Silicon Valley has looked into the future and seen what many of us are seeing – automation and technology are replacing jobs faster than businesses are creating them. What started as a mere murmurings has reverberated louder into an open call from some of the wealthiest businesspeople in the United States including Mark Zuckerberg and Elon Musk for universal basic income.
Universal basic income is a stipend paid by the government to individuals simply for being alive. The idea began in Europe and has been gaining momentum in several countries. The principal behind the idea is that it serves as a safety net for unemployment due to market forces such as automation. Several countries have begun experimenting with a basic income including an experiment run in Ontario, Canada, which distributed a stipend of $12, 616 as its basic income. The idea has started to gain traction in America.
Hawaii recently became the first state to make a major push towards a universal basic income. As of this May, the Hawaii state legislature adopted HCR 89 calling for the Department of Labor and Industrial Relations and the Department of Business, Economic Development, and Tourism to convene a basic income economic security working group to begin to structure a universal basic income. The relevant text from the resolution gives the group’s focus:
WHEREAS, while the United States is the wealthiest nation in the world, many families, individuals, and businesses in Hawaii have been struggling to keep pace with the increasing cost of living as economic inequality widens the gap between a few top earners and the middle and lower class, the latter of which has seen its overall share of income decline in recent decades; and
WHEREAS, efforts to increase wages, benefits, and working conditions are important steps to assist local families in the short-term, but a paradigm shift in policy will soon be necessary as automation, innovation, and disruption begin to rapidly worsen economic inequality by displacing significant numbers of jobs in Hawaii’s transportation, food service, tourism, retail, medical, legal, insurance, and other sectors …
Hawaii state representative Chris Lee led the push towards a basic income and predicted that Hawaii’s future economic troubles due to Silicon Valley innovations like self-driving cars and Airbnb to be potentially hazardous to Hawaii’s tourist-dependent economy. Though this seems to be an anticipatory measure, however; as of April 2017, Hawaii’s unemployment rate was at a ten year low. This fact didn’t stop the Democrat dominated state legislature from approving the measure.
In other parts of the country, calls in for universal basic income are growing. In California, Silicon Valley has made well known their support for a basic income citing the necessity of social security from the jobs they will take away with their businesses. In the media, a cursory search of liberal publications reveals a bolder comfort with an idea of providing a stipend to people for doing nothing. In Georgia, former documentary assistant turned congressional candidate, Jon Ossoff, went above and beyond agreeing to a $15 minimum wage and instead gave a nod to his California benefactors by saying he would push for a “living wage” in the final debate for the Georgia Sixth Congressional district special election. It’s easy to see the sly rhetorical distinction between “living wage” and “basic income.”
There is very little hope that this trend will change without forward-thinking leaders who will refuse to rest on lazy ideas like the universal basic income.
Our politicians have been able to see technology replacing jobs for decades now and made little adjustments other than to make more individuals reliant on the government for their economic well being. I echo what I wrote in The Hill last September that automation would require lawmakers to be innovative in their approaches for creating jobs. Many lawmakers and those in the best position to see automation replacing jobs, such as CEO’s in Silicon Valley, it would appear are opting towards a more top-down income redistribution in the form of a universal basic income rather than wrestle with retraining workers, re-calibrating the economy, or encouraging innovation to offset job loss.
This is to simply say: universal basic income is a lazy, socialist solution to future unemployment problems. There are dozens of issues with universal basic income, but I will list some of the bigger issues below. As to avoid being an armchair critic who only points out mistakes, I will also offer up some of my own solutions or alternatives to reposition our economy.
First, universal basic income stifles economic growth through exorbitant tax rates. To pay for a basic income that would be a living income or sustainable income requires taxation of wage earners well above 50% for the highest and second highest tax brackets. Offsetting high cost of living cities like New York, San Francisco, and Washington, D.C. would necessitate a tax rate unsustainable for most Americans. This leads to either a subsidy for poor Americans, or force many low-income individuals to relocate out of major cities. Needless to say, this exodus hampers innovation.
With our current immigration debate, this analysis presumes a comparable rate of illegal immigration and immigration as we have seen in recent years. If history is any indication, the moment a universal basic income comes into law for U.S. citizens, Mayor de Blasio and Governor Cuomo will rush to the front of public debate to argue that universal basic income should be extended to undocumented workers as well since it’s a human right. If that happens, keep your wallets open because that’s going to hurt.
Second, universal basic income is a mere proxy for socialism. The plan relies on the assumption that the income will be a social safety net to hedge against unemployment. In a perfect world, individuals would be able to save to offset economic unpredictability. This is an interesting argument to hear coming from a Left who finds the thought of alternatives to social security and Obamacare in the form of private savings account abhorrent. If liberals don’t trust Americans to allocate their money correctly, how can they reasonably suspect that this universal income will be treated differently to realistically serve as a safety net?
Finally, a basic universal income only hedges against future unemployment rather than creating opportunities in the present to anticipate economic changes. If automation continues to replace jobs, more Americans will shift from universal basic income being a subsidy to their earned wages towards it being a necessity in unemployment. It’s easy to see how this would spiral the economy into the garbage heap. As workers exit the workforce, fewer workers pay into the pool for distribution meaning that there is less money for the same amount of government handouts. To accommodate the gap, either taxes would have to go up on higher income earners to account for a depleting workforce, or businesses and the government would have to create alternatives to get people to work, or the government would have to require businesses to hire individuals. (Beginning to sound a bit like Atlas Shrugged.) All are bad alternatives. Creating a safety net that promises no ability to put people to work is giving them $1,000, not teaching them to build boats or sail, and asking them to get off an island.
There is still time to right the ship. As I said at the outset, nay saying without a solution is as empty as the politicians that will inevitably thrust the universal basic income upon us. There are many avenues to avoiding the calamity from unemployment Silicon Valley predicts from their innovation. I will list several here.
First, public schools and innovative STEM charter schools need the resources to teach STEM subjects and trade skills. Understanding how the workforce is being educated and what they are learning are far too often overlooked. For one, a realistic alternative would be to increase trade skills education during high school education while it is cheaper in order to provide career paths for students that do not seek a college degree while equipping them with a skill. It will be a long time before a plumber or electrician can be replaced by a machine. Access to STEM early in education will also improve female participation in STEM fields which has been noticeably absent and will lead to greater market participation in a field that will continue to grow as automation boxes out other fields. Targeting areas that lead to innovation and businesses can allocate resources will put people to work.
Please do not misinterpret me to suggest that we need more education. I’d wager there are less than 1,000 people in America using an art history degree for its intended purpose. Instead, this is a proposal to reallocate resources to target types of education where humans will be valuable – trades that machines have difficulty replacing and STEM fields where humans create the machines who replace them.
My second proposal is to unburden small businesses. Legislators should be in the business of making it easier for small businesses to operate and comply with government regulation. If state and federal regulation is reduced, small businesses will be best situated to create jobs cheaply. Healthcare constantly being in flux, taxation changes, and legal hurdles make running a small business and creating jobs difficult and in an economy that many predict will desperately need to create employment, government doesn’t need to be a formidable burden in that process.
My proposals are not perfect. There are plenty of holes in these proposals and many require intensive policy debates. The debates are worth having because a universal basis income is a road towards a dying economy – settling on a universal basic income is both lazy and simplistic. Without real ingenuity in the way we approach our workforce, we may be doomed to an economy bereft of innovation and liberty.