Why a guaranteed minimum income won’t protect us from the automation wave

Summary: My post A guaranteed minimum income: faux solution for the new industrial revolution sparked discussions in the comments and on Twitter, with some powerful insights and incisive questions. Here are answers to a few of the questions raised.

Money from Uncle Sam

A guaranteed minimum income (GMI) is a powerful tool for fighting poverty. As such it has been implemented in many nations (in different forms) and proven to work. My previous post said that it would not work if expanded to offset the job destruction coming from the new industrial revolution. That is, it could provide subsistence level income to the unemployed (preventing mass poverty) — but little more, with ill effects.

  • Automation might lead to a massive increase in the number of people collecting subsistence-level GMI. While preventing suffering, it would help create a two-tier society of rich and proles — as the productivity gains from the new industrial revolution went to the owners of the machines. We could end up living in the world of 1800, a high-tech Pride & Prejudice.
  • Above subsistence-level GMI would reduce people’s willingness to work at many of the boring, dangerous, or unpleasant jobs that pay low wages — either destroying them or boosting their wages (and so accelerate their automation) — either way boosting the program’s cost.
  • It would be politically difficult to implement an above subsistence level GMI. There is support for fighting poverty, although the decades-long rollback of welfare in America shows the limits are quickly reached. But there is today little cultural basis for large redistributive income transfers.

Objections were raised to this analysis. A brief note follows about each of these complex issues, just sketches of an opinion.

  1. Can we afford a high GMI?
  2. The GMI is a transitional step, followed by more radical redistributive measures.
  3. Is a high GMI is politically feasible?
  4. How would a large class of idle people affect society?

(1) Can we afford a high GMI?

Let’s run the math. The Federal government spends $2.2 trillion on social security, Medicare, and welfare benefits. State and local governments spend $0.688 trillion ($489B on Medicaid and $199B on welfare). Total: $2.9 trillion. That’s paid for by taxes which are on the low end of the post-WWII range (lower than those of most of our peers), with a small deficit (~3-5%) — which also fund a monstrous military/intel budget ($800 – $1T, depending on definition — almost half of total world spending).

Assume the GMI replaces the existing welfare and social security system (probably more cheaply). Assume a high GMI with an average cost per household of $40 thousand/year. That assumes a higher benefit since a GMI would supplement, not replace, the wages for many (most?) people on it. On the other hand, the program would probably have to provide some form of medical care coverage. For comparison, the 40th percentile of household income is $41 thousand; a $15/hour wage at 40 hours/week yields $31 thousand/year.

Under these complex assumptions each trillion dollars spent brings very roughly another 25 million people on the GMI “dole”, equivalent to 16% of the current working population (151 million), with a loss of their income taxes. We probably can afford to spend an added trillion dollars per year if military spending is reduced and taxes are increased (current GDP is $18 trillion). That would take the percent of Americans employed very approximately down to near the 1960 low (note: the graph double counts the part-time reservists with jobs, roughly 800 thousand).

Percent of Americans Employed

A cautionary note: we can’t predict effects of massive automation

We reach the limits of reliable analysis when looking into the future of the industrial revolution. Automation on a larger scale — eliminating more than a sixth of all jobs in a short period of years — would probably require massive changes in our social, economic, and political systems. I doubt this can be usefully modeled, as we would be deep into the unknown.

The difference between a low and high GMI disappear in the uncertainties if too many jobs disappear too quickly. A 2013 study by two Oxford professors found that 47% of all US jobs are at risk from “computerization”. The rapid advance of technology will increase that number.

Such automation might happen fast. To see how quickly jobs can vanish, look at the number of horses in America — down 90% in two generations (of people).

  • 1915: 20,500,000
  • 1949: 6,000,000
  • 1955: 2,000,000

Friedrich Hayek advocates a Guaranteed Minimum Income

(2) The GMI is a first step, followed by radical redistributive measures.

This is a logical plan, but I suspect unlikely to work. The 1% (a somewhat arbitrary label for the plutocracy) has been gaining strength since the 1970s, both in income, wealth, and political power. If we get a jump in productivity along with large-scale job losses (neither are certain) and put the unemployed people on the dole (a subsistence-level GMI) — would the 1% become stronger or weaker?

We can only guess about the result of so many hypotheticals, but I suspect the answer is weaker. Perhaps people on the GMI will unite and vote ever greater incomes from the federal treasury. Or perhaps they will form a massive new underclasss, content to receive crumbs for nothing as the fruits of the new industrial revolution flow to the 1% — making them ever stronger.

Sanders: income gains go to the top

(3)  Is a high GMI politically feasible?

