Though not an entirely new idea, universal basic income is becoming an increasingly viable and revolutionary solution to the looming job disruption due to automation. Another revolutionary concept — which is also not that new — is cryptocurrency. Some believe that the union of the two might be the answer to challenges increased automation in the workforce could present.
UBI is all about giving a regular income to people regardless of their socioeconomic status or employment condition. A fixed amount is decided on, which should ideally be enough to cover a person’s basic needs. In the context of automation, however, UBI is being explored as a means to cushion the effects of unemployment. As such, receiving basic income wouldn’t necessarily stop when a person finds a job, like government unemployment programs.
UBI is a simple concept, but as its critics point out, implementation is not so easy. For one is the issue of funding, and whether or not governments could actually approve such a program. That’s where cryptocurrencies come in.
Cryptocurrencies used to have a bad reputation, thanks to Bitcoin and its association to the dark web. However, while it is the most popular, Bitcoin isn’t the only cryptocurrency around. Recently, more cryptocurrencies have been popping up — like Ether and Zcash.
Cryptocurrencies are mined from a decentralized system of ledgers and transactions known as blockchain. In a blockchain, transactions from various sources get recorded and are kept by a network of specialized computers. Usually, these blockchain keepers are “compensated” for their efforts in maintaining in a block with cryptocurrency. This process is called mining. For every digital transaction recorded and stored, a miner is paid in Bitcoin, Ether, or Zcash, depending on which blockchain they are using.
Faster Than Government
Several governments — notably Finland’s — are already implementing a UBI trial program. However, experts say “[a] government solution to this issue will not be swiftly implemented,” according to an article in the BTC Manager. Still, several institutions have begun conducting trials of UBI programs that use cryptocurrencies.
One such program, the first of its kind, is run by a U.S.-based nonprofit called the Grantcoin Foundation. It uses a digital currency called Grantcoin (GRT) to distribute basic income to participants from all over the world. Grantcoin’s UBI program began in January 31, 2016, and has since then distributed digital coins to participants on a quarterly basis. Currently, the program is on its third leg of implementation, and has already distributed digital currency to 1,132 applicants since February of this year.
Another known UBI program running on cryptocurrencies is Daniel Jeffries’ open-source distributed application platform known as Cicada. A unique characteristic of Cicada is that it makes everyone on its network into miners, with everyone limited only to one miner. It’s also based on Distributed Proof of Work (DPoW), which is regarded as being more efficient than Bitcoin’s Proof of Work. As such, individuals can mine even on their mobile phones and get paid for it, creating a UBI system from the bottom up.
These cryptocurrencies can be converted to cash, or used directly to buy goods, eliminating the need for government to fund a UBI program.
“Basic income, and especially universal basic income, requires a secure, tamper-proof ledger that can be audited by anyone to ensure the safe delivery of funds.” — Greg Slepak, a developer for the okTurtles Foundation
Additionally, there are other cryptocurrency-based UBI programs like uCoin and Swarm, as well as Circles, which uses Ethereum. There are also UBI-like programs by Kiwicoin in New Zealand, Cubecoin, Strangecoin, the Worldwide Globals Organization, and the Basic Income Project, LLC.
As increased automation is set to disrupt employment in various industries by 2020 to 2045 — with an expected 47 percent of jobs lost in the U.S. alone —, it’s crucial to have working options. UBI is one such option. And UBI via digital currency seems an even better one.
Dismissing vague warnings that robots are coming for our jobs is pretty easy. Not so easy? Dismissing hard evidence that they’ve already arrived and are doing those jobs better and more cheaply than we ever could.
Those are the facts the workers of the world faced when news broke earlier this year that a Chinese factory increased its production by 250 percent and dropped its defect rate by 80 percent by replacing 90 percent of its human workforce with automated machines. In fact, the transition to machines has been so successful, the plant may soon cut its remaining workforce from 60 to just 20 human workers.
That factory is just one example of how automation is putting the future of human labor in jeopardy.
Experts are predicting that up to 47 percent of jobs in the United States may be replaced by automated systems—and that’s all in the next decade. If that’s not enough, manufacturing jobs aren’t the only ones at risk. Automated systems are proving that they are capable of handling everything from “low-skill” work like flipping burgers and driving taxis to white-collar professions like managing hedge funds and preparing tax returns.
Researcher after researcher has concluded the same thing — automation is going to put a lot of people out of work very soon — but what people can’t agree on is what we should do about it.
Some, like President Barack Obama, recommend focusing on education and training to prepare people to take on new types of jobs once their jobs are replaced. Others recommend putting systems in place that would make having a job a guarantee.
Still others think a tax on robots could be the solution. Perhaps the most seriously discussed option, however, is universal basic income (UBI).
So what exactly is it?
The 411 on UBI
The idea behind a UBI system is that every member of a society regularly receives a set amount of unconditional money from the government or a public institution. How much money, how often it is given, who supplies it, and other variables are all open to interpretation.
