Universal Basic Income Is a Solution In Search of a Problem

This article was originally published on The Hill.

The fear of automation and artificial intelligence (AI) has spurred countless conversations about the future of work and how we humans will fare in an age of robots.

Many fear technological unemployment as others preemptively denounce future income inequality. To confront the “dismal” future of work, many in the policy world, the tech world, and even aspiring presidential candidates like Andrew Yang, tout the promise of a universal basic income (UBI) to overcome these uncertainties.

But whether policymakers should even consider ideas for a UBI, given recent studies that suggest an expanded labor market from future AI and relatively strong current economic conditions, is still an open question.

Rather than focusing on familiar concerns about UBI — the risk of dependency, the price tag, how to implement it or how work often provides meaning in one’s life — it is worthwhile to recognize that the case for such a broad and radical reform of our economic system is actually rather weak. 

Although an influential 2013 forecast by Oxford University reported that about 47 percent of jobs in the U.S. in 2010 and 35 percent in the U.K. were at “high risk” of being automated over the following 20 years, a more recent study by the Organisation for Economic Cooperation and Development (OECD) puts that figure at about 10 percent for the United States and 12 percent for the United Kingdom.

Moreover, a recent study on the future of jobs by the World Economic Forum predicts that robots will displace 75 million jobs globally by 2022 but create 133 million new ones — a net positive. Overall, these numbers are hardly scary; but as concerns remain, a growing number of researchers from across the political spectrum are taking an interest in the concept of a UBI.

Because much of the automation and disruption that lies at the heart of discussions about the future of work comes out of Silicon Valley, entrepreneurs from the valley have often tried to suggest proactive solutions. One of the latest experiments with UBI is the one currently being pursued by Y Combinator, a Silicon Valley seed funder.

Y Combinator reported that their $60 million UBI experiment will start in 2019. Their experiment consists of giving people $1,000 per month for up to five years.

In discussing their motivation for the experiment, they assert, “In the U.S., extreme poverty has dramatically increased, the middle class is shrinking, and employment and incomes have become more volatile and unpredictable.” 

Fortunately, none of the data confirm these dreary assertions. In the most recent report released by the Census Bureau, poverty has continued to decline for the third consecutive year, there has been modest but positive wage growth, and inequality is not statistically different in 2017 than 2016.

As for the middle class, economist Mark Perry reports that it’s shrinking because more people are better off than they were before. More members of the middle class are joining the ranks of the upper class, causing the middle to shrink. 

With the latest unemployment rate at just 3.7 percent and 7 million current job openings, according to the Bureau of Labor Statistics, the need to experiment with such dramatic changes to the social safety net like a UBI seems overblown.

Furthermore, a recent Bloomberg article, based on a study from the Conference Board, even describes a shortage of workers for many industries.

Although not typically as vocal as supporters of UBI, not everyone in Silicon Valley is fearful about the future of work and AI, and some actually welcome it. In a column for Wired magazine, Palantir founder Joe Lonsdale outlined various industries where new types of jobs are and will continue to be created.

Lonsdale puts his money where his mouth is through his work at Palantir, which harnesses the power of AI to solve complex problems using big data in a variety of industries — improving productivity while shifting the nature of jobs rather than destroying them. 

Much of the discussion around a UBI and the future of work is triggered by a concern about a future lack of upward economic mobility and an increase in income inequality.

However, the reasons why there might be less upward economic mobility in the United States than we’d like, as discussed by researchers such as Raj Chetty and Scott Winship, is almost certainly due to factors that do not require such a drastic change in our welfare and economic policies.   

One factor is the decline in male labor force participation, a complex problem with multiple causes, but among them are likely the excessiveuse of disability programs, job polarization where middle-skill workers are in less demand, and the skills gap (soft skills included), highlighted by people like Mike Rowe, that creates frictions in the labor market.

Other reasons include the steep decline of business dynamism in the U.S. since the 1970s. There are fewer startups being created due to a variety of factors, one of which are the occupational licensing laws that restrict employment opportunities and have been shown to be related to lower levels of economic mobility and higher levels of income inequality.

Local zoning laws that affect where low-income workers can afford to live and high incarceration rates both affect opportunities for upward economic mobility and leave many people, especially males, out of the labor force.

Fixing these issues, often at the state and local level, will help produce a more dynamic and healthy economy by removing barriers that currently prevent people from moving up the income ladder.

While it may seem mundane by comparison to more radical proposals, tackling these problems would increase our ability to face the future of automation and AI and will likely boost upward mobility and even reduce inequality along the way.

Welcoming innovation and remembering that human ingenuity is the ultimate resource should be the cornerstones of every discussion about the future of work.

Gonzalo Schwarz, President and CEO of the Archbridge Institute, has written numerous articles and op-eds in that capacity, on topics ranging from the importance of entrepreneurship and the health of the American Dream to trends in economic mobility and inequality.