A guaranteed basic income does little to change the distribution of income, unless it is set quite high. A high GMI seems politically problematic in today’s America because it would be seen as generous welfare.

To a large fraction of Americans taxes are theft and welfare is for free-loaders. Make it generous, equal to what people can earn by working, and the 1% will find a large number of supporters eager to kill it. After all, we already see the power of this framing as the existing welfare system was rolled back during the past 2 decades.

This can be easily field tested. Buy some beers in a blue collar bar and start a discussion about a GMI. My guess is that most of the folks there will agree with me.

(4)  How would a large class of idle people affect society?

The long-term unemployed on a GMI might become wonderful citizens, wise and educated. Or they might become aimless mobs, consuming entertainment, booze, and drugs. Either way, they’ll be dependents — creating an America unlike the citizenry of independent craftsmen, merchants, and farmers imagined by Jefferson and Jackson (although both past and future rest on the work of non-citizens — slaves then, machines tomorrow).

It would be an experiment. I suspect it would be tried only under duress, after all other solutions had been tied. Chaos is more likely if we fail to plan for the likely effects of automation, and instead react to events.

Other posts in this series

  1. 50 years of warnings about the new industrial revolution. It’s here. Ignore the naysayers.
  2. The coming big inequality. Was Marx just early?
  3. The coming Great Extinction – of jobs.
  4. Steps to make the tech revolution boost America, not just the 1%.
  5. The robots are coming, bringing hope of a better future.
  6. Our future will be Jupiter Ascending, unless we make it Star Trek.
  7. Well-meant minimum wage increases will accelerate automation.
  8. The battle of institutions vs. technology = rising wage inequality.

See all posts describing the 3rd industrial revolution and about inequality and social mobility.

For More Information

For an introduction to the problem see “Will Humans Go the Way of Horses? Labor in the Second Machine Age” by Erik Brynjolfsson and Andrew McAfee in Foreign Affairs, July 2015.
If you liked this post, like us on Facebook and follow us on Twitter. See these books to learn about the new industrial revolution now in progress…

Rise of the Robots
Available at Amazon.
The Future of the Professions
Available at Amazon.
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17 thoughts on “Why a guaranteed minimum income won’t protect us from the automation wave

  • Ooh, my favorite topic :-)

    First, if I may also fantasize about policy for just a moment, why not try to kill 2 birds with one stone, and require GMI recipients to put in 10 hours a week either training for or doing work as health care aides. A lot of this labor intensive, difficult to automate, and doesn’t need an MD or RN. (example: https://www.medicare.gov/coverage/home-health-services.html, typically done by minimally educated people, paid for by tax dollars, and actually a really valuable service). During the depression, they built things like parks (which I get to enjoy 80 years later), so is this any less crazy?

    Will it solve the displacement caused by automation? I suppose not. The way to do *that* is reduce hours worked per week – exactly like previous wave tech revolutions. Doing so would work only when geographic differences in incomes are taken out of the picture (either by protectionism, by waiting another generation or three or five for it to happen naturally, or via an internationalist movement – lets not go there.). Reduced workweek would actually be more empowering to the “99%” than a GMI… so I suppose if one wanted GMI, their strategy should be to advocate for the 25/30 hour workweek combined with protectionist measures, and accept GMI as a compromise.

    Political feasibility boils down to the angry-peasants-with-pitchforks factor.

    Cheers!

    Liked by 1 person

    • Pete,

      “Will it solve the displacement caused by automation? I suppose not. The way to do *that* is reduce hours worked per week – exactly like previous wave tech revolutions.”

      Can you give an expert source saying that reduced hours/week “solved” the previous industrial revolutions?

      Liked by 1 person

    • Solved displacement caused by automation/obsoleted occupations? Counterbalanced loss of wage negotiating power caused by that displacement?

      I don’t have a quote in the past tense like you ask, and I can’t find one, and I tried.

      Best I can do is a recommendation in the future tense. [1][1b][2][2b].

      Returning to the super simple concept that you lower the max-hours constraint, and get back at least some benefit by tightening the labor market (with the additional benefit of increasing non-work hours)

      Traditionally refuted as the lump-of-labor-fallacy[3], on the grounds that the demand for labor is not constant, and reducing max hours loses more in wages from the reduction than it gets back from shifting the work to another person.

      There are critics of this dismissal[4] At least one economist says if taking into account the value of non-work time, both employed and unemployed may actually come out ahead in terms of “welfare” under a policy of reducing work hours, despite reduced earnings, with the effect on employment being very small[5]. Well known promoters of the robot issue actually criticize what they say is the anti-lump-of-labor fallacy[6], though I don’t think what they’re saying is what I am after.

