Now Robots Are Taking Over, a Basic Income is Inevitable

Disclaimer: The views expressed here are solely those of the author, and do not necessarily represent the views of or the Association of Foreign Affairs Lund.

The time is finally here: we can stop working and enjoy our lives. Through current advancements in artificial intelligence, robots can do all the dirty jobs, while we watch every Bob Ross episode and learn about The Joy of Painting. No matter how nice it might seem, in reality the rise of robots will have different consequences. People will lose their jobs, wages will go down, and inequality will rise. These dynamics will have many losers, and except for the rich, only few winners. Yet a solution to the potential nightmare of automation exists: a universal basic income. If we find a way to successfully implement a basic income, automation will not be a nightmare, but a dream.

Machines replacing humans is nothing new: companies have tried to replace human labour ever since the Industrial Revolution. Yet with current advances in the field of artificial intelligence (AI), this process of automation is accelerating. Tasks for which human input was previously deemed essential are now within the reach of automation. This will have a profound impact on labour: in a recent report by PricewaterhouseCoopers, it is estimated that 30% of all jobs in the UK will be automated by 2030. The US fares even worse: around 38% of all jobs are in danger of automation.

Historically, it were only low-skilled jobs that were in danger of automation. A machine could do all kinds of packaging, yet it could not fill in forms or make decisions. Through the advances in AI, high-skilled jobs are at stake too. Reform, a UK think-tank, suggested that for routine operations robots could replace doctors. This might take place in a not-too-distant future, but even today robots are already taking over. Just this year, a Japanese insurance company replaced 34 highly skilled workers with an artificial intelligence system, able to fill in forms and make decisions.

The rise of robots and its replacement of both low- and high-skilled jobs has significant consequences. Wages will stagnate, unemployment will rise, and inequality will increase.

Just think of all the extra leisure time we might have thanks to automation (Picture: Badics, Wikimedia Commons)

As the advances in artificial intelligence continue, replacing people with robots becomes cheaper. Humans need breaks, labour rights, monthly payments, and some variation in their jobs. Robots on the other hand do not complain. You can put them in a basement, only turn them on when you need them, and you only have to pay them once, when you buy them. As the benefits of robots continue to increase, the power of labour decreases. Employees demanding a higher wage have a weak bargaining position when a robot can simply replace them. For both low- and high-skilled workers, this leads to only one thing: a decrease in wages.

Related to the decline in wages is an increase in unemployment. In the PwC report, 30% of current jobs in the UK will disappear, but new jobs will be formed – right? The answer to this question is that we do not know. It is impossible to predict what services that cannot be performed by robots will be created in the future. Yet, what can be said is that a rise in unemployment will be likely. Humans need a minimum wage-level, either to survive or because the government installed it. Yet, once the price of automation is lower than the minimum wage, firms will use robots instead of people and unemployment will rise. Estimating exact levels of potential unemployment is impossible, but the costs of high levels of structural unemployment are significant: levels of crime, illnesses, and suicide are all positively correlated with unemployment.

The biggest problem associated with automation is the rise in inequality it will facilitate. As the power of labour decreases, the relative power of capital increases. In other words: as the poor get weaker, the rich get stronger. With robots doing the work, the owners of robots – i.e. the rich – will get most of the returns, and thus get richer. This creates a clear distinction between the winners and the losers of automation. On the one hand, workers depending on their wages will lose. On the other hand, rich individuals owning robots will win, creating a society characterized by inequality.

Through automation, income inequality is likely to increase drastically. (Picture: nakagawaPROOF, Flickr)

One of the ways of dealing with automation is the creation of a universal basic income. Automation creates an incredible increase in labour productivity, and by instituting a basic income everyone can benefit from this increase. If every adult, no matter age, background, or employment, receives an unconditional sum of money enough to live a decent life, the negative consequences of automation might be offset.

That does not mean instituting a universal basic income is easy. It requires significant cultural change. Today, people draw much of their identity from the jobs they have. Only few students study for the sake of studying; most do so for the increased chance to get a satisfying job. When large swaths of people cannot have a job or when the quality of jobs available decreases, this part of forming one’s identity disappears. In the future, a person’s job cannot be the most important source of one’s identity, and thus the value given to work must change.

An even bigger challenge will be upholding a universal basic income. Increases in productivity through automation will allow countries to afford a basic income, yet it will still be costly. Significant taxes need to be levied on those who work. The most important source of tax money however will be robots. If human labour is taxed, so must a robot’s. The problem here, however, is one of the key aspects of modern globalization: the competition between nation states, each trying to attract as much foreign capital as possible by lowering their regulatory standards. Multinationals shop around, choosing the country offering the most attractive location (i.e. the one with the lowest tax rates and most lenient labour rights). In this system of competition between governments, instituting a basic income and its high levels of taxation would be economic suicide. No firm would go to a country where both labour and capital are highly taxed, and instead choose another country.

This creates a traditional prisoner’s dilemma. It is best if every country installs a system of universal basic incomes: everyone can benefit from automation, and society remains inclusive. Yet, if a country wants to install a basic income whereas others do not, it will inevitably lose. Multinationals will leave the country due to high levels of taxation, and the country will be hit by an economic recession, eventually maybe even forcing it to abandon the system of a basic income. It is best that all countries install a system of basic incomes, yet as with any prisoner’s dilemma, this is difficult if not impossible to achieve. The chance that all countries will implement a basic income is virtually nil – making everyone worse off.

The problems mentioned above however do not take away the need for a basic income. Without a basic income, unemployment will increase, inequality will rise and wages will go down. This is not a future we want to live in, and the way to deal with automation and making the globalized system inclusive is thus a major issue for politicians, economists, and philosophers alike. A system of basic incomes plays an indispensible role in this, despite the difficulty of implementing it. The question is not whether to implement a basic income or not; the question is how to do it. Only then, automation can be a dream come true.

Rick Huisman

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