US Economy

Universal basic income debate sharpens as observers grasp for solutions to inequality

Is Universal basic income the answer to automation and robotic taking our jobs?
Is Universal basic income the answer to automation and robotic taking our jobs?

Is a guaranteed paycheck from the government, with no strings attached, the answer to the relentless rise of automation?

The concept might sound far-fetched, but a so-called universal basic income (UBI), is currently one of the most hotly debated policy topics being floated as a means to address income inequality and the disruption that technology poses to the workforce. UBI is being tested in Finland and other international markets, but has received decidedly mixed reactions.

Meanwhile, developments in robotics and artificial intelligence have grave implications for the labor force. A report issued this week from consulting firm PwC found that more than a third of U.S. jobs were at risk from automation, upping the ante for policy makers to cushion the blow to workers.

Advocates for UBI argue that a guaranteed paycheck could serve as a way to fight poverty and uncertainty in an evolving U.S. economy, and encourage workers to take more risks in the job market if they had some extra money as a cushion.

The idea has gained prominent backers such as Tesla CEO Elon Musk, who recently told CNBC he supported UBI — joining a growing list of tech execs who've voiced support for the concept as a solution to unemployment that will be caused by future automation — the rise of the robots. Silicon Valley's Y Combinator President Sam Altman and eBay Founder Pierre Omidyar have also expressed support for a universal income.

A homeless man sleeps under an American Flag blanket on a park bench on September 10, 2013 in the Brooklyn borough of New York City.
Spencer Platt | Getty Images

Skeptics, however, insist that a guaranteed paycheck would actually reduce the incentive to work. In their view, a UBI would accomplish little other than wasting money on those who don't need it, and may even crowd out programs like Social Security and Medicare.

The increasingly polarizing concept was on full display this week, as UBI backers and antagonists sparred at a debate hosted by Intelligence Squared U.S. in New York City.

The debate made for strange bedfellows, as a well-known labor organizer teamed up with an economic libertarian to argue in favor of UBI, while two aides to former president Barack Obama and vice president Joe Biden pushed back on the idea.

"Despite job growth, the November election is a shocking warning that the economy is off to a bad start, and many people are stuck in minimum wage jobs," said Andrew Stern, the former president of the Service Employees International Union, one of the largest and most organized labor unions in the country.

With a turbulent economy giving rise to populism, Stern said the economic environment was creating a "U.S. of anxiety" over money. A universal income would be "humane, flexible, it promotes choice and freedom, and offers security to individuals," Stern added.

Staying relevant in the age of artificial intelligence
Staying relevant in the age of artificial intelligence

Well-known libertarian Charles Murray agreed, saying that by the government eliminating spending on some programs, thereby generating revenue to spend elsewhere, "we can afford to do this in America."

However, Jason Furman, a former chairman of the Council of Economic Advisers under Obama, rejected the suggestion, saying it would do more harm than good.

"If you give someone a dollar, [that dollar] has to come from somewhere," said Furman, arguing that a universal income would actually take America in the wrong direction and worsen economic conditions.

UBI boosters "argue that [government] money sent to the elderly today doesn't work … that the welfare state today doesn't work, but these claims are false," Jared Bernstein, a former economic adviser to Biden, told the debate's participants.

Myriad welfare programs currently employed by the government "lift more than 40 percent of Americans out of poverty, and instituting a universal income in our country would undermine that progress," he said.

A guaranteed paycheck would be an expensive proposition. In the U.S. alone, it could cost more than $3 trillion to distribute just a $10,000 annual income to all citizens, science and technology website Futurism said in a report recently.

Stern and Murray suggested that cutting spending on defense and curbing tax credits could pay for UBI. Yet both Furman and Bernstein warned about the cost to the federal government, with the latter calling UBI little more than "bad math."

'A huge mistake'

A robot delivers meals in a restaurant.
Photo by VCG

Switzerland recently considered introducing a basic income for its citizens last year, but the plan was eventually scrapped. Meanwhile, Scotland is planning to test a UBI in cities Fife and Glasgow later this year. Other countries including France, Kenya, India and the Netherlands have also begun discussing the feasibility of a UBI.

The discussion has taken on added urgency as economists nervously eye the wave of disruption posed by automation. Studies show so-called robot-to-worker ratios are increasing at a steady pace worldwide, and that has broad implications for a workforce lacking in technology-related skills.

"To ignore the possibility and not plan [for automation] would be a huge mistake" Stern said this week, invoking the warnings presented by former Microsoft CEO Bill Gates, Musk and physicist Stephen Hawking. "Studies all say there will be a massive disruption in jobs."

A 2016 analysis from the World Bank estimated that roughly two-thirds of all jobs in developing nations around the globe are susceptible to replacement by automation. In the U.S. alone, a 2013 study by Oxford University's Carl Frey and Michael Osborne estimated that 47 percent of American jobs could potentially be displaced by robots and automated technology over the next 20 years.

Yet not everyone is sold on the idea of robots taking control of the American workforce—including billionaire investor Mark Cuban, who's pushed back aggressively against the idea of a guaranteed paycheck.

@scottsantens: @mcuban Welcome aboard Team #Basicincome! We're happy to have you. You are for #UBI as the best response, right?

@mcuban: @scottsantens no. I think it's one of the worst possible responses

Rather than give people a basic income, governments should focus resources on finding out how people can thrive in an era of robots, mainly through skills training, some argue.

"Education is the closest thing to a 'magic bullet'," Furman said at the Intelligence Squared debate this week. "While the world is a messy place, it makes sense to give more to people who need support more."

WATCH: Elon Musk: Robots will take your jobs, government will have to pay your wage

Elon Musk: Robots will take your jobs, government will have to pay your wage
Elon Musk: Robots will take your jobs, government will have to pay your wage