      Liked by 1 person

    • Pete,

      As I said, your theory contradicts what actual experts with real data say about how we adapted to the past industrial revolutions.

      You are misapplying the lump-of-labor fallacy, which primarily refers to the conjectural ability of new tech to create new jobs. It worked in the past, but this revolution might work out differently.

      Liked by 1 person

  • Let’s speculate on the possible outlines of distributive policies that would be an alternative to gmi, and that would structurally weaken the 1%. Even today, there are other forms of non government ownership besides the modern limited liability joint stock company, of which partnerships, credit unions and employee owned cooperatives are most relevant to distributive justice. Mondragon of Spain is a large coop that has known success, at least at certain times. And John Lewis in the UK is a highly distributed partnership.

    Government could pursue tax and regulatory policies that greatly favor these alternatives to the joint stock company. It would have great resonance in view of American History, and I hope this happens. But it would be a great struggle, for several reasons:
    (1) The Plutocrats would undermine it tooth and nail
    (2) Quite frankly, modern middling class Americans have lost some of the required virtues for this to work, namely pride in quality and consensus style decision making as an alternative to “sticking it to the man”.
    (3) Joint stock companies would still be needed for the most cutting edge ventures, since they need to make rapid decisive decisions. Which means the MBA elitism would have no place, but rather product expertise at the top. The MBAs will not go quietly into the night!

    Liked by 3 people

    • Eliotclingman,

      “modern middling class Americans have lost some of the required virtues for this to work, namely pride in quality and consensus style decision making as an alternative to “sticking it to the man”.”

      These things are difficult to see, but I have a different spin on this. I think we love consensus decision-making — but dislike leadership. That was a core characteristic of both the Tea Party and OWS, and a major factor in their failures. Without leaders we’re sheep. I suspect we are happy to be sheep, and dislike the risk and work that results from organization and clarity of thought.

      Liked by 1 person

    • These posts about a GMI are part of a long series on the new industrial revolution. I always end by discussing possible solutions. Otherwise info is just entertainment for my fellow Outer Party readers.

      As you correctly note, we’re in the early problem discovery stage — with action on responses years in the future. But that’s where the FM website’s content focuses. it’s an uncrowded space, but too small to be profitable. The mass audience is in the hot dot of NOW, amnesiac about yesterday and unconcerned about tomorrow.

      Liked by 2 people

  • I appreciate your continued attention to this topic, and agree you are FINALLY starting to discuss possible solutions, rather than simply continuing to sound the alarm–as necessary as that is. I will have more to say soon about this post, as well as your last two most recent posts on this topic, in the hope you continue to explore possible ways to prepare for the end of “full” employment–including the MANY other alternatives I have previously posted to your site.

    But, for now, I will leave you with this article published today about GMI, aka UBI, BIG, etc. “Should we scrap benefits and pay everyone £100 a week?” — “The idea of a universal basic income is about to leap from the margins to the mainstream, bringing promises of a happier and healthier population.”

    INTRO: “Imagine the government pays every adult the basic cost of living. Whether rich or poor, whether in paid employment or not – everyone gets the same weekly amount, with no strings attached. The harsh, punitive model of modern “welfare” is a distant memory; unsteady employment in today’s “gig” economy is now something everyone can afford.

    “Women are financially independent and can exit abusive relationships, public health is noticeably improved, and more people can care for an ever-aging society. Just as the welfare state underpinned the 20th century, this new idea defines the 21st. Welcome to an unconditional basic income, or UBI. It might look like insane utopianism, but the idea is now moving from the fringes into mainstream politics – and is being tried around the world.”

    Liked by 1 person

    • Thomas,

      (1) “you are FINALLY starting to discuss possible solutions”

      While it is common on the Internet to discuss solutions before preparing an analytical basis for them, I consider that to be quite mad.

      (2) “about GMI, aka UBI”

      Very wrong. A guaranteed minimum income is a means-tested benefit (often with conditions, such as having or seeking work). It provides supplemental payments to bring an individual’s or a household’s income up to a floor level. A basic income — as The Guardian says — is an automatic payment to every person (or household).

      Their finances and politics are quite different. A guaranteed minimum income is a plausible if ambitious expansion of current US policy (e.g., welfare, minimum wage, earned income tax credit). A “basic income” is a dream, with near-zero public support and absurdly high costs (except at trivially-low payment levels, or with conditions — such as Western welfare systems).

      (3) “and is being tried around the world.”

      No, it’s not. Some areas with low population and great mineral wealth have a form of it (e.g., Alaska). But they are special cases, not generalizable examples.

