Should We Support a Universal Basic Income?

If there is a policy that would violate the political sensibilities of the status quo, it is the proposal for a universal basic income (henceforth UBI), which is a guaranteed amount of income paid to every citizen of a country regardless of his/her other sources of income. People on the intellectual left have long ago begun to propose this policy idea (Andre Gorz (1999) being the one most foremost in my memory, and Guy Standing (n.d.) more recently). But in more recent years, it is less and less likely even for more moderate and mainstream thinkers to ignore UBI as an important policy to reduce poverty and create a stable livelihood for the vast majority of lower class and working class people.

The reason why we can no longer avoid a discussion of UBI is quite plainly because the Biblical model of “you work or you should starve” is becoming increasingly anachronistic given the current conditions of technological development and the labor market. Plainly speaking, technologies are destroying jobs at a rampant pace. And jobs are the major way to survive in our contemporary economy. How can people survive if there are not enough jobs?

In a poor society it made absolutely a lot of sense for most people to work on the field, and the reason why most families had so many children was not only because infant mortality was so high, but also because every child meant another labor hand on the field. The more workers you had on the field, the more food you could produce, and the more stable your economic livelihood was (the family being better fed and capable to sell the surplus on the farmers’ market).

Even before farming, hunting and gathering, the natural activity of all our ancestors, was also a very labor-intensive activity requiring the labor input of all tribal members. As societies gradually became more complex thanks to technology and the production of grain surpluses that could also be stored, a whole layer of government bureaucrats, kings, tribal leaders, military officers and priests were created to run this more complex society. For the first time in human history, it was possible to have a small group of people, who were not primarily responsible for doing the most basic tasks of survival for humans (excellent depiction in Diamond 1997).

Fast forward to 200 years ago, the production of the steam engine implied that factories could produce manufacturing goods in vast quantities and shorter periods of time, allowing a new and more complex form of division of labor to be created. Farmers were moving out of the farms, from which they were either forced out or lured out because of the greater economic opportunities connected with city wage work. In the most recent industrial transformation that is going back at least to the mid-20th century, most factory workers lost their jobs in the factories due to increasing automation in the factories, and gained jobs in the service industry. But what about today? Technological progress has resulted in an increase in material wealth, but labor market data shows that not all workers that lost their jobs were reabsorbed into the growing service sector, and part of the reason is that the service sector itself is facing growing automation. (See the falling rate of US labor force participation, Gandel 2015).

The result of all of this has been a growth of the precarious low-wage labor force that is too scared to put up demands against their employers, because of the insecurity of labor market access and career advancement, and the growth in technological rents, which are benefiting the Jeff Bezos’ and the Bill Gates’ of the world rather than the working class as a whole, which has become a shrinking political force. It is quite obvious under these circumstances that wealth has to concentrate further and further into the hands of the few, and it certainly does not help that globalization allows the very rich to play off one country’s lax tax regulations against another countries’ strict regulations, and that the very rich in all countries are ensuring tighter control over the political process, resulting in ever more favorable policies for the very rich, like the abolition of the inheritance tax.

In the short term, the turn toward regressive politics and economics implies that any chances for discussing UBI, which would pose a redistribution of resources to the popular masses, are very slim. The only sustainable progressive hope for introducing the UBI, as it was tried in some localities, is if a political shift can stimulate those discussions. The powerful don’t tend to implement progressive reforms, unless they feel the popular pressure. Left-wing parties and their platforms should increasingly adopt UBI into their agenda, and argue that such policy is one of the few effective mechanisms that we have to reduce poverty and distribute the fruits of the national wealth more equitably. For those, who care about freedom, it stands to reason that a person can only be free if he does not have to worry about his survival.

But what are the critics saying about UBI? Why would it be such a bad idea? The most coherent response is that UBI would result in disincentives for work, because why would anybody want to work if he/she gets paid to do nothing. Some of my economist friends have put forward such argument, even though there is not much empirical truth to it. Firstly, it should be noted that traditional welfare schemes are the real disincentive for work, because earnings that are very small result in huge cuts in public benefits, which might even result in a lower standard of living when welfare recipients begin to join the labor force. UBI would counter this disincentive effect, because benefits can never be reduced. UBI wherever it has been tested usually results in higher worker productivity and willingness to work, not less (Standing 2015).

Secondly, even if UBI results in work disincentives, why should this be a terrible trend? It might very well be possible that people’s morale will sap as they no longer feel the compulsion for work, but it is easily conceivable that they instead develop independent interests that they could only pursue because the immediate survival problem was solved. Joanne K. Rowling, the famous writer of the widely popular Harry Potter series, wrote her novels in the subway and on restaurant tables, while collecting welfare. One should imagine that Rowling had lived in a poor society without welfare services. We would not have received the pleasure of reading the Harry Potter series, because it probably would not have been written at all. It is very much conceivable that we would have more Rowlings if UBI is in place. And even if not, people would spend more time with their families and do other productive things for others.

Third, we must not forget the original motivation for putting the UBI scheme in place: growing automation makes human labor increasingly redundant, so UBI is necessary to stabilize consumption for all people. The work disincentive argument as it is proposed by economists is related to the presumption of labor scarcity and not moral imperatives (i.e. biblical principles for work being good for worker morale). Labor is considered scarce because if all workers stopped working at the same time (presumably because the utility of leisure by far exceeds the utility of work in an UBI environment), our society would collapse. I agree with the mainstream economists that labor scarcity has not been completely removed from contemporary society. Just walk out and take a bus driven by a bus driver, order a latte at Starbucks served by a barista etc.

