Chapter 7 – Solving the Near-term Unemployment Problem with the Basic Income
by Marshall Brain
What are our goals as a species? This, to me, is the most important question we can ask ourselves as human beings. Another way to say it: What is the meaning of our existence as a species? We never seem to directly ask ourselves these two questions in a collective way, which is very odd. Because if we were discussing these questions openly, collectively and consistently, I believe we would live in a very different society. We would be asking ourselves questions like:
- How do we want society to treat its citizens?
- What societal designs and features would produce the best outcomes for the most people possible?
- How do we bring these designs to reality?
There will come the day when the second intelligent species – a species of super-intelligent robots – arrives and takes over planet earth, as described in chapters 1 and 2. But prior to that day, the previous chapters show that we will see tremendous economic turmoil as more and more jobs are automated out of existence. How will human beings handle this situation? What should a highly automated society look like to the people living inside it?
Section 1 – A thought experiment using a simplified society
In order to get a discussion started, and to simplify things for a moment, I would ask you to entertain the following thought experiment. Let’s think for a moment about a highly simplified society that has the following features:
- The society consists solely of one million working-age adults.
- To be specific, this society has no children, no disabled people and no elderly people.
- The adults all live alone in a single-person residence. There are no marriages, no couples, no room mates.
- There are no government handouts or welfare of any kind, nor any charities.
- The one million adults are all ready and willing to work. Their educations are complete, for example.
- Everything else about this society, in an economic sense, functions as we would expect in a developed, capitalistic economy today.
- The people in this society all need to pay individually for housing, transportation, health care, food, clothing, furniture, appliances, utilities, smart phones, Internet, entertainment, hobbies, insurance, taxes, etc. as usual out of the wages they take home from their jobs.
- If someone owns their own private business, we are going to call the position that the person holds in his/her private business a job. Corporations provide jobs as well.
- The people in this society do not have any extraordinary savings. There are no heirs to family fortunes who can sit about idly living off of their inheritances.
That’s the setup. As I said, this is a highly simplified society.
Here’s the first question: How many jobs does this society need?
The great thing about this highly simplified society is that the answer is obvious: This society needs one million jobs for the one million citizens. Every single working adult needs a job. Otherwise they are unable to live their lives. Without a job , there is no way to afford the normal expenses associated with living a life.
In this society, what happens to someone who does not have a job? If he or she happens to have any savings in the bank, then living off of savings is the only alternative until the savings are exhausted. And then the person becomes homeless. Any jobless person will soon be living on the street, eating out of dumpsters, desperate for a job. If there is no food in the dumpsters, then any unemployed person dies of starvation. If the person contracts a deadly disease or gets seriously injured, the person dies from lack of access to health care. That is the nature of this society.
A corollary to the previous question: What happens if only 900,000 jobs are available in this society? Then there will be 100,000 people in this society who are either homeless, or who are burning through their savings on a path to homelessness.
We can ask other questions about this society as well. For example: How much money does a person in this society absolutely need to make? This question is also easy to answer. We can add up the costs for the lowest level of housing, transportation, health care, food, clothing, utilities, etc. that are viable in this society. We can cut out all “luxuries” like entertainment, air conditioning, etc., and we can determine some minimum amount of money that an adult needs to make in order to live on the very bottom edge of this society. So if the lowest cost apartment in this society is $400 per month, and the cheapest car (plus its normal insurance, fuel, maintenance and repair) is $300 per month, and the cheapest health care plan is $300 per month plus another $200 per month once you add in all the deductibles, co-pays, etc., and the cost of the cheapest food is $100 per month, and so on, we can add it all up and we can come up with the absolute lowest cost of existence in this society.
