This discussion focuses on the pressing issue of unemployment and wage insecurity in the face of increasing automation, exploring potential policy responses and their political feasibility. It delves into four main areas: Universal Basic Income (UBI), minimum wages, the Earned Income Tax Credit (EITC), and transitional assistance programs.
The discussion begins by illustrating the accelerating pace of automation, citing examples such as self-driving trucks and robot-operated pizza kitchens, leading to concerns about massive job displacement. The author Martin Ford argues that this wave of automation will impact not only blue-collar jobs but also white-collar professions like journalism, medicine, and finance. This raises the fundamental question of what will happen to the millions of workers who will be displaced.
The first proposed solution discussed is Universal Basic Income (UBI), a concept where all citizens receive a regular, unconditional cash payment regardless of their employment status. Proponents, like political philosopher Philippe von Perese, see it as a fundamental right, a floor rather than a safety net in a free society. Andrew Yang, a US presidential candidate, advocates for a "Freedom Dividend" of $1,000 per month for every American adult, arguing that it is necessary to address the economic disruption caused by automation. He draws a parallel to Alaska's petroleum dividend, showcasing a successful example of distributing resources directly to citizens. UBI could increase worker bargaining power by lowering exit costs from jobs, enabling them to demand better treatment from employers.
However, UBI faces significant challenges, particularly concerning its political viability. There's a strong "work ethic" in society, leading to resistance against the idea of receiving money without working. Some conservatives, like Charles Murray, support UBI, but in a drastically different form: as a replacement for the entire existing welfare state, including Social Security and Medicare. This conservative vision aims to streamline social programs and incentivize work by allowing individuals to keep their UBI payments until they reach a certain income threshold. However, this proposal would face fierce opposition from groups like the AARP and those who benefit from existing social programs. Switzerland had a referendum on UBI which failed and in Finland an experiment was abandoned after a few years.
The discussion then shifts to the political pressure to raise minimum wages. The push for a $15 minimum wage has seen success in states like California and New York. However, there are drawbacks, including the potential for increased prices for consumers and the risk of job losses as businesses either automate or relocate to areas with lower labor costs. Furthermore, minimum wages are hard to adjust for inflation, and may face political push-back. The increasing minimum wages in one state can incentive a race to the bottom between the different states.
The third solution considered is the Earned Income Tax Credit (EITC), a wage subsidy paid directly to low-income workers. It has received bipartisan support and has been significantly expanded over time, now benefiting millions of families. The discussion sees it as one of the biggest recent increase in downward distribution. The EITC creates an incentive for a "race to the top" among states, as businesses are drawn to states with more generous EITC programs, effectively reducing their labor costs. Since payments go directly to workers, there is less chance of corruption or rent-seeking that can accompany incentives for firms.
Finally, the discussion examines the history and potential of transitional assistance programs, specifically trade adjustment assistance (TAA). Initially conceived to gain union support for free trade agreements, TAA aimed to provide robust unemployment insurance, relocation assistance, and free retraining for workers displaced by trade. However, due to administrative problems and shifting political priorities, TAA has never achieved its initial promise. The discussion argues that this idea has taken off in some countries, and that in an era of technological job displacement, these programs need to be rethought as universal adjustment assistance, available to anyone whose job is lost due to trade or technology. By universalizing it, it may be easier to sustain a coalition for it.
The discussion concludes with a sobering reflection on the underlying causes of political upheaval, particularly the election of Donald Trump, arguing that it was a result of ignoring the economic anxieties and desperation of voters. The discussion urges for more proactive policy responses to address the challenges of unemployment and wage insecurity.