Do we have a solution to two of the world’s biggest problems: Inequality and Artificial Intelligence (A.I.) replacing human beings at work?
Well, we have part of the solution. It is called Universal Basic Income (UBI), which essentially means giving out a salary to all citizens regardless of circumstances. This salary would cover basic costs.
How would UBI solve the problems of inequality and unemployment caused by A.I.?
For the past 20 years automation has been replacing low skilled labour. Between 1990 and 2007 in the USA alone, 670,000 jobs were lost to robots in the manufacturing industry. That number has risen to four million manufacturing jobs being automated in the last decade. Drivers will be facing the same fate with the rise of the driverless car. More complicated jobs that require higher skill levels are now under threat also as A.I. advances. A widely cited study from 2013 projects that 50% of all jobs in the USA will be automated in the next 20 years.
(Please see my article on why we should be worried about robots taking over our jobs.)
UBI will provide a safety net for a large number of people that will be made redundant through AI. It will also provide basic costs for people who are facing difficulties making an income for any reason, whether mental health problems, accidents, traumas or are just having a hard time finding a job that is suitable.
A basic income would reduce homelessness, petty crime, and many illnesses caused by stress. This would reduce health care spending, and other public costs, not to mention improve everyone’s quality of life.
In addition, a UBI would provide the opportunity for people to spend more time looking after their children, aging parents, and even neighbours in need. This in turn would address a number of social problems such as a lack of childcare, and elderly care, addictions, and plain loneliness to name a few.
This solution leads to one main question: how would we pay for UBI?
The response is simple, ensuring everyone pays taxes at a global level. That means we remove tax havens from the world which allow the wealthiest companies and individuals to evade taxation, and which forces the rest of the world to make up for it.
Tax havens force countries to offer lower and lower tax rates – or tax incentives as they are called – to attract big business; since these companies can establish headquarters in tax haven countries and still operate anywhere in the world.
If a country or a few try to enforce the same taxation system on these large global corporations that they apply to the small and medium companies, without a global system that supports this principle of fairness, that country would lose out as these corporations will leave and set up where governments give them a tax break.
I am not promoting to tax the rich more than we tax the poor, I am promoting that we tax them at the same rate. Currently the low- and middle-income people are taxed at a higher rate than the wealthiest in the world. Just that small adjustment will bring billions into the world economy.
The Tax Justice Network estimated that wealthy individuals hold approximately $11.5 trillion worth of wealth offshore. That is about one quarter of all global wealth, and equivalent to the entire gross national product of the United States. The entire global aid budget to address poverty in developing countries could be covered two to three times over by the estimated $ 250 billion in taxes lost on just the income that money earns each year. This only represents money lost on wealth individuals hold offshore; it does not include the wealth and lost taxes of corporations.
Tax havens allow big corporations to get away with tax rates of 0.0032%. In 2006 the world’s three biggest banana companies did nearly £400 million worth of business in Britain but paid just £128,000 in tax between them. In stark comparison to individuals that are charged a tax rate of 40% on any income above £45,000 in the UK.
A Universal Basic Income is Not a New Idea
The idea of a basic income for all dates back to the early 16th century. Thomas More‘s Utopia depicts a society in which every person receives a guaranteed income. In the late 18th century, English radical Thomas Spence and American revolutionary Thomas Paine both declared their support for a system that guaranteed all citizens a certain income. Nineteenth-century debate on basic income was limited. However, by the early part of the 20th century discussion on the topic picked up again. Bertrand Russell was one of the main proponents, and he included it as a main component in his new social model.
Has UBI ever been tested before?
Several pilot experiments have been conducted in various forms, however they all have end dates, such as the Finnish experiment that lasted two years, and the on-going pilot in California, which is planned for two years. In the limited cases where they are continuous, they are either restricted by certain factors, like finding a job in a pilot conducted in Canada; or they do not provide enough to cover basic expenses such as the Alaska guaranteed income program, which pays each resident an average of $ 1,200 a year.
These experiments do not give us enough evidence to draw conclusions about the UBI system because none of them adhere to the three main conditions; 1) it is provided to all residents whether they have a job or not, 2) it covers basic expenses, 3) it is continuous. Without these three conditions it would not be possible to judge how people would react. If people knew the income would stop or decrease once they got a job that is a disincentive to work. If people know this income will only be paid for two years they would probably act differently than if they knew it would continue until they died. And of course, if the payment does not cover basic expenses then they do not have the luxury of waiting for better job opportunities or spending time setting up a business which usually takes a while to create profits and may end in failure.
One test that is currently in action that could prove more conclusive is the one being conducted in Kenya by the non-profit GiveDirectly, where a whole community will receive an unconditional income for 10 to 15 years.
What are the Arguments Against UBI?
- How would we pay for it?
- Why should successful businesses pay unsuccessful people to sit at home?
- A UBI will lead to much lower productivity as people won’t have the incentive to go to work if they are receiving a free income.
Let’s look at these arguments one by one.
How would we pay for it?
