Synopsis: UBI could be invaluable for today’s society, but the AI problem is another matter.
There are two very different scenarios for Universal Basic Income or UBI.
- Scenario 1: Gateway to employment UBI, which has been demonstrated to work.
- Scenario 2: Wealth distribution UBI, which is highly questionable.
The first scenario for UBI as an alternative to current welfare schemes, for societies using UBI to have as many people as possible gainfully employed. For this scenario, UBI has had many passionate advocates and both very successful limited implementations and trials which validate that UBI could be the most effective welfare system ever tried. This raises the question as to why UBI has not seen mass adoption as a welfare system despite having diverse advocates including Thomas Payne (first proponent and advocate for the role of government), Rev Dr Martin Luther King Junior (civil rights advocate), Milton Freidman (free market economist), Friedrich von Hayek (advocate for minimum possible government). I suggest the major barrier to adoption has been that people fear UBI goes against the concept of a meritocracy, and this makes it very hard to sell to a voting public.
Conservative president Richard Nixon almost implemented a UBI after pilot programs were successful, but there was the whole Watergate thing, and opposition from those ideologically opposed to the concept.
The second scenario is for UBI as a solution for wealth distribution in a wealthy society with widespread unemployment as a result of AI and AI robots because, as Elon Musk put it, “There will be fewer and fewer jobs that a robot cannot do better”. While this scenario may sound similar, the goal is no longer that of providing people a safety net, so they have a starting point that enables them to build on, but instead is assumed to be the sole income of a large percentage of society.
Understanding the difference between these two scenarios, is critical to understanding what a UBI scheme can achieve, and what UBI alone can’t achieve.
The goals of a successful “gateway to employment UBI” scheme are:
- reduce the number of people existing on welfare alone, as well as the number of people receiving “net welfare”.
- reduce the cost and administration of welfare.
At first, it may seem counterintuitive that paying welfare to everyone could reduce the number of people on welfare, and while not all trials have reduced the numbers on welfare, the only situation with rise in the numbers on welfare in trials has been from students remaining at school to finish their education instead of being forced to leave school in order to start work.
All trials have been based the first scenario; that of providing solving the current need for welfare in a society where the goal is for everyone who receives welfare to work and in almost every case, no longer depend on welfare. If, as a society, we want to see that by whatever means, everyone gets at least sufficient food to prevent starvation and sufficient housing to not be completely homeless, then every other welfare scheme will end up just having more intermediaries to providing each individual with the money for that minimum. But the key, is that UBI is the minimum to enable the most basic standard of living, and even that is difficult to sell to a voting public. A key ingredient of a UBI is that it can lower the threshold for gaining employment by removing the need for a minimum wage, since with the UBI in place, an employer need not take over responsibility for the basic welfare an employee before offering them a job. The most common system is that welfare ends when a person gets a job, which means the job has to take over the role of providing welfare.
If perhaps 50% or more of the population is not only unemployed, but also with no prospects for any work that a robot can’t do better and for less, can we really live with over 50% living at the absolute minimum in a world where there can be greater total wealth than ever before.
UBI can be start, but it alone is not the solution to how we distribute wealth if AI and AI robots managed what is expected of them.
Gateway to employment UBI.
The goals of a “gateway to employment UBI” are:
- reduce the number of people existing on welfare alone, as well as the number of people receiving “net welfare”.
- reduce the cost and administration of welfare.
- improve society and wealth for all citizens
What is a UBI?
For this answer, I am quoting the words or Rutger Bregman at a TED talk in September 2013, and for those who prefer to listen rather than read, this talk is available on YouTube.
What is the basic income? Well, it is a monthly grant, paid enough to pay for your basic needs: food shelter education. Now some of you might ask, “Don’t we have this already? Isn’t there something called social security, don’t we have the welfare state?” Well, yes, but the basic income is something entirely different. In the first place, it’s universal, so everyone would get it. Whether you are a billionaire or a beggar, whether you are a man or a woman, employed or unemployed, the basic income is a right, a right as a citizen of your country. Moreover, it’s also unconditional, so you get it no matter what. No one’s going to tell you what you have to do with it; no one’s going to tell you what you have to do for it. The basic income is not a favor, but it’s a right, just like, for example, the freedom of speech is a right as well.
Why we should give everyone a basic income | Rutger Bregman | TEDxMaastricht
The talk by Rutger Bregman goes on to discuss the various successful experiments of with a UBI, which leaves to the two basic questions:
- Won’t people who would otherwise be working just choose to be lazy and live on the UBI?