Therefore, what does the minimum wage need to be at the very minimum? Again, the answer is obvious: The minimum wage needs to, at the very least, match the absolute lowest cost of existence in this society. And let’s note that if we set the minimum wage at the absolute lowest setting possible, there are people in this society who are going to routinely become homeless on a regular basis when something goes wrong. Because when people are living on the bleeding edge, at the absolute lowest cost of existence in this society, then occasionally things are going to go wrong and the person is going to run out of money. The things that can “go wrong” are myriad:
- the transmission in the car fails and needs replacing, causing a $1,500 repair bill or the need to buy a new car
- the person gets a $200 speeding ticket or parking fine plus towing
- there is a serious illness that takes the person out of work for a month
- the business the person works for fails and the person needs two months to find another job
A person living at the absolute lowest level of existence in this society will necessarily have no savings, and therefore will become homeless instantly in any of these cases. Sure the person could stop eating and starve to death, but most people will choose homelessness over starvation. Remember that we are talking about the absolute lowest cost of existence in this society.
And here we arrive at an important question from the perspective of societal design. Do we really want to design a society where some of the adults are living on the bleeding edge of poverty like this, with the potential to become homeless at any moment? Also, do we really want or expect people in our society to live a life with zero entertainment, no access to any luxuries or fun, etc.? Probably not. What is the purpose of designing a society like that? Why not design it so that everyone in the society has a decent life at some reasonable standard of living?
Therefore, the minimum wage should really be set at some reasonable level, somewhat above the absolute lowest cost of existence in this society. The minimum wage in this society should provide even the lowest-level workers with a tolerable standard of living.
Which gets to a broader question from the societal design standpoint. Long term, what are the goals we have for the citizens in this society: Over time, do we hope to see people’s lives getting economically better in this society, or do we want them staying about the same, or actually getting worse? As a simple example of where this question can lead: Over time, do we want to see average wages rising faster than inflation so people have more spending power, or do we want their wages falling so that more people are moving toward more precarious positions? Do we want the number of working hours per week falling or rising over time? Do we want the quality of food, housing, health care, etc. that people can access rising or falling? And so on.
Over time, some of the citizens in this society will grow too old to work. Those at the lower end of the pay scale will, necessarily, have little or no savings (unless the minimum wage has been set high enough to allow for such savings, and regulations or systems of some type have been put in place to force people to save for retirement).
Given this scenario: How will the society accommodate these people who need to retire? Will it allow many of them to die of starvation? Or will the society accommodate them with some level of dignity as they retire? Will the society set the minimum wage high enough and require people to save for their own retirements? Will it require younger workers to use some of their wages to support the retired people? Something else? These same questions could be asked about the portion of the population who become disabled or so ill (e.g. cancer) that they cannot work. Should the society let these people die immediately, or accommodate them in some way?
Now think about the economy. Let’s assume that, in this hypothetical society, the average take-home pay is $X per person. That means that consumers in this society have $X * 1,000,000 in spending power if there is full employment. This aggregate number is an important driver for the society’s economy.
What happens if there is a big economic downturn for some reason and 200,000 jobs evaporate? 200,000 people will necessarily become homeless. Now the consumers only have $X * 800,000 in total spending power, which is definitely not good for the society’s economy because of the retraction. Total buying power of the population has fallen by 20%, and 200,000 people are now homeless. How does the society best deal with a situation like that? Should it watch the 200,000 people die? Should it start some sort of temporary welfare system to keep the 200,000 unemployed people alive? Should the government inject $X * 200,000 into the economy in some other way? Where should the money for the welfare system or the injection come from?
What if there is no economic downturn, but instead new technology comes along that eliminates 200,000 jobs? For example, imagine that one company develops self-driving trucks and that they eliminate all of the truck driver jobs, while another company develops automated tools that eliminate many of the remaining factory jobs, and another company develops brick-laying, painting and roofing robots that eliminate quite a few construction jobs, plus another company develops a kiosk system that eliminates the jobs of many waiters and waitresses in restaurants, and so on. Now the society has a permanent loss of 200,000 jobs, with 200,000 homeless people and with more pressure on jobs from other forms of automation that are rapidly advancing. How does the society deal with this situation?
