Universal Basic Income
Introduction
The use of artificial intelligence (AI), automation, and robotics by businesses can create opportunities for economic growth and productivity gains. However, these technologies also have the potential to disrupt numerous industries, leading to the displacement and loss of millions of jobs worldwide. As tasks once performed by humans are increasingly automated, many workers find themselves facing uncertain futures and job insecurity. The World Economic Forum estimates that by 2025, automation and AI could displace 85 million jobs while creating 97 million new ones. According to Kristalina Georgieva, managing director of the International Monetary Fund, Artificial intelligence is hitting the global labor market “like a tsunami,” changing the job market dramatically. She also stated that it “could bring tremendous increase in productivity if we manage it well, but it can also lead to more misinformation and, of course, more inequality in our society.”
Job displacement and job loss can have severe financial and economic consequences for affected workers and their families. Without a steady source of income, displaced workers may struggle to make ends meet, leading to financial hardship, poverty, and even homelessness. Moreover, the economic uncertainty caused by job displacement can have ripple effects throughout the economy, impacting local businesses and communities.
As these new technologies continue to disrupt labor markets, a policy proposal called Universal Basic Income (UBI) is being considered by governments and proposed by technology leaders as a policy tool to address the negative repercussions that are already being felt. UBI is a government program in which every adult citizen receives a standard amount of money regularly, regardless of their employment status or income level. This unconditional payment is intended to cover basic living expenses and provide a financial safety net for all members of society.
Position
It is Coazt’s position that well-designed UBI legislation can be an effective mechanism to mitigate the adverse impacts of technological unemployment and promote a more equitable future of work.
Benefits
Mitigating the Effects of Job Displacement and Wage Inequality
- AI and automation are reshaping industries, rendering certain jobs obsolete. However, this doesn’t mean permanent unemployment need become prevalent. Instead, workers may transition to lower-paying, gig economy roles. UBI provides a safety net during this transition, ensuring financial stability for displaced workers. The benefits of automation disproportionately accrue to capital owners, exacerbating income inequality. UBI acts as a dividend for impacted workers and communities, effectively distributing economic gains more equitably to address wage disparities and promotes social cohesion and stability.
Encouraging Innovation and Entrepreneurship
- UBI has the potential to stimulate innovation and entrepreneurship by providing individuals with the financial stability and freedom to pursue their creative passions and intellectual ideas. With the assurance of a basic income, people may be more inclined to take risks, start businesses, or engage in creative endeavors that could ultimately drive economic growth and job creation.
Stimulating Demand
- UBI would put money directly into the hands of consumers, boosting aggregate demand and potentially offsetting any economic slowdown caused by job losses.
Safety Net Providing Economic Security
- UBI would act as a safety net for those displaced by automation, ensuring they have the resources to meet basic needs while retraining or searching for new opportunities. Financial security fosters a sense of well-being, allowing individuals to take risks and pursue education or entrepreneurship without the fear of financial ruin. This could lead to a surge in innovation and economic dynamism.
Enhancing Social Cohesion
In an era marked by rapid technological change, UBI can promote social cohesion by ensuring that no one is left behind. By guaranteeing a basic level of income for all citizens, regardless of their employment status or socioeconomic background, UBI can foster a sense of solidarity and shared prosperity. This, in turn, can contribute to greater social stability and resilience in the face of economic disruption.
A Human-Centric Approach
UBI acknowledges that work extends beyond mere survival. It allows individuals to pursue personal satisfaction, creativity, and community engagement. As AI takes over routine tasks, UBI empowers workers to explore non-traditional employment, entrepreneurship, or leisure without fear of destitution.
Implementation Considerations
Cost and Financial Feasibility
- Local, state/provincial, and national governments need to assess the financial implications of implementing UBI, including the costs of funding the program and its potential impact on their budget. This includes determining the appropriate level of basic income and identifying potential funding sources, such as taxes, dividends from natural resources, or savings from reduced administrative costs.
Impact on Workforce Participation and Incentives
- Governments must evaluate how UBI may affect workforce participation and incentives. This includes considering the extent to which UBI could theoretically disincentivize work, reduce labor supply, or encourage individuals to pursue education, training, entrepreneurship, or unpaid work.