- Why give money to the poor when they clearly can’t manage money?
- How can paying everyone be affordable?
The problem of merit, what about lazy people who don’t deserve the UBI?
With any welfare system, people generally fear that taxes they pay from their hard work will be distributed not just to those in genuine need, but also undeserving recipients of welfare.
“It might be a good idea, but — when you give people free money they will stop working!” You know, it’s human nature, people are lazy, nothing can be done about that. The interesting things here is that if I asked each one of you, in this room: would you stop working when I’ll give you, about €1,000 each month? About 99% of you would say: Of course not. I’ve got dreams, I’ve got ambitions, I’m not going to sit on the couch, no. But if I asked each and every one of you, what would other people do, when they receive €1,000 each month? I think about 99% of you would say: “Yeah, other people, they’ll probably stop working!” You know, it’s human nature, they’re lazy — If that’s what you’re thinking, I’ve got some news for you. The experiments that were conducted all over the world, and also common sense, actually tell us that most people want to contribute to society. Most people want to make something of their lives! In fact, some of the experiments have shown that poor people, especially poor people, actually work more when you give them a free grant. Because it gives them the opportunity to invest in their lives, or their business, for example.
Why we should give everyone a basic income | Rutger Bregman | TEDxMaastricht
It is unavoidable that A UBI system, where there is no test for who deserves welfare, increases those concerns.
What successful UBI experiments have proven, is that tests for who deserves welfare don’t work, and not only does administering those tests costs money, the failures of the tests cost even more money. The result is both those paying taxes and those in need of welfare suffer.
We desire a meritocracy where those who work hardest gain rewards for their efforts, but when we look at the incomes and the behaviours of some “personalities, and some “sports stars”, it would seem very questionable that things are working well. Perhaps a well executed
Why give money to the poor?
Now what researchers have shown, time and time again by comparing a test group of poor people who receive free money, and another similar control group, so they could see the effects — time and time again, they have shown the free money results in — well, lower inequality, lower poverty, obviously; but it also results in less infant mortality, lower health care costs, lower crime rates, better school completion records, less truancy, higher economic growth,
Why we should give everyone a basic income | Rutger Bregman | TEDxMaastricht
Poverty is not a lack of character; poverty is a lack of money! Nothing more, nothing less. So it turns out that it is a great idea just to give money to the poor if you want to resolve that problem
Why we should give everyone a basic income | Rutger Bregman | TEDxMaastricht
How can paying everyone be affordable?
It was only a few years ago that I discovered that everything I thought I knew about poverty was wrong. It all started when I accidentally stumbled upon a paper by a few American psychologists [including Eldar Shafir]. They had travelled 8,000 miles all the way to India, for a fascinating study. And it was an experiment with sugar cane farmers. You should know that these farmers collect about 60% of their annual income all at once, right after the harvest. This means that they are relatively poor one part of the year, and rich the other. The researchers asked them to do an IQ test before and after the harvest. What they subsequently discovered completely blew my mind. The farmers scored much worse on the test before the harvest. The effect of living in poverty, it turns out, corresponds to losing 14 points of IQ. Now to give you an idea, that’s comparable to losing a night’s sleep or the effects of alcoholism.
Poverty isn’t a lack of character; it’s a lack of cash | Rutger Bregman
Bringing people out of poverty can help them make better choices, and be better able to finds a job.
The key is that all experiments and trials have so far found that while have been a percentage of people delaying work to complete studies, UBI schemes have not otherwise resulted in, on the balance, people simply electing not to work. Logically if a UBI led to people choosing to live on the UBI alone, the scheme would need to have the amount lowered, in order to avoid a cost blowout, but there are important factors that can lead to an increase in people finding work:
- Since the UBI remains in place even when people find employment, getting into work is easier, as a first job can pay less than when it would mean losing social security.
- Bringing people out of poverty increases peoples ability to find work.
The tax system needs to be adjusted so that on balance, most people pay the same amount more tax than they receive from the UBI, so that for most people, the only change is the presence of a safety net. Lower income people normally pay a lower percentage of tax, but since the lower the income the more significant the UBI, tax rates at the lower end can be flattened while still ensuring those earning the absolute least as still somewhat better off.
Then there are savings in medical costs, crime rates, and the overhead cost of running more complex social security systems. In the end, while it does mean people like the homeless may receive more, studies confirm that group becomes smaller, with many of them becoming an asset to society.
The problems with a wealth distribution UBI.
It moves from gateway to employment to gateway to unemployment.
