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17 June 2013updated 27 Sep 2015 6:00am

Basic income versus the robots

An economic all-stars match-up.

By Alex Hern

Two weeks ago, I wrote about the idea of a citizen’s income: the state replacing the vast majority of the benefit system with one cash payment made to everyone, regardless of employment or income.

The advantages of such a change are legion. At a stroke, the thorny issues of incentives are done away with, since work always pays; the deadweight loss associated with means testing disappears (albeit replaced with the deadweight loss of giving money to people who don’t need it); those most likely to fall through the cracks of a regimented welfare state find the barrier to re-entry done away with; and it allows for a recognition of the value of certain types of non-market labour, like caring or raising children.

The New York Times’ Paul Krugman and the Financial Times’ Izabella Kaminska now wade into the fray, proposing another advantage of the policy: its redistributive effect.

Now, redistribution is already, prima facie, one of the absolute best things a government can do. Simply put, rich people don’t need money, and poor people do. All else being equal, taking some money from rich people and giving it to poor people is therefore the absolute best way to improve worldwide welfare we know of.

The problem is that all else is not equal: the act of taking and giving money changes people’s actions in material ways. Giving or taking money from people changes their incentives, and may lead to sub-optimal decisions. So even if, on first assessment, redistribution is great, it may not be quite as effective as it ought to be.

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But Krugman and Kaminska argue that there’s a strong chance that redistribution will get significantly more important in the near future. That’s because, they fear, all our jobs will be taken by robots.

(Well, alright, not robots exactly. Think of “robots” as a short-hand for a huge amount of automation, from factories running with fewer staff, through genuine robots doing work like caring for the elderly, all the way to the replacement of white-collar jobs in journalism or law with algorithms which can write financial stories or legal documents automatically).

For the most part, all our jobs being taken by robots isn’t that bad a thing. What that would mean in practice is that we would have the same standard of living that we have now, and wouldn’t need to work for it. That’s actually pretty great.

The problem comes when the benefits from increased automation accrue, not to society at large, but to one small subset of society: the robot owners. (In other words, the problem comes when automation meets capitalism. But let’s not go there)

Krugman writes:

I’ve noted before that the nature of rising inequality in America changed around 2000. Until then, it was all about worker versus worker; the distribution of income between labor and capital — between wages and profits, if you like — had been stable for decades. Since then, however, labor’s share of the pie has fallen sharply. As it turns out, this is not a uniquely American phenomenon. A new report from the International Labor Organization points out that the same thing has been happening in many other countries, which is what you’d expect to see if global technological trends were turning against workers.

And Kaminska adds:

The new inequality we are seeing has little to do with how well educated you are. It’s hard to penetrate beyond the barrier on education alone. The new inequality is about capital owners and non-capital owners.

And increasingly, it’s about technology capital owners. Those who own the robots and the tech are becoming the new landlord rentier types.

If automation does squeeze the labour market – even if it’s just temporarily – then a basic income may be a good way to respond to it. That’s especially the case if its implemented somewhat pre-emptively, avoiding the massive social upheaval caused during the last time technology disrupted the labour market this way: the industrial revolution. That only shook out fully once half the ruling class had been massacred in the First World War, and the Labour Party nationalised many of the companies owned by the other half.

More than being just an evergreen idea, a basic income is a policy whose time has definitely come.

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