The concept of a universal basic income has now gotten a lot of attention. This state of affairs has been helped greatly by the support offered to the UBI by luminaries such as Elon Musk of Tesla and Mark Zuckerberg of Facebook. However, before we get on the UBI bandwagon, it is helpful to first ponder the meaning of this concept and to then analyze whether there is a need for a UBI.
There is no single and widely accepted definition of a UBI. Even so, most people agree a UBI is a welfare program in which the government makes cash payments to every citizen with no strings attached. This means that it does not matter whether the recipient is destitute or a millionaire, employed or unemployed, sick or healthy. Everyone gets the UBI. The difficulties begin as soon as we get past this basic observation.
To see this, let us first ascertain the objective of a UBI. There are two cases to consider. Many would like to use a UBI to reduce income inequality and create a more efficient social safety net than the mishmash of Medicaid, Medicare, Social Security and the other programs that we have in place. The economist Michael Hicks points out the cost of implementing a UBI in America would be around $3.3 trillion. There is no way to implement a UBI that costs this much without either substantially or completely eliminating all other anti-poverty programs. Many of these anti-poverty programs (free school lunches) have large constituencies and it is hard to see how the beneficiaries would willingly forego their beloved programs.
Because a UBI in its purest form is so costly, some have suggested we should limit the benefits to high-income people or eliminate payments to children. But the moment we do this, the program ceases to be universal and becomes another welfare program that may or may not be more efficient than the programs we presently have in place.
The poor in America are poor because they either have little education or are teenage parents or have abused drugs. It is unclear whether the receipt of a pure or modified UBI will alter this disagreeable state of affairs. In other words, a pure or modified UBI may not make a dent on extreme income inequality.
Now consider the second objective of a UBI. The concern here is not income inequality per se but the absence of an income. Writers such as Martin Ford have contended that with the rise of automation and artificial intelligence, we are increasingly looking at a future with massive job losses. Fears about this kind of “technological unemployment” have arisen before and even John Maynard Keynes, arguably the greatest economist of the last century, was wrong about his fears about technology-driven unemployment. Even so, the techno-pessimists claim that with innovations in AI, this time is different and hence their solution to attenuate the human suffering resulting from joblessness is to put in place a UBI. Does this make sense? Let us investigate.
As noted by the economist Jason Furman, a key problem lies in the way in which techno-pessimists pose the issue. The issue is not that automation and AI will make a vast majority of the U.S. population unemployable. Instead, the issue is that workers will either lack the skills or the ability to match with the high paying and desirable jobs created by automation. When the issue is looked at in this way, the appropriate solution is not to provide all workers with a UBI. Instead, we need to put in place training programs, job search assistance programs and specifically programs that enhance worker skills. The objective here would be to ensure that qualified workers are able to match the requirements of the new and different jobs resulting from automation and the rise of AI.
Finally, even with the above mentioned measures, new technologies and automation may still increase income inequality and poverty. Our present tax and welfare policies are designed to reduce income inequality and poverty because they target people in the bottom half of the income distribution. If we replaced these policies with a UBI that went to all citizens regardless of their income then there would be no targeting of citizens in the lower half of the income distribution. As such, a UBI might even worsen the problem of income inequality. Therefore, when it comes to a UBI, Shakespeare’s caveat that “All that glisters is not gold” is pertinent.
Batabyal is the Arthur J. Gosnell professor of economics at the Rochester Institute of Technology but these views are his own.
(c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-363-7269 or email firstname.lastname@example.org.