The Case For Universal Basic Income

01/26/2017 04:12 EST | Updated 02/01/2017 12:02 EST
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A closeup shot of Canadian currency on a white background with special attention to the reflection of the holographic foil stamping. Good for Canadian financial themes, it illustrates the diversity and colour of Canadian culture.

When the government provides a basic income to all citizens of the country without any conditions attached, it is termed as universal basic income. It is a form of social security. There is increasing debate in the developed countries about the introduction of Universal Basic Income.

The combination of four factors, globalization, outsourcing, automaton, and the increasing adaptation and use of artificial intelligence is taking a growing toll on the low-income and middle-class sections of the society in developed countries, which is prompting the debate for the introduction of universal basic income.

In Canada, manufacturing employment has decreased. According to Statistics Canada, manufacturing employment decreased by 322,000 between 2004 and 2008. This indicates the impact that globalization, outsourcing and automation had on Canadian manufacturing employment during this period. However, during the same period, 1.5 million jobs were created in the Canadian economy. It was a net increase in jobs, which indicated dynamism in the Canadian economy.

But, some of the unemployed manufacturing workers may have found it difficult to find employment in other industries. This could have been due to lack of skills and not enough opportunities, including financing opportunities, for retraining of the unemployed workers. This might have led to lower income and standard of living for the unemployed workers, and some might have even fallen into poverty.

In the United States, there has been a decline in manufacturing employment as well. 5.8 million manufacturing workers lost their employment between 1999 and 2011. It shows that the combination of globalization, outsourcing and automation has taken a serious toll on US manufacturing employment. While other jobs were created, the manufacturing sector workers might have fallen into economic difficulty.

The same trend is observed in other advanced economies. The manufacturing sector is shrinking. While this trend is expected as an economy matures, it is creating significant manufacturing unemployment in the advanced economies.

Even though retraining the unemployed workers is important, it is a reality that there will simply not be enough jobs to employ the relatively low-skilled unemployed workers as many of these companies, typically manufacturing companies, move their production to low-wage destinations while automation reduces the number of workers required in the production processes.

Again, the increasing adaptation and use of artificial intelligence is also taking a toll on employment in the developed countries.

Therefore, these four factors are leading to unemployment among the low-income and middle-class sections of the society in developed countries, especially among the low-income and low-skilled section of the society. The impact of artificial intelligence on employment may become more pronounced when driverless cars and trucks become more widely used.

These economic changes (globalization and outsourcing) and technological changes (automation and artificial intelligence) are leading to economic difficulty or even poverty among the disenfranchised workers. At the same time, there are people who have benefited significantly from these economic and technological changes. This has led to rising income inequality in the advanced economies which is undesirable.

Also, a large pool of unemployed people can lead to social and political instability. Angst and anger of the unemployed, and adversely affected low-income and middle-class sections of the society have led to the rise and popularity of right-wing politics. Again, reduced income of the low-income and middle-class may have dampened consumption and expenditure by these sections of the society.

Considering the challenges that these four factors have created and may create in the future, it is prudent to introduce universal basic income in the developed countries. It will help the adversely affected workers and their families to have decent standard of living. This will reduce or even eliminate poverty. With higher levels of income, people will be in better health leading to lower health care costs and healthier workers.

Also, they may be more inclined to access and afford education. This may lead to healthier, more skilled and competent workers. Again, the buffer created by universal basic income may encourage people to pursue entrepreneurship and take risks in being self-employed and start businesses. This may increase business activity and employment in the country.

As it will increase the income of the low-income and middle-class, universal basic income will reduce income inequality. With its introduction, the disenfranchised workers and their families will have decent standard of living that will contribute to higher levels of social and political stability. This will stem the rise and popularity of right-wing politics that has affected some developed countries.

Again, with higher income, the low-income and middle-class may consume and spend more. Higher levels of consumption and expenditure will stimulate the economies of developed countries.

One argument against universal basic income is that it may make people less inclined to work. But, research has shown that its introduction has little effect on the number of hours worked. It added that even the people who worked less became involved in alternative work valuable to the society.

There are several countries that have considered as well as experimented with universal basic income. Finland is the first European country to conduct a two-year social experiment to understand the effectiveness of introducing universal basic income.

Universal basic income will replace existing social benefits and be paid irrespective of a citizen's employment status. The Finnish government hopes that it will reduce poverty and increase employment. However, the majority of Swiss voters rejected a proposal to give every citizen and long-time residents a universal basic income.

Therefore, the idea is not popular in all countries. In Canada, Ontario is planning to run a trial of universal basic income. Even though two-third of the respondents in a poll of 1,500 Canadians were open to the idea of basic income, most were unwilling to pay higher tax to finance the program.

This is a challenge to governments and policy makers trying to implement universal basic income. Also, Silicon Valley has become a supporter of universal basic income realizing the job-replacing effect of technology.

The combination of globalization, outsourcing, automation and the increasing adaptation and use of artificial intelligence is creating significant challenges in the developed countries. This makes the introduction of universal basic income an increasingly viable policy option. It will generate a myriad of benefits like reducing or eliminating poverty to fostering greater social and political stability in the developed countries. Also, research has shown that it has limited effect on the number of hours worked. One concern of universal basic income is the way in which it will be financed.

As respondents from a poll in Canada show, people are unwilling to pay higher tax to finance the program. In this case, governments can get increasing revenues from corporate tax and by encouraging corporations to bring their overseas profits to their home countries at attractive tax rates, generating tax revenues to finance the program of universal basic income. Also, governments can save funds as universal basic income will replace other social programs.

Finally, healthier population will lead to lower health care costs so that governments have to spend less on public health care, sparing funds which can be redirected to finance universal basic income.

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