Automation and the Guaranteed Minimum Income

In recent years I’ve been interested in the effects of automation on our economy and our society. Throughout history every advance in technology has brought more wealth, health, and opportunity to pretty much everyone. With every revolution people changed jobs but their lives got significantly better. When farms mechanized, workers moved into the city and got factory jobs, and Henry Ford’s assembly lines made use of this labor to great effect.

Early factories needed labor in great quantities and as industrial processes became more efficient at utilizing labor, the value of human labor rose and the demand kept increasing. So did pay. Factory workers up through the 70’s could afford a nice house to raise a family, a big car, and even a boat or nice vacations. Since the 70’s however, the purchasing power of a factory worker or even a bank teller has been pretty flat. These are two professions that have seen the most advances in automation in the last 30 years, due to industrial robots and automated tellers. If automation makes workers more productive, why aren’t we seeing that translate into purchasing power?

There are two types of technological improvements at work here. A farmer with a tractor is very productive compared to one with a horse and plow. The displaced farm workers who went to the city were given the tools of the industrial revolution: steam engines, motors, pumps, hydraulics, and so forth. These technologies amplified the value of human labor. That’s the first kind of technological improvement. The second kind is the automated teller or the welding robot. The older technology adds value even to the lowest skilled employees, but the new technology is reducing their value and the new jobs require significantly higher skill levels. There’s something about this new revolution that’s just… different. The demand for low skill labor is drying up.

The increasing divide between the “haves” and the “have-nots” has been documented extensively. Some divide is good and promotes the economy and productivity. Too much separation is a recipe for significant problems.

I’m not the only one worrying about this issue, and as I’ve followed it over the last few years I’ve been surprised by the amount of interest in a Guaranteed Minimum Income or some such plan. Basically it involves getting rid of every low-income assistance plan such as social security, welfare, minimum wage laws, etc., and creating a single universal monthly benefit that everyone is entitled to. Some people are talking about a number as high as $24,000 per year per adult. Considering that the 2015 federal poverty level in the US is just below $12,000 for a single adult, you can see that $24,000 per adult isn’t just a trifling amount.

For comparison, a little Googling tells me that the US GDP per capita is around $55,000. Think about that for a second. You’re talking about guaranteeing almost 45% of the productivity output of the country to be distributed evenly across all adults. One presumes you would also provide some extra money per child in a household, but to be fair the “per capita” figure includes kids too. It’s possible. Sure seems a bit crazy though.

Is it practical? Won’t some people choose not to work? Will productivity go down? It turns out that we’ve done some experimenting with this type of program in Canada called MINCOME. The results were generally positive. There was a small drop in hours worked by certain people, mostly new mothers and teenagers. These costs were offset in other areas: “in the period that Mincome was administered, hospital visits dropped 8.5 percent, with fewer incidents of work-related injuries, and fewer emergency room visits from car accidents and domestic abuse.” More teenagers graduated. There was less mental illness.

I’m fiscally conservative, but I’m mostly pragmatic. It’s only my years of exposure to automation, technology and working in factories that makes me ask these questions. Not only do I believe that people should contribute, I believe that people need to contribute for their own happiness and well-being. That’s why I don’t think paying people to sit at home is the ultimate solution.

The elephant in the room is this: as technology improves, a greater proportion of the population will simply be unemployable. There, I said it. I know it’s a disturbing thought. Our society is structured around the opposite of that idea. Men are particularly under pressure to work. The majority of the status afforded to men in our society comes from their earning potential. The social pressure would still be there to work, even as a supplement to a guaranteed minimum income, so we still need to find something for those people to do. Perhaps if we expand the accepted role of men in society then we can fill that need with volunteer work. Maybe.

What’s the right answer? I don’t know. For lack of a better term, the “American Dream” was accessible to anyone if you were willing to work hard and reinvest that effort into yourself. Not everyone did that, but many people created significant fortunes for themselves after starting in the stockroom and working their way up. That security gave people a willingness to take risks and be entrepreneurial. Proponents of the idea say that a minimum income would bring back that innovative edge. Entrepreneurs could try new ideas repeatedly until they found one that worked, and not worry about their family starving. With your basic necessities met, you could start to realize your potential..

I do know that as we continue down this road of increasing automation, we can’t be leaving a greater and greater proportion of the populace without the basic resources they need to survive. Do we expect them to grow their own food? On what land? Do we expect them to do a job that I could program a robot to do, if the robot’s average cost is only $10,000/year? Do you have some valuable job we can retrain them to do? One that pays enough to support a family?

Look, I don’t like the alternatives either, but it’s better than an armed revolt.

6 thoughts on “Automation and the Guaranteed Minimum Income

  1. Ranjit Singh

    Very well written article. The society needs to give a serious thought to questions that arise. But, it may be too late by the time most of the people wake up to “How we as people have changed in unintended ways ‘cos of automation?”

  2. Steve Griffin

    Actually I think this article could be written at just about any point after the Industrial Revolution began. There will always be some poverty in the world, but most of it won’t be caused by automation, and people who are used to working for a living but lose jobs to automation will find or invent vocations you and I couldn’t predict today.

  3. Scott Whitlock Post author

    @SteveGriffin – I used to think exactly that, and now my experience tells me I was wrong, which is why I wrote this article.

    It seems to me that the “people who are losing jobs to automation” have almost zero chance of finding or inventing new vocations. It’s the people who aren’t self-starters, who grew up being told that if you just worked hard all your life then you’d get a job and be able to feed your family. Those are the people we’re displacing. Hard-work, by itself, just isn’t good enough anymore. The new economy will require a basic level of competence in technical matters that some people just don’t have.

    If these same people, by a fluke, end up in a new vocation that we can’t predict, then I predict we’ll automate that one away very quickly too.

    Don’t get me wrong. I hope you’re right. But consider this… for a long time we’ve subsidized the national income by using some national resource revenue to fund new infrastructure, education, basic healthcare, etc. That makes a bit of sense because if a nation is its people, then the people should be getting the benefit of the natural resources. However, as we deplete some of the easier-to-exploit resources, don’t we need to shift some of that basic revenue over to the nation’s technological resources? The GPS constellation was developed by the government for military purposes, but now I can buy a GPS receiver for under $100 and it does things that we couldn’t dream up a few decades ago. The GPS constellation is effectively owned by the people and it benefits the people.

    Why can’t the people, through the government, also invest in the means of some basic production capacity so that they get some of the benefits? Otherwise, how does a person with no useful skill actually participate in the market? You need to start trading up but you have nothing to start with. That wasn’t true in the industrial revolution. Back then you always had your labor to trade.

  4. Steve Griffin

    This is a well-expressed reply. I’m bothered, however, on how easily you are throwing in the towel on promoting personal initiative and ambition as a core societal value. I think that’s a lot more promising than building a society on busy-work.

  5. Scott Whitlock Post author

    @SteveGriffin – I think I’m looking at it a little more pragmatically. If you took, say 15 or 20% of the productivity (GNP?) and reserved that as a guaranteed minimum income, and the rest was still distributed by the free market, I still think you’d be promoting personal initiative and ambition. In fact, I think that by removing the fear of failure (you can always fall back on your minimum income) then you’d promote people to take risks, start businesses and be innovative, etc. I absolutely agree that the free market is what provides the economic engine, and I’m certainly not suggesting throwing it away. I’m just saying that a guaranteed minimum income is a better social safety net (simpler, more fair) than a combination of welfare, food stamps, and other government social assistance. I’m also a proponent of reforming income tax by instating a flat tax with a single basic personal exemption.

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