This argument has already been tackled above. However, it is worth noting that there are other solutions that have been suggested. American presidential candidate, Andrew Lang, is proposing a UBI to be paid for through an increased value added tax (VAT). I would consider this a transitionary solution as it would only provide a portion of the funding required, however, it would be much easier to enforce than eliminating tax havens at a global level.
Why Should Successful Businesses Pay for People to Sit at Home and Do Nothing?
I agree hardworking successful people should not have to pay for people to sit at home. However, that is a deceiving way of putting it. Allow me to elaborate.
Ultimately companies need to operate where the market is. That means substantial population size and purchasing power. Without all the infrastructure available in a country, companies, whether small or huge, could not operate. That includes the transportation system, the technology, the education system, the healthcare system…etc.
If the population in these countries were sick or ill-educated they would not be able to perform the required jobs. They would not be able to afford the products. If the logistics and transportation were not running efficiently, companies would not be able to run efficient and reliable operations. If the urban planning was a mess, or the utility system was not effective, again running a business would be extremely costly. One just needs to look at countries where these systems are failing to see how difficult it is to run a business there successfully. Not many people are rushing to invest in Somalia.
All these well-functioning systems are using hard earned taxpayer money from all citizens to maintain. Thus, it only makes sense that those that benefit from these systems and make enormous amounts of profit should pay back into it. At present people that are employed or are running a small to medium enterprise are the ones footed with the bill to support this system while those benefitting the most pay a proportionately much lower share.
By paying taxes companies are not paying people to sit at home even if a UBI system is implemented. They are paying for the infrastructure.
Will UBI Lead to A Lazy Population That Does Not Want to Contribute to Society?
There is an assumption here. That is people who don’t need to work for a living will sit around doing nothing productive all day. This is an assumption I disagree with. Granted some people in this position do nothing, but not the majority.
Having an income that satisfies our basic needs does just that, it satisfies our basic needs. Once a human being has reached that level of satisfaction s/he starts looking to satisfy the next level of needs, namely a need to achieve, to be accepted in society and to gain recognition. Humans look for belonging to something bigger than themselves, humans look for meaning in life.
Granted there are those who chose to ignore these needs. There are those who would rather remain in their comfort zones and let their talents go to waste. But we have those people in our society today anyway. You may argue that these people at least have to work now, they would not if they had a basic income coming in.
Let’s consider the implication of this.
If these people are so uninterested in their work and hate it so much that they would jump at the opportunity to quit, even if that means an income that just covers their basic needs, then as a society are we not better off with someone else that has more passion and commitment doing the job? Or with A.I. taking over if no humans want to do it? It’s better for society to allow people to live at subsistence level for free than forcing them to perform jobs they hate. Less stress, less healthcare costs, less use of transportation, less negative energy in the workplace.
UBI could actually increase productivity
A guaranteed minimum income would give people bargaining power in the market. If a company wants to hire people to do a job they are going to have to provide incentives. Even without a UBI system, people do not only work for money. They want a good working environment, the opportunity to learn, to grow, and to be heard. This will create better quality companies.
How Would this Work in Economically Poor Countries?
UBI is much more difficult to implement in poor countries as they don’t have the functioning economy to support the costs. The pilot in Kenya mentioned above is funded by an international foundation, not the government.
If we would like to see a more equitable world, not just a few equitable countries, and avoid the problems arising from a world where nearly half the world’s population live in poverty, then we need to find a way to help these economies support themselves so they too can implement an UBI system.
This has strong implications on how to structure aid money. However, that is another topic, to be addressed in another article.
Giving money out for free may seem like an outrageous economic setup if we compare it to our current economic paradigm. However, if we look at history, economic systems change over the ages as technology advances, and as societies change to rectify inequalities. We transferred from a barter system to feudalism to capitalism. If we could go back in time and ask someone living in the 17th century whether they believed it would be possible to be born into a peasant’s family and have the opportunity to become a lord, i.e. a land-owner, they would most probably have said no. We would probably receive the same response from a person inhabiting the 19th century during the industrial revolution, if we were to ask would it be possible to work a 40 hour week in a clean factory with safety standards, health insurance and a lunch break.
Time is running out. We need to adjust our economy to the new era of technology. If we don’t the system will change anyway, it always does. Change is inevitable. It will just be more disruptive in nature if we don’t cooperate.
I would love to hear your thoughts on this article. Please feel free to leave a comment below.
 Acemoglu and Restrepo, Robots and Jobs: Evidence from US Labour Markets, the National Bureau for Economic Research (NBER), Working Paper No. 23285, March 2017.
 Talk by Andre Lang, 2019 US Presidential elections.
 Frey and Osborne, The Future of Employment: How susceptible are jobs to computerization? Oxford Martin School, University of Oxford, September 2013.
 Shaxson, Nicholas, Treasure Island – Tax Havens and the Men that Stole the World. Great Britain: Vintage – Penguin Random House, 2016 (original edition 2012).
 United Nations Development Programme. “Sustaining Human Progress: Reducing Vulnerabilities and Building Resilience.” Human Development Report, 2014.