Proponents of such a system say its benefits would be multifold. With so many people expected to lose their jobs in the coming decades, UBI would be a way for the government of a country to ensure it doesn’t see a drastic increase in poverty due to unemployment. They point to the encouraging results of past studies in their support of UBI, noting how some trials have revealed a link between UBI and better health, while others have noted a drop in the usage of “temptation goods” like alcohol and tobacco in societies with a UBI in place, particularly if those societies are in underdeveloped nations.
While notable figures such as Tesla CEO Elon Musk, Y Combinator president Sam Altman, and eBay founder Pierre Omidyar have all expressed their support for UBI, just as many people remain on the other side of the debate.
Business mogul Mark Cuban simply called UBI “one of the worst possible responses” to automation, philanthropist Bill Gates said even the richest countries couldn’t afford such a system, and the Obama administration released a report stating that job training and job search assistance are much more likely to mitigate the potential unemployment situation than UBI. Others argue that UBI would discourage people from working, wouldn’t be enough to lift them out of poverty, and would result in immigration problems for countries that enact such systems.
Untested, but Not for Long
Until recently, we’ve had very few examples of UBI systems to look to for definitive proof of their potential benefits or burdens. Those examples we did have involved smaller groups of people for relatively short durations of time. What we need to move forward are more extensive trials involving larger groups, and thankfully, that’s what we’re finally getting.
This year, Finland kicked of a two-year UBI trial in which 2,000 randomly selected citizens each receive the equivalent of $587 a month. Each participant was already receiving unemployment benefits or an income subsidy from the government that they would lose if they started earning outside income. The hope is that the UBI will encourage those people to take chances on potentially risky job offers, like those at tech startups, knowing they’ll still have an income to fall back on.
Once the two-year trial is over, the government plans to compare the data it collects from the 2,000 participants and 173,000 non-participants from a similar background to determine if a larger UBI system would be economically worthwhile.
GiveDirectly is poised to launch the largest UBI program to date this spring. With the support of investors like Omidyar, the nonprofit will provide UBI to more than 26,000 Kenyans, with the total amount dispersed expected to hit around $30 million. The company is spreading the money across 200 villages, with recipients grouped into one of three potential systems. Some will receive 12 years of basic income, some will receive two years of it, and others will receive two years’ worth of income as a single lump sum.
Kenyans in 100 villages will act as the control group against which the results of the trial will be judged. GiveDirectly is hoping to learn a great deal about UBI from the study, including how it affects a person’s economic status, willingness to take risks, and their gender relations, particularly in terms of female empowerment.
Canada has its own UBI project set to launch this year. In December, the state legislature of Prince Edward Island (PEI) approved an initiative to test out a UBI program, with leaders of all four political parties in the province approving the measure. The details still need to be hashed out and the plan implemented, but with 150,000 citizens, the small Canadian province could prove to be the perfect setting for a UBI pilot program — large enough to provide a valid sample size but small enough to be logistically feasible.
With so many projects in place, 2017 is being touted as the year we’ll finally find out if a UBI system could work, and really, we have no time to waste. That Chinese factory may have been one of the first, but it certainly won’t be the last example of automation’s superiority in the workplace.
WHY EXPERTS DON’T THINK IT WILL WORK
- Universal Basic Income (UBI) is a controversial plan to alleviate poverty in the age of automation.
- While the UBI has its supporters, some experts believe that the initiative would be too costly and that it is unnecessary at this point.
UBI, A CONTROVERSIAL CONCEPT
Basic Income (or Universal Basic Income [UBI] when applied to an entire population), is, according to Basic Income Earth Network, “a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.”
So, in short, it’s a baseline income that is given to all. It is given outside of work, assistance programs, certain qualifying factors, etc. There is the possibility of implementing both full and partial UBIs, and it is a solution that has been posed to issues of unemployment, especially in the age of automation. Some think that, as more and more jobs are made obsolete by technology, UBI could be what saves a large percentage of the population from desperate circumstances.
Many argue that UBI could alleviate poverty as automation-caused unemployment becomes a very real threat. One potential benefit of a UBI is that, unlike bureaucratic and often flawed assistance programs, it could, theoretically, legitimately level the playing field. Opportunities like education, career advancement, and self-betterment that are often only afforded to the wealthy could become accessible to much larger populations.
Other experts see implementation of a UBI as a necessity. In fact, according to Elon Musk, in the age of automation, “I am not sure what else one would do.”
A COLOSSAL COST
But, there are many who are not on board with this potential plan. According to some experts, a $10,000/year UBI could add approximately $2 trillion to federal spending annually. Others are more focused on the possible effects that could arise from people who might no longer benefit mentally and emotionally from working for their salary.
There are also those who do not think that job displacement due to automation will be an issue for many decades (despite current predictions that say we are closer than that). Erik Brynjolfsson, a researcher at MIT’s Sloan School of Management, pointed out that the U.S. still has a large number of unfilled job openings, and was quoted as saying,
The idea of a basic income is a good one in a world where robots do most of the work, but we probably won’t be there for 30 to 50 years. While automation is replacing many jobs, it’s also creating new ones. There’s still plenty of unmet needs and work to do, so the right strategy for the current situation is to prepare people for those new tasks…we’re not rich enough to afford a basic income that will provide everyone with a decent standard of living without having to work.
