How Universal Basic Income could solve unemployment

5 Jul, 2016

It doesn’t take much reading to form a picture of what digitisation and improvements in robotics are doing to jobs. In fact, a recent study found we could be looking at as many as 5.1 million job losses in the next five years due to the rise of artificial intelligence.

However, filling the hallways of Silicon Valley (and a fair number of column inches online) is talk about a possible solution. An idea so preposterous, if it didn’t have proponents on both the left and right of the political spectrum, it would’ve been used as just another brush to paint the other side as balmy: how about simply giving people money?

Universal Basic Income (UBI) proposes whether you’re rich or poor, working or jobless, every citizen is paid a fixed amount each month – enough to take care of basic needs. The state has no say in how the UBI is spent, there are no requirements to partake in any type of work, and there’s no discrimination based on financial means.

Why both sides are supportive
On the right side of the political spectrum – at least in the States – UBI is attractive because it frees up government bureaucracy regarding the administration of grants. It simplifies the payment system and reduces the scope for fraud or abuse.

On the left, supporters note the ability of UBI to alleviate unemployment, increase job satisfaction and improve living standards, while providing the labour force with more bargaining power.

But will it work
A concern that pops up quite regularly in the UBI debate is: if everyone is receiving a payment, why would anyone bother to work? It’s worth noting where this concern originates. In the States, and other countries where welfare payments are in place, you start losing benefits if you manage to find a job and earn a salary. This might not be significantly more than what you’ll receive on benefits, thus, the incentive to work disappears, creating what’s called an ‘unemployment trap’.

When it comes to UBI, it can be argued you never lose your basic minimum payment, with the ability to add to this by working, so the incentive to earn more remains. But it could mean certain low-paying jobs become unattractive, leading to an increase in labour cost for these jobs.

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The impact
Sam Altman, a venture capitalist and president of a start-up incubator aiming to kick-off their own experiment in UBI, is less concerned about people’s incentive to work. Instead, speaking on the Freakonomics podcast, he notes the added value those looking to capitalise on UBI might bring to the table. According to Altman, 90% of people might “smoke weed and play video games”, but if 10% of the people create new products, services and wealth, it’s still a huge net win.

Indeed, it’s the freedom UBI could provide that makes it so attractive, opening up certain opportunities which might not have existed without the ability to fall back on basic income. For example, the ability to quit a job for an entrepreneurial pursuit, study further or acquire skills, invest in personal creative output, or not having to persist with a soul-destroying job just because you need money to survive.

There’s also a social aspect UBI could address that’s important in societies, such as South Africa, where lack of financial independence can lead to difficult, morally-conflicting choices. For instance, remaining in an abusive relationship because you’re financially dependent on your spouse, getting involved in prostitution or turning to crime.

And locally?
In 2002, The Taylor Committee recommended the introduction of a Basic Income Grant (BIG) as part of a social protection platform. Two years later, the BIG Financing Reference Group published a comprehensive paper on financing basic income grants in South Africa. Very little has been heard about basic income grants since.

Due to the vast income inequality experienced locally, a UBI model for SA would have a strong focus on alleviating poverty and lifting people out of destitution as opposed to providing added benefits, as it would in Europe.

The great unknown
There’s no nation that’s seen the introduction of UBI on a national level. Instead, a number of pilot projects and experiments have been implemented or are being considered in Switzerland, Canada, Finland, the Netherlands, Kenya and Namibia amongst others. For now, the unproven nature of UBI makes it difficult to do much more than simply speculate on its possible effects.

One thing is clear. The current economic climate, inequality, and job losses due to the rise of technology will continue to put immense strain on the current way of doing business. It’s important to investigate innovative solutions – and it might just be support for UBI that forces it on the agenda sooner rather than later.