What if many of the people in the society stop worrying and caring about the design of the society? What if, at that time, 10,000 of the richest people in this society see the complacency and gain economic control of the government? These 10,000 people decide that their share of the society’s wages and wealth should increase dramatically, while the wages and wealth of the other 990,000 people should stagnate or fall to make it possible. What if, in this situation, through processes such as bribery and corruption, the society’s government turns its back on the large majority of people and instead begins catering to the wealthiest members? What if that process continues over several decades? Does the society become better or worse as a result of this transition? (Lest you think this scenario is impossible, this process has been underway in America for several decades, leading to a measurable increase in the concentration of wealth and wage stagnation for rank and file workers.)
Thinking about these wealthiest members of the society one step further, does this society benefit at all from having citizens with massive wealth? In the same way that there is a concept of a reasonable minimum wage, should there also be a concept of a reasonable maximum wage, so that the wage spectrum flattens and is more equitable to everyone in the society? As an example, imagine these two scenarios:
- The top 1%, or 10,000 people, makes an average wage of $10 million per year
- The other 99%, or 990,000 people, makes an average wage of $30,000 per year
- The top 1%, or 10,000 people, makes an average wage of $1 million per year
- The other 99%, or 990,000 people, makes an average wage of $120,000 per year
In both scenarios, the society’s total payroll is about the same per year. But in the second scenario, the 99% make four times more money than in Scnario 1, while the 1% is still very well off. Which scenario is better for the society as a whole? (If you believe that the $10 million number in the first scenario sounds ridiculous, that is actually now the average for American CEOs. If you believe that the 100X or more difference between the top 1% and the lower 99% sounds ridiculous, the factor is actually higher than 100X in America right now).
That simple question – “Which scenario is better for the society as a whole?” – lies at the heart of the concept of a Basic Income. When we think about and talk about a Basic Income, we are thinking about and talking about the design of our society, and how to best provide for the citizens of the society as a whole. This question is especially important in the current economic environment, where escalating automation is eliminating many jobs and threatening many others, and where the wealthy people in society have taken control of the government and are rapidly concentrating wealth, especially in the United States.
Section 2 – Expanding our view to a real society, the United States
The United States is quite a bit larger and much more complicated than the simplified society we used in Section 1. Let’s look at some of the differences.
The population of the United States, as of today, is approximately 319 million people [ref, accessed 9/15/2014]. Of those people:
- 49.15% are male and 50.73% are female
- 14.08% or 44,915,200 are age 65 or higher, typically retired
- 12.43% or 39,651,700 are between the ages of 55 and 64, meaning they will be retiring within the next 10 years.
- 23.27% or 74,231,300 are age 17 or lower, typically have not yet entered the adult working world [ref, 2013 data]
- 17,487,475 of people are in college, typically age 18 through 23. [ref, accessed 9/15/2014]
This means that there are, potentially, approximately 182,366,025 working-age adults in the United States today. This number is derived from the total population minus those age 65 or older, minus those age 17 or younger, minus those in college.
Approximately 100,000,000 of these working-age adults in the United States receive varying degrees of welfare benefits from many different programs [ref]. There are food assistance programs, housing assistance programs, medical assistance programs, direct cash payments, unemployment benefits, etc. [ref]. For example:
Among the 108,592,000 people who fit the Census Bureau’s description of a means-tested benefit recipient in the fourth quarter of 2011 were 82,457,000 people in households receiving Medicaid, 49,073,000 beneficiaries of food stamps, 20,223,000 on Supplemental Security Income, 23,228,000 in the Women, Infants and Children program, 13,433,000 in public or subsidized rental housing, and 5,854,000 in the Temporary Assistance for Needy Families program. Also among the 108,592,000 means-tested benefit recipients counted by the Census Bureau were people getting free or reduced-price lunch or breakfast, state-administered supplemental security income and means-tested veterans pensions. The 108,592,000 people who were recipients of means-tested government programs in the fourth quarter of 2011 does not include people who received benefits from non-means-tested government programs but not from means-tested ones. That would include, for example, people who received Social Security, Medicare, unemployment, or non-means-tested veterans compensation, but did not receive benefits from a means-tested program such as food stamps or public housing. [ref]
In short, there are more working-age people in the United States receiving some form of welfare than there are working-age people who do not.
