot afford the capital to pay someone the amount required, without a contribution. Could this contribution come from taxing idle money? A demurrage of sorts, purporting that individuals carry the cost of money laying unused in banks. Whilst this could perpetuate currency cycling, instigating a negative interest to pay into a collection fund for UI is unattractive.

Considerations

Fundamentally, UI is only implementable by stable nations with relatively reliable economies as the burden of implementation, facilitating and ensuring it works as intended will require constant overwatch. This is also followed by the difficulties of families with more children or that live in different areas or with unique circumstances. There exists a disparity in income power, for example, a family in London may require more UI than one in Preston, a northern town in England. On top of this, simply giving individuals money is flawed. Coupled with UI, there would need to be the distilling of essential financial advice, as giving people more money is not enough, they need to be educated in how to use it.

Overhyping Automation

Currently, we cannot foresee the conditions of the future, from advancements in 3D printing bring costs of goods down, to agricultural production decreasing in price as new machinery is used and better methods are adopted. For one, it is entirely possible that there will be a creation of new jobs after automation becomes more widely adopted (including using AI). This is, of course speculation, because we cannot predict the future.

This shows the difficulty with discussing technology as we cannot know how far a new advancement will take technology, alongside the fact that it is prone to being overhyped. The more threatening a technology, the more likely mass media will see it. Furthermore, one runs the risk of oversimplifying the speed of automation and AI implementation. To take the legal industry for example, software and AI dedicated to research tasks should have disintermediated low-level legal workers, yet it instead freed up more work time to conduct other tasks. Lawyers, rather than being replaced by AI that collected information in seconds, were augmented, lowering client costs, presenting better and more well-researched arguments and used more time to conduct truly legal jobs, such as those that require emotional intelligence. On this point, currently AI has yet to replicate human emotional intelligence, a niche AI rather than Human grade AI, cannibalising routine, non-emotionally intelligent jobs.

Conclusion

The pilot schemes and research tasks in previous years have shown some successes, but whether or not the program can be a solution to technological unemployment remains a good question. UI is also politically ambiguous, from being seen as a vehicle to dissolve the welfare state to a “capitalist road to communism.” As such, the type of UI that will be discussed will depend on the political nature of the inquiry. Will it be heralded as the solution to our ever increasing technological development? Or is it a reaction to needless worry?

 

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