Even if there is a large drop in earned income in the near future, there are alternatives to a UBI that several experts support. For example, Robert Gordon, an economist at Northwestern University, suggests that, rather than create a entirely new benefits system, the best option for the U.S. is to expand and improve existing safety-net programs, especially by increasing the Earned Income Tax Credit. This would present people with a continued incentive to work, even if it was for few hours or lower rates.
“I’d make benefits more generous to reach a reasonable minimum, expand the Earned Income Tax Credit, and greatly expand preschool care for children who grow up in poverty,” Gordon said to the MIT Technology Review.
Experts will likely continue to debate whether a UBI will alleviate poverty and solve inequality issues in the ways that we need and hope for, but perhaps not for too much longer. We may soon have more concrete evidence on the costs and effectiveness of UBIs as several countries begin implementing them. In fact, Finland has already started testing the waters.
THE BOTTOM LINE: IS UBI FEASIBLE?
- An expert considers the economic feasibility of UBI, arguing that the time is right for such a system as we have large levels of wealth and can collectively afford such a social policy.
- With automation disrupting the workforce, we must rethink the current structure of capitalist society, asking ourselves how we can achieve our desired social outcomes in this new era.
INCOME FOR EVERYONE
Much has been said, both in favor of and against, universal basic income (UBI). Those who don’t agree with the system dismiss it as a socialist idea. Those who are in favor see it as a chance to reform social welfare programs and a viable solution to the problem of job displacement due to automation and digitization. What is clear, though, is that a UBI program would present a significant change in public policy.
UBI can be summed up as a regular, unconditional cash payment to each individual in a society. It is universal because it considers nothing beyond the person’s belonging to that society; their economic status, employment state, and even level of education are of no relevance. Various schemes of implementation are available, such as whether the payment is distributed monthly or yearly or as a lump sum. For example, in the case of Finland’s pioneer UBI program, the basic income is given monthly.
A unique compilation of papers discussing UBI, “Can Less Work Be More Fair?,” prepared by Australia-based think tank The Green Institute, offers many perspectives into how UBI could be beneficial. Among these papers is one written by Frank Stilwell, a professor emeritus in political economy at the University of Sydney. Stilwell is the coordinating editor of the Journal of Australian Political Economy and is on the editorial boards of Regional Studies, Social Alternatives, and Australian Options, among other things.
CAN WE AFFORD IT?
One of the primary things UBI critics often bring up is funding. Is funding a UBI program feasible? In his article, Stilwell provides an answer by considering the economic ramifications of implementing a UBI program.
For starters, Stilwell notes that the time is right for UBI:
We have wealth on a scale unknown to previous generations, but we now need to distribute it more equitably and use it more wisely. We can collectively afford social policies, such as a UBI, that would have been impractical in previous eras. The current low-inflation environment is propitious because it does not have the macroeconomic stresses that were evident when UBI was previously being widely discussed in the 1970s and 80s.
Stilwell also mentions that technological changes, i.e., automation, are making UBI a necessity as these changes challenge “conventional assumptions about continuous full-time waged employment as the principal means of generating income.” UBI can also help solve the unequal distribution of income as it “would help provide the necessary income floor.”
To the question of costs, Stilwell provides an answer as well:
The question of how to fund a UBI is fundamental. General taxation is the obvious revenue source. Depending on the level at which the UBI were set and the extent to which it replaced other welfare payments, it would comprise a substantial share of total government spending, probably somewhere in the $100 billion to $300 billion range annually. Consideration could be given to funding it out of a particular earmarked revenue source. Inheritance tax is one such possibility that might be appropriate (as a means of establishing more inter-generational equality of opportunity).
Stilwell goes on to talk about the cyclical nature of capitalist economic systems, with those governments regularly experiencing periods of deficit:
Because a UBI would be an expenditure commitment that is on-going whatever the state of the economy, there is a potential problem of funding it from more cyclically volatile revenue sources. Cyclical variations in budget deficits are already a feature of public finance but could potentially become more pronounced with a UBI.
He sees that situation as being both a positive and a negative, though, as it would provide citizens with a short-term cushion during times of recession, but also put into question whether a UBI system could be sustained for a longer period of time.
Implementing a UBI system isn’t impossible, really, if one puts an effort into it. Certainly, such a program would require a great deal of planning and careful implementation, which is why the countries that are considering it have opted for pilot programs first. As Stilwell concludes in his article, however, discussing UBI might be just as important as actually reaching a decision on whether or not to implement such a system: “The UBI proposal is important to consider because it … directs our attention to the all-important questions of ends and means: ‘What sort of society do we want?’ and ‘How should we restructure our economy so that the desired social outcomes can be achieved?’”