Another interesting fact about the United States is that a surprisingly large portion of working age adults are not working. This may not be obvious, because the declared unemployment rate in the United States seems low, at consistently less than 10% over a long period of time[ref]. The problem is that the official unemployment rate hides the huge number of working-age Americans who are no longer considered a part of the workforce. Currently, only 63% of working-age adults are actually working [ref].
Remember back in Section 1, with the simplified society, people were not able to exit the workforce without becoming homeless. In the United States there is more of a cushion. One member of a married couple can exit the workforce and live off the other; 20-something workers who lose a job can go back to living with their parents. This article points out that “More than a third of Americans between 18 and 31 are currently living with their parents” (or in dorms).
Meanwhile, the concentration of wealth both in the United States and the world is increasing rapidly. The point is: by any rational estimation, the concentration of wealth (as described in chapter 6) is out of control and getting worse. We see it in myriad different ways:
- The welfare situation seen above is one way to understand it. The fact that more than half of working Americans needs to access welfare in some form starkly shows the effects of concentrating wealth. This article explains why that is becoming so common.
- The very low wages of a large number of Americans – so low that workers require public assistance to make ends meet – also points in that direction. [ref]
- The escalating cost and burden of a college education is another [ref] [ref].
- The monopoly position of cable companies that provide Internet service, the very poor service they provide and the high prices they charge is another indicator. According to CNN: “Broadband Internet speeds in the United States are only about one-fourth as fast as those in South Korea” while costing U.S. consumers almost twice as much on average. [ref].
- And so on.
What do all of these trends indicate? They show that the way we have currently designed our society in the United States is heavily skewed toward the wealthy, to the point where a large majority of the U.S. population is suffering while a tiny percentage is concentrating a shocking amount of wealth at everyone else’s expense.
Section 3 – How might we solve the problems caused by the concentration of wealth and income inequality in the United States?
How might we begin to solve the problems caused by the concentration of wealth and income inequality in the United States? In the current economy, as we currently think about it, one way we might begin to find a solution is by significantly increasing the minimum wage, and then scaling other wages appropriately. In addition we would simultaneously slash the wages, stock grants, cash bonuses, etc. received by the wealthy by establishing a maximum wage (or using the tax structure, which once went as high as 94%). In this way, prices would not have to rise at all, while the vast majority of the population would be significantly better off (see the two Scenarios in Section 1 for a quick demonstration). This is not a “tax on the wealthy” or a “redistribution of wealth”, but instead a change in the fundamental design of our society and the rules that govern it. This is how we, as a society, choose to design our society to equitably treat all of the citizens who make up the society.
In other words, as a society we would reject the idea of the concentration of wealth and change the rules so that, as a result of those rules, society’s income is available to everyone across the full population. This solution is a start. However, it fails to understand and address three important factors happening in the American economy right now:
- The first is the significant mismatch between the number of adults in the labor force and the number of jobs, as expressed by the unemployment rate and the labor participation rate in the United States seen in Section 2.
- The second is the very large number of people who are receiving various payments from a hodge podge of government programs, including retirees, those of disabilities, those receiving unemployment benefits, those on various forms of welfare, etc.
- The third is the significant loss of jobs that has already started to occur, and is about to accelerate in the United States, due to automation, artificial intelligence, computerization, robots, etc.
The last of the three is extremely important to recognize because it is imminent and has the potential to destroy the lives of millions of people if not anticipated and handled properly. Simply by looking at current news articles, we can see what is starting to happen. Here are just a few examples:
- Driverless cars are improving rapidly, and it is easy to understand that they will begin to eliminate all the jobs held by truck drivers, taxi drivers, etc. That is a million or more jobs that will be lost.
