What’s wrong with UBI?

meat-loaf-two-out-of-three-aint-bad-epic-cleveland-international
One out of three ain’t good

Universal Basic Income (UBI) is a fashionable policy idea comprising three elements: it is universal, it is basic, and it is an income. Unfortunately, two of these elements are unhelpful, and to paraphrase Meatloaf, one out of three ain’t good.

The giant sucking sound

The noted economist John Kay dealt the edifice of UBI a serious blow in May 2016 in an article (here, possibly behind a paywall) for the FT. He returned to his target a year later (here, no paywall) and pretty much demolished it. His argument is slightly technical, and it focuses on UBI as a policy for implementation today, so I won’t dwell on it. But if you are one of the many who think UBI is a great idea, it is well worth reading one or both articles to see how Kay demonstrates that “either the basic income is impossibly low, or the expenditure on it is impossibly high.”

To put it more bluntly than Kay does, if UBI was introduced at an adequate level in any one country (or group of countries) today, there would be a giant sucking sound, as many of the richer people in the jurisdiction would leave to avoid the punitive taxes that would pay for it.

UBI and technological unemployment

But what happens a few decades from now if a large minority – or a majority – of people are unemployable because smart machines have taken all the jobs that they could do? We don’t know for sure that this will happen, of course, but it is at least very plausible, so we would be crazy not to prepare for the eventuality. Kay explicitly ignores this question, but tech-savvy and thoughtful people like Elon Musk and Sam Altman think that UBI may be the answer.

Imagine a society where 40% of the population can no longer find paid employment because machines can do everything they could do for money cheaper, faster and better. Would the 60% who remained in work, including those in government, simply let them starve? I’m pretty sure they wouldn’t, even if only because 40% of a population being angry and desperate presents a serious security threat to the others.

Many people argue that UBI is the solution, and will be affordable because the machines will be so efficient that enormous wealth will be created in the economy which can support the burden of so many people who are not contributing. I describe elsewhere a “Generous Google” scenario in which a handful of tech firms are generating most of the world’s GDP, and in order to avoid social collapse they agree to share their vast wealth by funding a global UBI.

Google and cash
I suspect there are serious problems with the economics of this. Exceptional profits are usually competed away, and companies which manage to avoid that by establishing de facto monopolies sooner or later find themselves the subject of regulatory investigations. But putting that concern to one side, in the event of profound technological unemployment, should we ask the rich companies and individuals of the future to sponsor a UBI for the rest of us?

This is where Meatloaf comes in. (Yay.)

Universality

The first of UBI’s three characteristics is its universality. It is paid to all citizens regardless of their economic circumstances. There are several reasons why its proponents want this. Experience shows that many benefits are only taken up by those they are intended for if everyone receives them. Means-tested benefits can have low uptake among their target recipients because they are too complicated to claim, or the beneficiaries feel uncomfortable about claiming them, or simply never find out about them. Child benefits in the UK are one well-known example. There is also the concern that UBI should not be stigmatised as a sign of failure in any sense.

But in the case of UBI, these considerations are surely outweighed by the massive inefficiency of universality. In our scenario of 40% unemployability, paying UBI to Rupert Murdoch, Bill Gates, and the millions of others who are still earning healthy incomes would be a terrible waste of resources.

Murdoch and cash
Basic

The second characteristic of UBI is that it is Basic, and this is an even worse problem. “Basic” cannot mean anything other than extremely modest, and if we are to have a society in which a very large minority or a majority of people will be unemployable for the remainder of their lives, they are not going to be happy living on extremely modest incomes. Nor would that be a recipe for a stable, happy society.

Many proponents of UBI think that the payment will prevent everyone from starving, and we will supplement our universal basic incomes with activities which we enjoy rather than the wage slave drudgery faced by many people today. But the scenario envisaged here is one in which many or most humans simply cannot get paid for their work, because machines can do it cheaper, better and faster. The humans will still work: they will be painters, athletes, explorers, builders, virtual reality games consultants, and they will derive enormous satisfaction from it. But they won’t get paid for it.

Nillionaire
If we are heading for a post-jobs society for many or most people, we will need a form of economy which provides everyone with a comfortable standard of living, and the opportunity to enjoy the many good things in life which do not come free – at least currently.

Income

UBI isn’t all bad. After all, it is in part an attempt to save the unemployable from starving. And the debate about it helps draw attention to the problem that many people hope it will solve – namely, technological unemployment. So UBI isn’t the right answer, but it is at least an attempt to ask the right question.

Perhaps we can salvage the good part of UBI and improve the bad parts. Perhaps what we need instead of UBI is a PCI – a Progressive Comfortable Income. This would be paid to those who need it, rather than wasting resources on those who have no need. It would provide sufficient income to allow a rich and satisfying life.

Now all we have to do is figure out how to pay for it.

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4 thoughts on “What’s wrong with UBI?

  1. I would suggest that first we need to find a way everyone can agree on it and it’s parameters ( amount, who, how and when paid, etc)

    The system will very quickly fall into chaos if only some countries/ governments/ global corporations agree to it. The citizens of those who don’t will do anything they can to migrate to the ones that do resulting in chaos in both place they go to and the places they leave. The corporations that do not pay their share will massively outcompete those that do quickly causing the generous ones to turn scrooge and reneg on any deal.

    Unless the world agrees it won’t work and if the world can’t even agree that those who use chemical weapons on human beings need to be punished or sanctioned then what chance have we got to get it to agree to this??

    Figure out a way it could work in one country (without mass migration to it) and then hope the others take it up, but i don’t see a very likely future for any successful PCI/UBI, not with the current level of co-operation in the world (or at any time in the past for that matter).

    love.

    • An optimist (admittedly a brave one) might hope that in a few years there will be a backlash against the current rush towards small-minded, purblind nationalism. Better hope so, because you’re right: very few countries, if any, can tackle the economic singularity on their own.

      • A backlash probably would occur once Joe Patriot realises the ones they voted for for a ‘Change’ did change things, they just didn’t change them for the better (for the average Joe and Jill)
        Basically – better the devil you know and have learned a few things about rather than the ones you don’t know and have not yet learned about so have no way to protect against!

        Being somewhat pessimistic on this topic, i believe it won’t be so much a backlash against nationalism as a largely unsuccessful rebellion against robot technology that the masses will take to first.

        But the genii was let out of the bottle long ago now and i’m pretty sure we are not going to be able to bung it back in or find a way to manage it for the benefit of all existing humans and most of us are heading for some very uncomfortable times to come.

        love.

  2. 2nd thought – Eventually all work is being done by unpaid robots. No human can earn a wage but some may already have, or be able to initiate a business that can generate products/services that earn the owner a profit/income from the few consumers with money left on the planet.

    The largest/richest business owners, through competition, buy out the smaller ones to absorb their profit and market-share for themselves (Global Capitalism at work) so eventually a very tiny minority (the 0.001% say) are producing all products services and getting all income of the World’s GDP. Since virtually no-one now has any money no-one can afford to pay for the products and services so the Rich are now without their main sources of income – they can only buy and sell products from or to themselves. They all have robot armies to protect themselves and their business facilities from the hungry ravenous rabble baying for their blood and live on the largest, greatest, self-sustaining, solar powered super-yachts ever built, sailing on tropical waters.

    The rabble quickly revert to stone age times losing all science, education, traces of a human civilisation (that one started decades ago) and have very little arable land (or water sources) of any quality on which to grow a subsistence crop or raise stock.

    The world divides into two very different classes, one smaller one, living like Gods, and one larger one (but much less than the current world population) and a ‘happy’ equilibrium is reached for the first time in human history – The End.

    love.

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