As the debate has raged about the impact technology will have on employment, the concept of the universal basic income (UBI) has been a popular riposte for those who believe in the darker side of automation. The rationale goes that so overwhelming will be the impact be on jobs that a basic income paid out to all is required to stop society descending into chaos.
It’s a concept that has gained a number of high profile supporters, with the likes of Facebook co-founder Chris Hughes outlining support for his own version of UBI in his recent book Fair Shot.
On the surface, it’s a tantalizing prospect. Hughes argues that many people cannot adapt because they lack the ‘bandwidth’ required to do so, whether in terms of spare time or resources. He believes this is the main reason why poorer people tend not to capitalize on educational opportunities, even when they’re free.
Critics of UBI fear that it will inevitably lead to fecklessness as people stop striving and settle into a life of relative luxury. It’s an argument that is largely debunked by a recent study examining the impact of UBI on the population of Alaska.
Discouraging work?
The Alaska Permanent Fund Dividend program has been in place for the past 25 years, with money distributed from the oil reserve royalties earned in the state. The unconditional cash payments amounts to $2,000 per Alaskan resident.
“It is reasonable to expect an unconditional cash transfer, such as a universal income, to decrease employment,” the authors say. “A key concern with a universal basic income is that it could discourage people from working, but our research shows that the possible reductions in employment seem to be offset by increases in spending that in turn increase the demand for more workers.”
The researchers found that the unconditional payments to residents had no real impact upon full-time employment levels (whether positive or negative), although they did find that part-time work increased by about 17%.
There was a noticeable difference in various sectors however. For instance, in sectors where the goods or services produced could be traded outside of Alaska, part-time employment went down, but this appeared to be more than offset by increases in part-time employment in the non-tradable sectors of the Alaskan economy.
Whether these findings render any possible lessons we can glean from the Alaskan experiment in terms of the transferability of findings from a very unique state to other parts of the world isn’t clear. Indeed, the researchers themselves concede that more research needs to be done to analyze the potential impacts of UBI.
This includes not only the impact on employment of UBI in the state, but also its impact on the prices of local goods and so on.
UBI around the world
Suffice to say, whilst the Alaskan implementation of UBI is one of the most well known, it isn’t the only such project around the world. For instance, Y Combinator ran a UBI pilot in Oakland, California in 2016-2017, awarding participants an unconditional monthly income of $2,000 each. There have also been experiments in Brazil, Finland, the Netherlands and Italy (to name a few).
The concept of unconditional cash transfers are also not a new thing. Indeed, they were advocated by Thomas Paine in the 1700s, and more recently by the liberal party’s Juliet Rhys-Williams in post-war Britain as a ‘negative income tax’.
The system was designed for its simplicity, with an income threshold established at which no taxes would be paid. If you earned above that threshold you would pay a proportion of your income in tax, with the level increasing as you earned more. If you earned less than the threshold, you would receive a payment as a proportion of your shortfall to the threshold.
It was an idea that never really got off the ground in the west, despite support from such doyens of the economic community as Milton Friedman. Perhaps, as Victor Hugo famously said, there is nothing as powerful as an idea whose time has come. Maybe that time is now.
