Does Technology Make a Universal Basic Income Inevitable?

08 Aug 2017 12:27 PM | Mike Lillich (Administrator)

By Oren Levin-Waldman

First published in the Yonkers Tribune.

Among the discussions that were held when policymakers first legislated a minimum wage was what constitutes a liveable wage. Should a minimum wage be a living wage, i.e. enough to support a worker and her family? Some early reformers contended that it should be a “family” wage. What we achieved through our incremental policymaking process was a wage to provide no more than minimal sustenance. And yet, the question remains: could the minimum wage be viewed as a first step on the way to a Universal Basic Income (UBI)?

he idea of a UBI is not new, but has captured the imagination of some, particularly in the Silicon Valley, who have perhaps raised a question that nobody really wants to address: does technology render work, especially low-skilled work, obsolete that all citizens will need to have a minimum basic income as a matter of right? In other words, does the process of creative destruction that Joseph Schumpeter identified make a UBI inevitable?

Schumpeter’s theory of creative destruction holds that the old and obsolete are replaced by the new and technologically more advanced. Just as auto manufacturing replaced buggy whip manufacturing and this was a measure of progress, high technology companies requiring highly skilled workers replacing low-skilled manufacturing is also considered to be progress. It is commonly assumed that everybody will be reabsorbed into the economy. But those who unable to acquire the skills needed for the new economy have been reabsorbed into the low-skilled service economy.

Let’s consider for a moment just what is going on. By many measures the Industrial Revolution that resulted in manufacturing replacing the old commercial craft economy was considered progress. And yet, highly paid craftsmen who were independent were now forced to accept barely subsistence wages as low-skilled assembly line workers in the factories.

It was through labor market institutions like unions that these low-skilled jobs were transformed into middle class jobs. In other words, the economic transformations that were occurring in Nineteenth Century America made labor market institutions that would bolster wages inevitable.

Now that we are in a more global economy where the effect has been to exert even more downward pressure on wages, especially at the low end, labor market institutions are more critical. A higher minimum wage could no doubt have the same effect of transforming low-skilled service jobs into middle class jobs.

The critic, however, will respond that mandating a higher minimum wage, especially a $15.00 an hour minimum will only be counterproductive as employers will find it more cost-effective to substitute technology for workers. Therefore, wages should remain low, and if necessary these workers can receive subsidies.

Subsidies? If we are going to have to subsidize their low pay, then why not simply provide workers with a universal basic income which allows them to live in dignity? Of course, if people then want to supplement their UBI with even low-wage work, they can do so. In other words, isn’t technology that resulted in our well integrated global economy only making it a foregone conclusion that everybody will need to receive a UBI?

Of course, the concept raises some serious questions. The first and obvious one is just how much would this cost and who would pay for it? If people receive a UBI would they not have less incentive to work? If as a result of fewer people working, we have fewer tax payers, then the first question of how we pay for it is even more important? If more people receive a UBI and opt not to work, does that not make us more dependent on the state, thereby eroding personal autonomy even further?

It is possible that there could be hidden benefits to the economy. The concept would transform the nature of work as we have understood it. Until now, work has been understood as that which is necessary because workers are needs traders who have to work in order to make a living. But if everybody were to receive a UBI, workers would be working because they want to.

Workers, just like their employers, would become wants traders and could use their desire to work as a new protection against exploitation. The employer, after all, can exploit because he has the power to do so and the worker needing wages is at his mercy. With a UBI, workers who are exploited simply walk away. It is now conceivable that employers who still need actual workers will be forced to pay higher wages in order to attract workers who otherwise don’t really need to work.

Therefore, it is possible that a UBI could result in supply-side effects in that more workers will be attracted into the labor market as employers are offering higher wages. We could also see more flexible scheduling, more family friendly workplaces as employers seek to make work more attractive. Workers working because they want to could be beneficial to society as a whole.

Of course, high paying employers have already been doing this, but now low-paying employers would be forced to offer similar inducements. There are those who will argue that a UBI is exactly what is needed in the face of rising inequality, but those with skills who continue to work for high technology companies will continue to receive higher wages on top of their UBIs. There will always be income inequality.

On one level, a higher minimum wage could be viewed as a first step on the way to a UBI. It helps us figure out the level for this UBI. On another level, the UBI renders the minimum wage obsolete. Workers will get their UBIs from the state and their employers will be forced to pay them wages that make them want to work. Because they want to work, they will be more efficient, in which case the wages they are paid are efficiency wages.

Will the labor force be smaller? It is possible that fewer people will want to work. But it is also possible that more people will be working, except that they will be working part-time because they want a better balance between work and family. Still, we are left with the question of cost.

And yet, when we consider the costs of the current welfare state, it may be that a UBI, which would replace all social programs might not cost that much more. The real challenge is that by creating a greater role for government it challenges American conceptions of independence. But then again, those conceptions have been under assault from the march of technology which may be making the UBI inevitable.

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