- Tablets and kiosks in restaurants will be eliminating many of the jobs currently held by waiters and waitresses.
- There are currently 3.7 million full-time K-12 teachers in the United States [ref]. Yet there is a host of new tools, including MOOCs, apps, computer-aided instruction, etc. that will start eliminating teaching positions in the near future [ref] [ref]. The pressure to reduce the cost of public education is relentless, and so is the advancement in the technology.
- Combine those trends with similar trends in factories, the construction industry, retail, etc. (See /r/Manna for articles).
- Combine those trends with similar trends in factories, the construction industry, retail, etc.
It is easy to see where we are heading – the future will need far fewer workers. Computers, automation and robots will eliminate jobs in increasingly large numbers, and also apply downward wage pressure. Which is completely backwards from what could be happening if we designed society for the benefit of all. If the wealth were not concentrating, every worker would be benefiting from the increases in productivity created by all of this new technology. Wages would be rising and the work week would be shortening. Instead, all of the benefits are flowing straight to the 1% and everyone else is suffering.
This is where the idea of the Basic Income comes in. It is a standardized way of addressing the large scale unemployment that is coming soon, as well as simplifying welfare, retirement and disability payments, as well as making the productivity increases available to everyone in society instead of the elite few. The idea is simple: everyone in society receives a regular income simply for being alive. The ultimate goal is for the Basic Income payment, by itself, to provide a comfortable living for every member of society without working.
The obvious question with the Basic Income is, “where will the money come from?” The good news is that there are many possible sources. One simple and working model is easily seen in the Alaska Permanent Fund, which has been providing an annual cash payment to all of the citizens in Alaska for several decades. It is easy to imagine the same program expanding nationwide, and the amount increasing. The Fracking boom could have easily started a fund for all Americans.
Another source of funds for a Basic Income is all of the money currently collected and spent on welfare, unemployment insurance, social security, medicare and medicaid, etc. These streams can blend into the Basic Income pool as the size of the Basic Income payments grows to a reasonable level such that it begins replacing welfare. To put it another way: eventually the Basic Income payments will be large enough to completely replace Social Security payments, welfare payments, unemployment payments, etc. The amount of simplification and streamlining from this transition will be impressive.
Here is another technique. Think about the current mismatch between the number of working-age adults in the United States and the number of jobs, as well as the low wages many workers are receiving compared to the poverty line and the cost of living, especially for families. As mentioned previously, we start addressing these problems by significantly boosting the minimum wage and scaling other wages accordingly, while also establishing a maximum wage.
Then, as a society, we start creating new jobs. Imagine the following scenario. Right now, in most states, people pump their own gas. But in Oregon and New Jersey, the states actually prevent this practice. Gas must be pumped by attendants. If we applied that philosophy across the country, we would suddenly create hundreds of thousands of new jobs. These jobs would all pay a living wage because of the new minimum wage rules. That same philosophy could easily be projected across many industries, until we have created enough new jobs for everyone to have one.
Would this process raise prices? Maybe not, because the maximum wage frees up a great deal of cash for the minimum wage (see also Scenario 1 and 2 in Section 1). But even in the absence of a maximum wage, the actual increase in prices could be small, as demonstrated in this article.
As you think about it further, you realize the following. No one actually wants to fill these new gas pumping jobs. Who wants to stand outside pumping gas all day long on a bitterly cold winter day? No one. And besides, automation has eliminated the job, so no person actually needs to do it.
Therefore, instead of creating an actual job and requiring an actual person to fill it, we create the job on paper only. Every gas station begins to employ several of these virtual employees. The pay checks for these virtual employees do not go to actual people, but instead go into the central account created for the Basic Income, and from there provide the Basic Income checks sent to everyone in society. Gas prices might rise a small amount to cover these new virtual positions, or they might not rise at all if we use a maximum wage to cut the pay of gas company executives. Either way, the benefits would flow to everyone.
