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Global Japan
AUG 18, 2020

The Future Holds More Unemployment, and Our Only Defense Is Universal Basic Income

By Karl O’Callaghan
An organizer at Berlin's basic income march looks at the sound truck. Patrick Maynard@ flickr

Coronavirus has given society a peek into the future of capitalism.

Robbed of free-spending customers, economies have seen unprecedented peacetime collapse. Many governments have eased restrictions to let their economies claw back lost growth. With promising reports of vaccines, there’s room for optimism that the pandemic will be under control sooner or later.

Still, coronavirus has made a lasting impact on the global economy. A University of Chicago working paper suggests up to 42% of all jobs lost in the US to coronavirus will not come back. COVID’s heavy-handed destruction of employment is similar to a bigger specter haunting capitalism—the specter of automation.

Artificial intelligence promises a bright future.

Big data will give managers all the answers, and automation means humans don’t have to do menial, repetitive jobs. But the effects of technological disruption are hard to dispute. Put simply, it kills jobs, and it’s already happening.

Chinese ride-hailing firm Didi Chuxing recently announced plans for one million autonomous vehicles by 2030. A slew of companies, including Softbank, Nvidia, Volvo, and BMW, are racing to get autonomous freight trucks on roads. Drivers aren’t the only vocation under threat, either. A Nikkei survey of the Persol Career website in May and June found there were 30% fewer positions in job categories defined as “easily automated.” The World Economic Forum predicts that even general managers and financial analysts won’t escape.

This decline in jobs is a problem because capitalism relies on two sides of the same coin. On one side, there’s production. Companies produce items to sell because there is demand. With their ability and willingness to pay, customers feed that demand.

Two yellow arrows are arranged in a circle. Demand feeds production, which then feeds demand.

While many people extract income from capital (buying and selling shares or renting real estate, for example), most derive their income from labor. A person automated out of a job loses the ability to pay and thus feed back into the capitalist system. The newly unemployed must reskill to adapt to the changing world. Some might reinvent themselves as, say, YouTubers, but it’s unlikely they’ll all find work.

We cannot stand in the way of technological evolution, so we only have one choice: either let capitalism die and replace it (a viable solution has so far eluded humankind) or prop up demand.

Free cash can help feed demand.

Lack of demand has brought global economies to their knees. Several governments have offered short-term solutions to help their citizens start spending again, but Spain’s is the most far-reaching. On May 29, the government approved a “minimum vital income” for 850,000 of the country’s most vulnerable families (2.3 million people, or 5% of the population). The measure will cost €3 billion per year and promises each eligible family at least €462 per month.

The Spanish economy is expected to shrink 12% this year, with unemployment hitting 20%. So a measure like this is needed to help those who find themselves out of work. The country learned a hard lesson from its 2008–2014 financial crisis, when unemployment topped 25%.

The program is a bold move that will help those who need it most. But it doesn’t go far enough.

Universal basic income isn’t a new idea.

Outmaneuvering both coronavirus and automation will require more than temporary bolstering of demand. In fact, long before Spain, there have been programs offering free money to citizens in many parts of the world. Alaska and Manitoba are commonly cited North American examples, while there have also been experiments in India and Africa.

The idea of universal basic income (UBI) is not new. Some say it originated with Sir Thomas More in his 1516 book, Utopia. Others go further back to Ephialtes’ citizens’ income reform in ancient Athens.

In 1967, shortly before his death, Martin Luther King wrote that “the solution to poverty is to abolish it by a now widely discussed measure: the guaranteed income.” In 2016, when Black Lives Matter published a list of demands for change, it included calls for “a guaranteed minimum livable income.”

UBI acts as a social dividend.

UBI is a return on the investment that we all make in society through our learning and labor. It is universal: everyone receives it. It covers basic needs, so it’s not a disincentive to work. And as a right, it is an unconditional income.

According to The Origins of Universal Grants, UBI aims for “capitalism with baseline income maintenance.”

UBI provides a level of freedom.

We cannot be effective citizens, workers, learners, or providers when we worry about how to pay for shelter or food. UBI provides a buffer against this psychological burden.

Unlike the initiative in Spain that will reach only the segment of society deemed most in need, UBI goes to all citizens, not just the designated head of household, ensuring one family member doesn’t hold financial power over another. Furthermore, a guaranteed income allows us to work fewer hours if we choose. This option provides better work-life balance and opens up possibilities such as job sharing and more mothers back in the workforce part-time.

UBI reduces poverty, inequality, and insecurity.

It won’t solve all the world’s problems, but it will help stem future injustice. It helps all citizens get and stay over the poverty line. Initiatives in Kenya, Alaska, India, and Finland brought strong, positive socioeconomic effects such as fewer hospitalizations from social and domestic violence, lower incidences of mental health disorders, fewer school dropouts, and lower crime.

Today, most governments provide welfare to citizens who can prove they need it. This “means-testing” can be degrading, as citizens must answer personal questions. They also fall into the poverty trap, as unemployment programs often force them to take jobs that make them worse off than before. These systems also require massive and expensive bureaucracy to check and administer claims.

How do we pay for UBI?

Opposition to UBI is often on the basis of expense. Guy Standing suggests that “affordability comes down to the priority society gives to social justice, […] freedom and economic security.” If the need is great enough, governments will find ways to reallocate budgets.

Graph illustrating the breakeven point of UBI.
©Scott Santens

To reduce bureaucracy costs, governments could replace unemployment and most other benefits with a standard amount provided to all, no strings attached. They could claw back the UBI of higher earners through higher taxes, thus redistributing some of the uneven wealth.

The World Economic Forum provides some reasonable numerical estimates for the US. After removing food and nutrition assistance, wage subsidies, child tax credits, temporary assistance for families, and the home mortgage interest deduction, the cost would be less than “a few hundred billion dollars.” A shortfall of this size can be covered by higher taxation of landowners, financial transactions, and companies that pollute or choose to automate, reducing tax breaks for the wealthy, or cutting military spending.

Though technological disruption won’t be as abrupt as coronavirus, both stress capitalism by decimating demand. Keeping everyone out of poverty is the only way to sustain demand and save capitalism.