27 December 2015 Is basic income the answer to robots?

In October the government of Finland announced that it was going to introduce a pilot scheme to test the concept of the universal basic income.

The general idea behind a universal basic income, also known as a guaranteed basic income or basic income guarantee, is that everyone, regardless of employment status, receives a flat income from the government that is just enough to live on.

Work, therefore, becomes an optional extra. Without the stigma of ‘benefits’, we shall all be free to go write that novel.

Moreover, with the option of getting by without work, ‘capital’ (companies and their shareholders) has to work harder to please us, so working conditions will improve. Some argue that wages would also go up to attract labour, although others argue that they will decline, since the basic income will cover most requirements.

There is a lot wrong with the social welfare systems in Europe, therefore simplifying them is probably worthwhile. However, universal basic income makes me uncomfortable for a number of reasons.


Robots will take all of our jobs’

The arguments in favour, many of which were recently outlined by Tom Streithorst on the Coppola Comment website (which by the way is wonderful, so do press the donate button), are usually based on the following assumptions.

The first is that robots are going to take all of our jobs. This will create surplus labour, in other words mass unemployment that depresses consumption.

With no demand for the latest smartphones made by robots, ‘capital’ will no longer be able to make money. It will therefore be in owners’ interests to keep up demand by ensuring that everyone has enough money to live on. A universal basic income is therefore inevitable, the argument goes.

“The Basic Income Guarantee may well be only way we will be able to maintain demand in a post-work future” says Streithorst.

It is true that artificial intelligence is becoming, well, more intelligent. This trend has been obvious for some time. Many years ago as a bookseller in Charing Cross Road, my colleagues and I took pride in being able to tell the customer not only that we had the book in stock but exactly how many copies we had and on which shelf they could find it.

Those skills soon became redundant as a result of computerised stock systems, online retail orders and e-books. The flagship store I used to work in is now a licensed sex shop.

Does that mean that robots will inevitably destroy jobs? I am not so sure. This is not only because this former bookseller re-skilled and became an economist. It is also because the predictions might simply be wrong. In the 1970s it was universally accepted that oil would run out and we would all have to learn to live without it. That never happened. Long-term predictions are unreliable. The most important premise of the robot revolution may therefore be false.


Ignoring demographic shifts

The second assumption, that robots will create surplus labour, ignores the major global demographic shifts already under way.

According to the median forecast of UN’s World Population Prospects 2015, the population aged 15 to 64 of the ‘more developed regions’ (rich world) is projected to decline from 826 million in 2015 to 812m in 2020 and 765m in 2040.

In other words, the rich world will have fewer people of working age. With a smaller number looking for jobs, there may not be any surplus labour, so there might not be any problem at all.

However, no surplus labour is not a safe assumption. While the working-age population is projected to shrink, the population over 65 in these states is expected to soar, from 221m in 2015 to 325m by 2040.

This will also have an enormous impact on the current glut of global capital.

“Today, total financial assets are nearly 10 times the value of the global output of all goods and services,” according to Bain Capital’s 2012 ‘A World Awash in Money’.

Most of this capital comes from wealthier countries’ baby-boomer pension funds, all chasing the same tiny return and creating a lot of bubbles in the process. However, assets will begin to decline as those born in the 1960s start to retire and draw down on their savings.

This means that the rich world will see a shrinking labour market at the same time as the availability of capital declines. China will not make up the difference because its population, too, will decline. Quite what impact this will have on the global economy is difficult to predict. But one can be sure that it will be highly disruptive.

This is why I am uncomfortable with the idea that the capitalists will simply buckle and lend their political support to a universal basic income.

My hunch is that they are far more likely to live in denial for a long time and use their shrinking capital base to sell their products to the 1% who can afford them. This means more products and services to keep the wealthy safe from the diseased hordes.


Why no stigma?

The other assumption, that receipt of a basic income that everyone receives will somehow have less of a stigma than benefits, is also a tall one. As soon as recession bites, which one can guarantee it will, there will be political pressure to cut the income of the ‘scroungers’.

The final reason why I am so wary of universal basic income is that it will make us more reliant on the state. In this age of mass spying on populations and the resurgence of political extremes in Europe, that makes me very uncomfortable indeed.