In addition to these new virtual positions, here is another option: As human jobs are eliminated in the near future by automation – for example truck drivers, teachers, waitresses, factory workers, etc. – all of the jobs remain on the books and convert to virtual jobs, creating new revenue streams for the Basic Income. Prices do not change much, if at all, under this system.
Over time we grow the Basic Income revenue streams and increase the Basic Income payments so that it provides a living wage for every citizen. The key point here is simple. It is easy to get a Basic Income for everyone started, and to provide increasing amounts of money to recipients of the Basic Income over time. By doing it we welcome instead of dread the robotic takeover of the workplace. Eventually, everyone in society is on a permanent vacation made possible by their Basic Income checks.
The new design of our society provided by the Basic Income would recognize these four simple facts, as discussed in Section 1:
- Everyone in the society needs a source of income in order to live their lives.
- There is a minimum amount of money that is required by every person in our society to live their lives. Therefore, the amount of money received must be sufficient to provide for all of the essentials of life like housing, transportation, health care, food, clothing, etc.
- In addition, in our society we want each citizen living not on the bleeding edge of poverty, but instead to experience a comfortable standard of living. And we want to live in a society where things are getting better for everyone rather than getting worse.
- There is no benefit to society when a massive concentration of wealth occurs, and myriad harmful effects spawned by the concentration of wealth. Therefore we eliminate that economic possibility by establishing rules and regulations that make the concentration of wealth impossible.
In short, we redesign society to benefit everyone rather than the elite few.
Section 4 – Where Humanity eventually arrives with the Basic Income
Where can the idea of the Basic Income take us as a society? This question underpins the book Manna, and by reading the book you can see for yourself how far a Basic Income can go.
Ultimately, our goal should be to apply the Basic Income concept worldwide, so that every human being on the planet receives its benefits, in a process I call Heaven on Earth.
This is a new vision for the human species. We should create Heaven on Earth for every human being – seven billion people living together peacefully, comfortably and without suffering. We try to get as close to that goal as possible, in an environmentally sustainable way.
What would Heaven on Earth mean in reality? It would mean that each and every person on the planet has access to an an abundant supply of healthy food and clean water. That each and every person has access to luxurious housing and clothing. That we are all safe. That we can all communicate with everyone. That we all have free and open access to education and entertainment. That cutting edge health care is available freely to everyone, and the cutting edge is advancing as rapidly as possible, curing more and more diseases and ailments as fast as we can. And so on. We do that in an environmentally sustainable way. Obviously there would be no wars. Obviously we would have to find safe, compassionate ways to resolve our differences. Obviously we would need for Heaven on Earth to be environmentally sustainable – otherwise we poison the planet and destroy ourselves.
What if we made Heaven on Earth our world-wide, species-wide goal?
I also realize that this sounds idealistic in the current political climate. That’s because our thinking is so backwards at the moment; our current societies so poorly designed. However, robots and automation could easily make Heaven on Earth possible in the near future as machines take over all of the labor necessary to make and distribute food, clothing, hosing, health care, etc. In fact, if we simply design our society to take advantage of robots, spreading their productivity benefits out to everyone rather than allowing the concentration of wealth, the robotic revolution can benefit everyone. We can start by providing a Basic Income to everyone as well as incrementally shortening the work week.
Let me ask you this. Would our lives be better, would they have more meaning, if we knew we were working together as a species toward common goals like Heaven on Earth for everyone? What if we begin consciously working together toward common goals, designing our worldwide society for the benefit of all? What if we all had a feeling that everybody was working together, because we are all members of the same team? Would that make life different? Would that make life better? Would it make life more meaningful? Would that give each of us hope when looking toward the future, rather than the dread that many of us are legitimately feeling right now?
The Basic Income is one step in the direction of Heaven on Earth, and we should fight to make it happen as quickly as possible.