[Note: This item comes from friend David Rosenthal. DLH]
No Need For Basic Income: Five Policies To Deal With The Threat Of Technological Unemployment
By Henning Meyer
Mar 27 2017
The potential threat of technological unemployment is one of the most hotly debated economic issues of our times: in boardrooms and trade union offices but also increasingly amongst policy-makers. The catch-all term ‘digital’ may have been added to numerous political concepts in recent years but beyond such branding there has been very little debate of substance about what a comprehensive policy response to this threat should be. We do not know whether some of the more sombre predictions about large-scale job losses will materialize but we do know that governments and others need to be prepared if and when substantial labor market shifts occur.
The revived idea of a Universal Basic Income (UBI) is the cornerstone of the limited policy discussion under way. The idea is, of course, not new but has had numerous incarnations over many decades and been presented as a solution for quite different problems. The one that concerns us here is simply whether the UBI could be a solution for large-scale technological unemployment or temporary labor market dislocations that could result from accelerated technological change. When examining the issue in detail it becomes clear that a basic income would not solve many of the key issues. There are several reasons for this.
The first is that basic income in effect reduces the value of work to mere income. I know that many people disagree with this argument but that is how I see it. Making a living is of course a critical element associated with work but social aspects are also crucial. The social value that work provides is an essential source of self-esteem and gives people a structure to their lives and role in society.
There is also the danger of scarring effects. If people leave the labor market and live on the basic income for a prolonged period their chances of re-entering that market become very slim. Accelerated technological change is likely to make existing skills obsolete ever more quickly so it would be quite easy to lose the ability to work and remain stuck on basic income quasi-permanently.
This point in turn raises the question of inequality. Paying people a basic income would not remove the fundamental problem that in the digital economy some people will do extraordinarily well and many others find themselves left behind. One oft-heard argument is that if people want more money than basic income provides they can just work a few days. If the problem is technological unemployment, however, this option is simply removed as the large-scale loss of jobs renders it unviable. The digital economy would thus produce a new underclass stuck at basic income level and an economic elite that would reap the greatest benefits; it would also be largely free of social responsibility for those left behind as ideas for funding basic income usually rest on flat taxes and the abolition of public welfare provisions.
A universal version of the basic income would also represent a bad allocation of scarce resources. Whether it is paid out directly or provided as some form of tax credit, it is very unlikely that all of the funds that would be paid to people who actually do not need it can be claimed back via reformed tax systems if you take the allocation of existing tax systems as a benchmark. And why should a universal payment be a good solution for a specific problem?
Finally, there might be some thorny issues about when immigrants would qualify for the basic income and, in the case of Europe, how such a system would be compatible with the European Union’s freedom of movement and non-discrimination rules. In many countries, moreover, it would not be easy at all to abolish current pension systems – also an effect of basic income – as these embrace strict legal entitlements.