Social and Economic Equity
- UBI should be designed to promote social and economic equity. Governments need to consider how UBI will impact income distribution, poverty levels, and social cohesion. They should also assess how UBI may affect different demographic groups, including low-income earners, the unemployed, and marginalized communities.
Complementary Policies
- UBI should be implemented alongside complementary policies, such as investments in education, job training, healthcare, and social services. These policies can help individuals adapt to changes in the labor market, acquire new skills, and access opportunities for economic mobility.
Impact on Government Programs and Services
- Governments need to evaluate how UBI will interact with existing social welfare programs, including social security, unemployment benefits, and disability support. They should assess whether UBI will replace, supplement, or complement these programs and how it will impact recipients.
Administrative Feasibility
- Governments should assess the administrative feasibility of implementing UBI, including the mechanisms for distributing payments, verifying eligibility, and preventing fraud. They need to consider whether existing administrative systems can be leveraged or if new infrastructure will be required.
Public Perception and Political Will
- UBI requires public support and political will for successful implementation. Governments need to engage with citizens, stakeholders, and policymakers to build consensus, address concerns, and communicate the potential benefits of UBI as a response to job displacement and economic insecurity.
Long-Term Economic and Social Impact
- Governments should consider the long-term economic and social impact of UBI, including its effects on poverty reduction, economic growth, productivity, innovation, and social stability. They should also monitor and evaluate the outcomes of UBI implementation to make necessary adjustments and improvements over time.
Examples
Finland
- Finland has piloted a UBI program to explore its effectiveness as a safety net during economic transitions. The most consistent interpretation of the results is that the program positively affected the participants' sense of well-being. Analysis of the economic results reveals that the participants had an increase in employment over the control group, although not statistically significant, perhaps due to the limited size of the program. The amount of financial assistance provided was less than the income of the average university student, and this may have also impacted the results. Implementation using a larger payment amount and in larger communities may increase the economic success factors. As more people succeed, more people become aware of the success stories and then more people participate in the program, ultimately creating a positive feedback loop.[1]
The Netherlands
- A study conducted in the Netherlands between 2017 and 2019 demonstrated the positive impact of UBI. Unemployed individuals who received basic income experienced reduced stress, improved health, and increased job search effectiveness, suggesting that UBI may foster resilience and adaptability in an automation and AI-driven economy.[2]
Conclusion
The rapid advancement and adoption of AI, automation, and robotics presents both immense opportunities and formidable challenges for societies worldwide. While these technologies promise productivity gains and economic efficiencies, they also raise legitimate concerns about unemployment, widening income inequality, and social instability. However, this era of disruption also provides an opportunity to reimagine our social contracts and economic policies. A well-designed Universal Basic Income, complemented by investments in education, retraining, and upskilling initiatives, can serve as a vital foundation for an equitable future of work. By providing a reliable income stream, UBI can mitigate the adverse effects of automation, foster economic security, and empower individuals to embrace the transformations ahead.
Sources
1. World Economic Forum. (2020). 85 million jobs at risk due to automation by 2025, World Economic Forum warns. WRAL TechWire. Retrieved from https://wraltechwire.com/2020/10/21/85-million-jobs-at-risk-due-to-automation-by-2025-world-economic-forum-warns/
2. Georgieva, K. (2024). Artificial intelligence hitting the global labor market ‘like a tsunami’: Implications for productivity and inequality. IMF Country Focus. Retrieved from https://www.usnews.com/news/technology/articles/2024-05-13/artificial-intelligence-hitting-labour-forces-like-a-tsunami-imf-chief
3. World Economic Forum. (2019). The results of Finland’s basic income experiment are in. Is it working?. Agenda. Retrieved from https://www.weforum.org/agenda/2019/02/the-results-finlands-universal-basic-income-experiment-are-in-is-it-working/
4. Nwanazia, C. (2021). Universal basic income in the Netherlands: would it work?. DutchReview Culture Society Living in the Netherlands. Retrieved from https://dutchreview.com/culture/universal-basic-income-in-the-netherlands-would-it-work/
