The Universal Basic Income Drumbeat Continues

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In his latest column, The New Yorker’s Financial Page writer, James Surowiecki makes the Case for Free Money. Why, he asks, don’t we have universal basic income?  It may be, he thinks, “an idea whose time has come.”

He notes that the work disincentive under a universal basic income is mild – in Canada’s Manitoba experiment in the 1970s working hours for men dropped only 1%.  Other measures of well-being improved markedly. Teenagers stayed in school and hospitalization rates declined. So what’s not to like?

He thinks that one driver of a universal basic income policy is the concern, which he takes seriously, that the 21st Century economy cannot generate enough jobs for everyone.  Larry Summers, former Secretary of the Treasury in Bill Clinton’s Administration and head of the Council of Economic Advisors in the Obama Administration, recently suggested that technology might be responsible for some of the observed drop in labor force participation rates. He noted that in the 1960s, 1 in 20 men between the ages of 25 and 54 weren’t working. And today, 3 in 20 men between the ages of 25 and 54 aren’t working. Summers thinks it is worth considering the role of technical change in creating this tripling of the “dis-employment” rate.  

It is worth considering, but there is plenty of evidence that technology creates jobs.  SIIA’s study of the software industry showed that it employs more than 2.5 million workers, and purchases by software companies supported another 1.1 million jobs. Moreover, there is a modest link between software purchases and job gains by industry, contrary to the widespread impression that software use tends to destroy jobs. The industries that invested most heavily in software over the 15 years from 1997 to 2012 (financial services, scientific and technical services, education) had relatively strong rates of job growth, while industries investing the least in software experienced both high levels (mining) and low levels (apparel) of job growth.

Software is also instrumental in the recent process of insourcing manufacturing jobs.  Labor economist David Autor has documented the loss of manufacturing jobs in U.S. industries exposed to import competition. But advances in software and artificial intelligence make new state of the art production facilities in the U.S. cost competitive with overseas facilities. This return of production facilities to the U.S. will not reverse the loss of manufacturing jobs over the past decades, but it will create substantial numbers of good high paying jobs for skilled U.S. workers.

As I noted in my earlier blog and InfoWorld column, artificial intelligence and machine learning will likely disrupt the job markets of the future without ending human employment as we know it. As Suroweicki sensibly observes, “concerns about robots taking all our jobs are probably overstated.”  Still, he thinks that a universal basic income, despite its high cost and implementation difficulties, deserves to move up on the nation’s policy agenda “as a kind of insurance against a radically changing job market…”

When this happens, he thinks, we might see a universal basic income “going overnight from completely improbable to totally necessary.”

Mark Mark MacCarthy, Senior Vice President, Public Policy at SIIA, directs SIIA’s public policy initiatives in the areas of intellectual property enforcement, information privacy, cybersecurity, cloud computing and the promotion of educational technology. Follow Mark on Twitter at @Mark_MacCarthy.