The entire premise of a “gateway to employment UBI” is that it can make society overall more productive. How can people be more productive in a society that accepts there is no prospect for gainful employment?
Instead of the goal of transform those who society does not want into those society does want, the whole of objective of a “wealth distribution UBI” is to allow for an ever-increasing percentage of people becoming a burden on society.
It costs a lot more, while reducing government revenue to fund the UBI.
Increasing the number of unemployed not only raises the cost of the UBI, it decreases the ability of governments to fund the UBI, since a large percentage of the population may become unemployed.
It fails to solve the problem of providing purpose.
Employment is key to the provision of purpose. People who have conducted studies into UBI all seem to realise this is important, and a reason why a UBI alone cannot solve distribution of wealth.
I think it is a component of something we should pursue. It is not a full solution. I think people work for lots of reasons, besides money. And I think we are going to find, incredible new jobs, and society as a whole and people as individuals are going to get much, much richer, and as a cushion through a dramatic transition, and it’s just like you know I think the world should eliminate poverty if able to do so I think it’s a great thing to do as a small part of the bucket of solutions. I helped start a project called World coin which is a technological solution to this, we also have funded like a large, I think it may be the largest and most comprehensive Universal Basic Income study as part of sponsored by Open AI and I think it’s like an area we should be looking into.
Sam Altman on UBI: Universal Basic Income | Lex Fridman Podcast Clips
What are some insights from that you gained:
We’re going to finish up at the end of this year [2023] and we’ll be able to talk about it hopefully very early next year [2024],
Sam Altman on UBI: Universal Basic Income | Lex Fridman Podcast Clips
UBI advocates and successes.
On engadget.com, the post How will you survive when the robots take your job? outlines the ‘basic income’ proposal, as put forward by many in the tech industry and being experimented with in Canada, Finland and the Netherlands. This article provides a great starting point and conveys the basic idea and if unfamiliar with the idea it makes sense to read that article first. This post is about looking further, in terms of thoughts about what else should change if a ‘basic income’ is introduced and what would be needed to make such an idea work. What would such a measure cost, and what would be the impact on society of a total package, of a ‘basic income’ together with a logical set of policies to create a total package?
“It’s really important to get data rather than just talk about it,” said Sam Altman, president of Y Combinator, during a Bloomberg panel interview. “Are they happy? Are they fulfilled? How does it change their skills, how they spend their time?” He wrote earlier in a blog post: “I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale.”
Sam Altman 2024 CEO of Open AI, speaking on the need for UBI in 2016: Courtesy Engadget.
A success every time?
As AI threatens jobs, policy advocates for UBI see it as a potential way to cushion the blow from a changing economy.
Universal Basic Income Has Been Tried Over and Over Again. It Works Every Time.
Richard Nixon launched a UBI program in 1969 that was tested on a small number of communities. The program was designed to deliver an ongoing, unconditional payment to working families to assist them with their basic needs. Hilariously, one of the people put in charge of these pilots was Donald Rumsfeld, who was working in Nixon’s Office of Economic Opportunity at the time. Rumsfeld also brought on Dick Cheney to help him with the program (later, of course, the duo would go on to disastrously run Bush II’s White House foreign policy team and embroil America in pointless wars).
Fears that the experiment would engender laziness in participants were not borne out in the project’s findings: “The ‘laziness’ contention is just not supported by our findings,” the chief data analyst of one of the experiments said. “There is not anywhere near the mass defection the prophets of doom predicted.”
Due to their success, Nixon’s experiments evolved into broader plans to institute a national UBI that would have delivered as much as $1600 a year to families of four (adjusted for inflation, that’s around $10,000 per family). This was known as the Family Assistance Plan, or FAP, which would’ve used something called a negative income tax to fund the massive new welfare program. Nixon actually introduced comprehensive legislation to institute the program but it was thwarted by political headwinds. The program was eventually canceled. Nixon’s advisors, including, allegedly, Milton Friedman, convinced him not to do it.
UBI under Nixon.
The state of Alaska has one of the longest-running and most successful basic income programs in the world. The Alaska Permanent Fund delivers around $1,600 a year to every resident in the state and has done so for the past forty years. It does this by divvying up a certain percentage of the proceeds from surplus revenue derived from one of Alaska’s most vital resources: its oil and gas reserves. This dividend, as it’s called, is then sent unconditionally to state residents on an annual basis. UBI proponents contend that this model—in which a valuable resource is treated as a shared economic asset—is one of the more promising methods by which basic income could be scaled up to provide for a much larger, national system.
