- Jane Ross/Reuters
- Most Americans are making less money than they did last year. Economic insecurity is rising.
- Policy decisions could help bolster economic security as robots and automation are added into the mix.
- Basic income and a jobs guarantee are two possible solutions.
Even with record low unemployment and corporate profits increasing, workers are not feeling the love. Nearly three quarters of American workers are making less money this year than last, inflation adjusted median incomes have declined over the last 50 years, and housing prices have skyrocketed. Toss robots and automation into the mix, and it creates a recipe for economic insecurity that raises fundamental questions about the long-term sustainability of pay.
Technology will continue to grow unabated, so rather than seeking to dull innovation and reduce long-term growth, new approaches may be necessary. If income, not work, is the problem, policy decisions must react to those realities.
As Siemens CEO Joe Kaeser recently said, “The social and economic impact of digitalization is going to be massive. The least efficient part of the value chain, the middle man, will be cut out. Unfortunately the least efficient part of the value chain is human beings so someone has to do something about the fall out.”
A variety of ideas have been floated to support incomes right now.
One idea seems deceptively simple: What if the government just gave you a job? It’s a concept commonly known as a jobs guarantee, and this bold policy move would reshape monetary policy and make unemployment effectively zero. The basic premise is that the government promises everyone a job if they cannot find one in the private sector.
This policy would drastically impact wages – assuming the federal government requires a living wage and adds in real benefits. All of a sudden, the national minimum wage of $7.25 an hour could become a thing of the past. Beyond just impacting wages, a jobs guarantee might also act as an “automatic stabilizer,” helping to smooth lows from economic downturns and curb inflation during growth periods.
The idea of a jobs guarantee stretches back to the FDR Administration’s so-called “make-work” programs of the 1930’s. The government used its market-making powers to create a floor for workers – a true safety net.
Today, a swath of potential 2020 Democratic presidential contenders are coalescing around this concept. Senators Cory Booker and Kirsten Gillibrand might be the most prominent of the group, but after the surprising Democratic primary win of congressional candidate Alexandria Ocasio-Cortez in the Bronx – who supports a jobs guarantee – it has continued to gain traction on the left.
We could also simply give everyone a check. A Universal Basic Income (UBI) would provide each person, working or not, with a minimum payment, for life. It would insulate displaced workers from poverty and could quell the potential for unrest during a profound and painful economic transition. It could even spur innovation and encourage entrepreneurial risks. The definition of “work” would be transformed by attaching compensation to whatever people choose to do with their time, including absolutely nothing.
UBI has a pedigree that stretches back to the enlightenment – in Thomas More’s 16th Century Utopia – and runs through twentieth-century adherents as varied as Martin Luther King and Richard Nixon. In recent years, UBI has taken on a more tech-focused sheen, with prominent figures like Mark Zuckerberg and Elon Musk saying that we might need one as a solvent to the tech-based future they are creating. By this logic, when the robots take over, at least they’ll send us a check.
While there are no national-level UBI programs currently in operation, experiments have bubbled up in the United States and across the globe. Whether it’s Sam Altman of Y-Combinator experimenting on the private-sector side in Oakland, California, or Mayor Michael Tubbs leading the charge on a pilot project from his government perch in Stockton, California, UBI is certainly having a moment.
In Oakland, Altman is giving $1,000 monthly checks to families, and is now expanding this effort to other cities. The UBI pilot in Stockton, funded by the Economic Security Project, will provide $500 per month to a select group of families. Neither scheme will make people rich, but it might just help someone make the rent.
Though they have captured the headlines, these ideas shouldn’t give short shrift to more traditional policy solutions, including raising the minimum wage to $15 an hour and expanding the Earned Income Tax Credit. Several cities have already passed laws to raise the minimum wage to $15 an hour, and many more cities would raise wages if states didn’t stand in their way of passing wage laws.
Meanwhile, Representative Ro Khanna and others have introduced legislation in Congress – with little chance of passing in the current climate – that would drastically expand the earned income tax credit. The credit makes sure that work pays by providing dollars directly back to people that work and make too little. The current maximum credit is set around $6,000, so doubling it would supplement a family’s income by approximately $1,000 a month.
This wide range of ideas all seek to support incomes in some form or fashion tied to or independent of work. The most likely outcome will be an eventual mix of these solutions (and others) pursued by policy makers.
In order to make this happen, funding is needed. Direct taxation or a repeal of existing tax cuts could help cover these programs, but more unique approaches are also gaining steam.
What if rather than raising taxes broadly, a specific sector paid into a fund and dividends were returned to the American people? In the realm of so-called “social wealth funds,” the Alaska Permanent Fund – and its oil dividend- is viewed as the American model.
A data dividend is one potential source of funding. In such a system, supporters say, everyone would own and profit from their data, not just corporations. In this moment, with data breaches galore, Facebook mishandling data, and data-dependent companies like Uber worth tens of billions of dollars, a collective commons for data may just gain support. How it is implemented, which companies pay into it, and how much they pay is clearly an unresolved issue.
Another potential resource to tap is a carbon dividend. Under a cap-and-trade program, carbon is priced at a much higher rate. The proceeds from those sales could be credited back directly to people. They could also be used to help fund UBI or a guaranteed work initiative. This type of plan would serve a dual purpose, helping the planet while also supporting incomes for people right now.
As artificial intelligence and robots become more commonplace, and both work and pay are broadly transformed, conversations around these potential solutions will only intensify. People want security, and without good jobs, people don’t feel like they have that.
The social safety net was always envisioned as a way of providing people with the security and well-being to pursue the lives they want. This has broken down. The jobs are there, but the wages are not. Now, we need to explore new solutions.
Brooks Rainwater is the Director of the City Solutions and Applied Research Center at the National League of Cities .