Robots have occupied a lot of our attention over the past year or so. The argument is that a new age of automation, supercomputers, and artificial intelligence augurs a rapidly changing economy and world of work. This debate has driven much of the interest in Basic Income. Technological change is an important context for rethinking our current social contract. But there are signs of widespread insecurity and volatility already.
In his review of the arguments for and against Basic Income in the FT at the weekend, Tim Harford comes to the following conclusion:
“A basic income makes perfect sense once we arrive at an economy where millions work for low wages while automation produces a bountiful economy all around them.”
Note the future tense. Many of the advocates for Basic Income focus extensively on the future tense also. It is difficult to look at the latest range of learning technologies – where computer code with or without physical manifestation through robotics learns how to achieve set objectives in a given environment – without supposing that widespread economic structural change is not on the way. We don’t know what the pace of that change will be, nor its ultimate impacts on aggregate measures of pay, productivity, and employment, but we do know it is very likely on its way. And we do know that structural change affects people in many negative as well as positive ways.
There are some such as Robert Gordon who take a Solow-esque “you can see the computer age everywhere but in the productivity numbers” view of the current wave of technological innovation. Of course, the computer age did eventually appear in the productivity numbers. And new technological innovation may well do so as well. We don’t yet know how this story ends.
It is conceivable that productivity splices into very high and low productivity sectors without much noticeable change at an aggregate level. It’s equally plausible that the spread of zero-marginal cost pricing - the spread of ‘free’ - could mask large-scale structural change thereby rendering aggregate productivity less useful as an economic measure. Very little change may appear on the surface but there may be convulsive change underneath.
These debates will evolve and they are crucial for the future political economy. But by focusing too much on the future, we may miss important aspects of the present. Already, there has been widespread structural change that requires closer attention. The low wage economy has been expanding. However, an economy of employment volatility and insecurity has already spread. Evidence is beginning to emerge on the nature of this highly insecure and precarious modern economy- and it applies to middle earners as well as the lowest earners.
The JP Morgan Chase and Co Institute has looked at the pattern of earnings of its current account customers in the US and has come to striking conclusions. This research is based on actual earnings data so is a highly significant contribution to the debate. They find that 74 percent of people in the lowest earnings quintile experience a greater than 30 percent month-to-month change in total income. The mean monthly change in income for the median income earner is $475. Most monthly variation comes from income within work and almost four in ten of the sample experienced job transitions in a given year (and this accounts for 14 percent of monthly income volatility).
These data are not only a traditional story of static inequality. They show that volatility is now also a major factor negatively impacting lives. Human beings do not thrive in an atmosphere of relentless change over which they have little control. It should be noted that this story is not simply one of technological change, it is also about labour market regulations, corporate practice and mores, economic climate, and labour market institutions. Assuming the US experience is similar to the experience in the UK and elsewhere (a decent working hypothesis) then this data indicates the reality of a precariat. This is now not the future – though things could get considerably worse if technological change advances at a greater pace than people can adapt.
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Given these insecurities, should we not look to push against the insecurity tide? And yet, when it comes to the tax and income support system, we’ve being doing precisely the opposite. As the JP Morgan Chase Institute data show, work is not necessarily a route to security and out of poverty at all. Yet this is precisely where the political consensus has rested – work, any work, is the solution. So we’ve set about gearing the entire system of work support around getting people into work, any work. As Professor Paul Spicker has written recently:
“If we look at what pushing people into work has done, it hasn’t led to a reduction in poverty. It has led to an increase in the proportion of people who are working on low incomes. It’s also given us, as a by-product, a staggering increase in penalties for non-compliance, and some catastrophically low incomes as a result. ‘Employability’ providers have been diverted from what they do best, which is to help people in need of support; benefits have been undermined by rules which have little or nothing to do with people’s financial circumstances.”
It should be said that Professor Spicker is not sold on a Basic Income – though he is certainly not dismissive of it - but his critique of the current system is telling (and his recent series tearing to pieces the design and implementation of the Universal Credit is to be recommended too). However, Basic Income as a system of tax and income support has a key benefit in insecure, volatile times: it acts as a foundation of safety and security, pushing against the maelstrom of the modern economy as it relates to work. Instead, we’ve gone for a complex, interfering system because it costs less and supports short-term work over all other social and economic policy goals - development of ‘human capital’, family security, mental health and wellbeing, ensuring people always have a basic level of subsistence, the education and development of children and so on.
The future is likely to contain stormier waters for a great number of workers who are not in the upper ranges of earning. But the present is already a burning platform. A resetting of the institutions supporting people in insecure times should be very high up the agenda. Basic Income is part of that resetting. There is much more besides. Public institutions should push against a dangerous tide rather than accentuate it. We’ve done precisely the opposite.
Anthony Painter argues that tax and welfare systems are adding to insecurity and volatility with harmful effects. Basic income is one of the policies needed to counteract this growing insecurity in work and life.