      Like

  • Thanks for “schooling” me without apparently reading anything in the link in my second comment above, http://www.basicincome.org/news/–especially the research archives, or at least the Guardian article I sent you. I agree with the distinction you draw between what you call GMI and UBI, BIG, etc., and that I carelessly lumped them together in my first comment above. But I don’t agree with the quick and simple conclusions you draw from that distinction. (And, yes, I am well familiar with the EITC concept.) It also seems you haven’t read any of the MANY other possibilities I previously sent you, or have simply dismissed them en masse as well.

    I agree with your characterization in a previous post of your own first-known (to me) published attempt to suggest ANY specific responses to increasing tech unemployment. As you said, they are indeed from the 20th century, and I would have more faith they might help–IF the relatively more novel ones (employees on corporate boards, and legally “required” profit-sharing”) had been implemented starting 30 to 40 years ago.

    It is possible it is still not too late, but federal tax incentives encouraging employers to share profits and even ownership with their employees have now existed for more than 40 years in the US. While the number of firms which share one or both has increased substantially (from nearly zero), they are still the relatively rare exception rather than the norm. (See the National Center for Employee Ownership at https://www.nceo.org/)

    But if employers are already automating jobs whenever cost-effective, and as ever more employers hire the human workers they still need as independent contractors rather than as employees–and only about six percent of the US private-sector workforce is now unionized–it is baffling to me that you think these would be more feasible simply because you have heard of them before and not the other alternatives I have brought to your attention.

    You have thankfully been sounding the alarm about tech unemployment for more than five years, but to the best of my knowledge, you have not ever even identified, compared, and contrasted the policy recommendations in the sources you recurrently cite as the best sources of info about the threat/opportunity of technological unemployment–such as the Second Machine Age, Rifkin’s End of Work, and Martin Ford’s most recent book–much less any of the other ideas and sources I have called to your attention.

    Also puzzling is your insistence that we should only consider past or present remedies you are familiar with as “realistic” for what you repeatedly refer to as an unprecedented problem/opportunity because–based on today’s political reality–you think that is all that could gain political traction NOW (even though your recent post about the rapidly changing nature of “gender” may also generate unprecedented societal changes that could radically, and perhaps rapidly, change the politics of NOW).

    If this is the case, maybe you should just stick to sounding the alarm because others think unprecedented problems/opportunities require unprecedented responses–even though many of the ideas I sent to you do, indeed, have precedents (as the info I sent you makes clear) other than the Alaska Permanent Fund.

    So if you see no point in comparing and contrasting the ideas in the sources you cite, much less the ideas in the sources I cite, then maybe you should leave that work to others. Thanks:)

    Liked by 1 person

    • Thomas,

      Your reply makes little sense. It’s mostly a reading FAIL. Try replying to quotes rather than making stuff up and attributing it to me.

      (1) “I agree with the distinction you draw between what you call GMI and UBI, BIG, etc., and that I carelessly lumped them together in my first comment above. But I don’t agree with the quick and simple conclusions you draw from that distinction.”

      It’s nice that you admit the basic and critical error underlying your previous comment. However you provide nothing showing that I am wrong. Most of what you attribute to me is false.

      (2) “federal tax incentives encouraging employers to share profits and even ownership with their employees have now existed for more than 40 years in the US”

      With almost zero effect. However, I said quite explicitly that expanding or even forcing such measures might be necessary in the future.

      (3) “Also puzzling is your insistence that we should only consider past or present remedies you are familiar with as “realistic” for what you repeatedly refer to as an unprecedented problem/opportunity”

      I say exactly the opposite.

      (4) “it is baffling to me that you think these would be more feasible simply because you have heard of them before ”

      Too weird for reply.

      Liked by 1 person

    • Well thanks for not deleting my previous comments so your readers can actually read my comments in their entirety, and don’t rely on your chopped up regurgitation of them, which focuses only on the points you want to make–and which miss my main point (i.e. if you see no point in comparing and contrasting the policy suggestions in the sources you cite, much less the ideas in the sources I cite, then maybe you should leave that work to others).

      In the past, I have been admonished for posting comments you regard as too long. So in an attempt to avoid that, I did not quote you verbatim and at length from your previous comments. When time permits, I will attempt to rectify that. In the meantime, I suggest you try to be less defensive and more open-minded. I only reply with snark after I have received it first.

      Like

    • Thomas,

      “I have been admonished for posting comments you regard as too long. So in an attempt to avoid that, I did not quote you verbatim”

      Absurd as usual. As you see from my comments, it’s only necessary to quote a dozen or so words for a clear reply. Your last suspended comment ran to over two thousand words (2,121). You could quote my entire post and give a thousand word reply — and still have less than 2,121 words.

      Get your own blog if you want to write essays. Don’t attempt to hijack others.

      Liked by 1 person

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