Alaska’s Permanent Fund
UBI Canada.
UBI Finland.
In 2017, Finland launched a program to give €560 ($616) a month to 2,000 unemployed citizens. The program, which lasted two years, was designed to replace traditional welfare systems in Finland that put employment-related conditions on cash dispersals. Part of the program’s design was to see whether an unconditional basic income could net better rates of employment in participants than those in a traditional welfare program.
While the program’s results showed that it had a positive emotional impact on participants, it did not markedly improve employment rates for them. As a result, some referred to the experiment as a “failure.” However, the experiment’s results also showed that a “no-strings-attached” basic income did not markedly dissuade recipients from job-seeking or employment behavior. Instead, it stayed roughly the same.
Gizmodo
More Ted Talks.
Advocates vs Detractors
- Detractor Arguments
- It costs too much
- the cost will be too high
- People are lazy: othering.
- many people will choose to not work if they do not need to work
- it will erode the principle of rewarding on the basis of merit
- disconnecting the link between work done and money earned would be bad for society
- operating such a scheme will attract the wrong people
- It costs too much
- Proponent Arguments
- greater wealth overall wealth
- response to occupation displacement
- current wealth distribution system is broken
UBI can help, but not solve AI employment problem.
Note how the position of Sam Altman seems to have changed from where he was in 2016 to that expressed in the this 2023 video:
“It’s really important to get data rather than just talk about it,” said Sam Altman, president of Y Combinator, during a Bloomberg panel interview. “Are they happy? Are they fulfilled? How does it change their skills, how they spend their time?” He wrote earlier in a blog post: “I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale.”
What would be a logical UBI package?
Elimination minimum wages.
The minimum wage would come from the ‘basic income’ itself, which means additional wages paid by an employer raise the employee further above the minimum. Even unpaid work ($0 per hour) as a caregiver or charity worker still would ensure the person performing that work has the minimum wage. This would simplify situations where people must be trained before they are productive and a variety of other scenarios.
A quote from Bernie Sanders in the Engadget article could confuse::
I am absolutely sympathetic to that approach. That’s why I’m fighting for a $15 minimum wage…
The ‘minimum wage’ is an alternative method to ensure people receive a minimum wage, and Senator Sanders is supporting the concept of people achieving the minimum wage.
With the employer not facing the hurdle of a minimum wage, and potential employees not needing to be of sufficient value to an employee on day one, many more jobs could be exist. The concerns people have of the idea are that people may not bother to accept employment, or that employers will abuse the ability employ lower cost staff. I suggest both of these fears are unfounded, and both will improve compared to the status quo, and I will discuss this in more detail in a follow up post.
Flatter Taxes with Increased Sales/VAT/GST taxation.
A sound principle is to tax that which the government seeks to discourage, and not tax that which the government wishes to encourage. On this basis, taxing spending is preferable to taxing earnings, since the government should encourage people to earn income.
Different counties use the labels ‘sales tax’, ‘Value added Tax’ or ‘Goods and Services Tax’ but all are related and work on the principle of collecting tax revenue when purchase are made. A limitation with such taxes is that they are basically flat taxes and cannot be ‘shaped’ to attempt to exempt those who can least afford to pay, or target those best placed to pay. “Excuse me madam, before I can process this sale I need to know your income bracket” is never going to work.
Shifting tax base from income tax to ‘sales’ type taxes generally requires some program to assist low income earners, and a ‘basic income’ does exactly that.
Where does the money come from?
Switzerland had vote to decide on a national scheme, and the biggest issue was not cost, but rather the risk the immigration would increase and attract specifically those planning not to work.
In a country with an existing welfare system, the ‘basic income’ becomes a much simpler, lower cost way to provide welfare. The result should be that those who enjoy sufficient income will see their ‘basic income’ recovered by the government through taxes and have the same circumstances as prior to the system. This leaves low income earners and the unemployed and the main beneficiaries, and many of these are welfare beneficiaries today.
Will some people simply elect not to work? In the end the cost is complex and will be again explored further in a follow up post.
What are the social implications?
Will people elect not to work? Will any state or jurisdiction to adopt such a scheme become a magnet for those who wish not to work?
Employment provides three roles in society today:
- labour to generate wealth
- salaries and wages act to share or distribute wealth
- occupation provides identity and a self of self worth
All of these create a complex picture. Follow up post number 3 🙂
Updates:
- *2024 May 5 : Second edition, worth full re-read.
- 2017 Feb 5 : First edition