But, on the other hand, the original reason why the UBI proposal became palatable is because the degree of labor scarcity is less today than it was even 20 years ago. It does not make sense to propose UBI in a poor society that is labor-intensive (where are the surpluses to pay for UBI to come from?), but it does make sense to have UBI in a capital-intensive society. UBI should be used specifically to allow people to purchase products from the capital-intensive industries (manufacturing and agriculture), which have hitherto produced enormous amounts of rents for their owners, but not sufficient benefits for the lower and working class.

It is, of course, conceivable to solve the labor scarcity problem in a different way, namely to reduce the working hours by redefining the full-time work week to less than 40 hours. I would certainly endorse the proposal if it came up for debate, but it currently does not. Restricting per labor work hours will lead to a fairer distribution of work, but will not fundamentally address the issues of automation and optimal distribution of labor. We know that automation of work is continuing apace, and we would constantly have to recalibrate the number of work hours per person, and such a policy can not be implemented without some heavy class and social struggle. It is possible but not straightforward or automatic. The second problem is that by reducing the work week we would allocate less amount of work hours to people, who like to work more, so the allocation of labor hours will not be optimal relative to the preferences of the workers. Under UBI, workers would work as long or little as they saw fit.

The second major objection is that UBI can not be considered realistic, because all countries are in direct competition with each other for greater market share, which forces every country to implement a labor regime that keeps workers disciplined enough to produce products at great quantity and moderate price (i.e. low wages). The reality is that UBI would dramatically revolutionize the labor regime by reducing the degree of discipline. What do I mean by discipline? Under the current labor regime, people work in order to get paid, and if they don’t work they collect 6 months of unemployment insurance, and then they have to spend down their savings before they can apply for welfare, which has a five-year lifetime limit. This is a fairly strict labor regime, and forces workers to accept any job regardless of how little it pays. Labor discipline is maintained. One can easily imagine that labor discipline disappears or is substantially weakened when UBI is introduced. Workers will apply for jobs, work a couple of months, realize that their boss is a jerk, quit, enjoy a few months of holiday while collecting UBI, then go back to work whenever they like. What a nightmare for the capitalists.

What will likely happen is that the cost of production has to increase, as labor wages face runaway increases. In order to remain profitable, capitalists will raise product prices, but consumers are not fooled and import the same products at lower cost from other countries that are keeping a tighter lid on labor costs. This is a real problem now. If we stuck within the capitalist-competitive-global economy framework, we would have to support faster technological development to boost labor productivity and square high labor wages with moderate and internationally competitive prices. But suppose this fails to happen. Now businesses will go bankrupt or are bought by foreign companies that refuse to support the lax labor regime. There is a genuine possibility that UBI could decrease the competitive position of a country, which destroys the original premise of UBI, i.e. that it could only succeed in an already rich country. If UBI results in lower standard of living because businesses fail, then the amount of UBI payments has to be reduced, and that would hurl workers back to the labor market as the price of necessaries continues to increase while purchasing power decreases.

The preceding discussion quite clearly shows that UBI seems to only make sense if all countries sign up for UBI as well. Therefore, transcending capitalism is the ultimate goal. But there is another way to look at it: UBI lowers the reservation wage at which employers can attract labor. If a worker knows that he can survive with UBI, and considers the work wage as a supplement, then the wages do not have to be so high relative to the competitors to attract him to work. The state uses the general revenues to subsidize capitalists with low-wage workers, which it has been doing all along. For the UBI to function, the rate is set low enough that the state can maintain the program, but high enough that work compulsion disappears. (Some people argue that UBI has to be set below a minimally acceptable threshold to ensure work compulsion, but I think that would go contrary to the intentions of the UBI.)

There is one more problem that UBI has not yet addressed: What about the survival of capitalism given the lack of disciplining the labor force? We should not forget that the history of capitalism is about commoditizing labor and making it exploitable for the capitalist class, such that labor can produce surplus value. Without the discipline of the labor force, wages are high enough for profits to disappear. If there are no profits, then the capitalist system has to collapse, because where would there be further incentives for continued investments? Some Marxist scholars have noted that the 1970s was a period, where labor was unusually strong, resulting in a profit squeeze amid rising wages and inflation (Moseley 1997). Part of the neoliberal counter-offensive was to crush labor unions, or at least their political clout by enforcing a permanent austerity regime, weakening the welfare state, and exposing labor to more market forces to drive down wages and restore the rate of profit.

Scholars on the left now need to ask themselves which route they want to pick. The left Keynesian response would be to deny the inherent contradictions in capitalism, and insist that UBI would increase market efficiency, economic growth and private-sector profit. After all, we are currently concerned about a crisis of underconsumption, resulting from the many robots that consume nothing but electricity and the many unemployed and underemployed human workers, who can not afford to buy all the products that exist in the economy. The crisis of underconsumption is a major reason why the neoliberal agenda is bound to fail, and we can see that prediction realized in the ever-worsening cycle of debt-based boom and bust in the global markets (currently manifested in Chinese stock volatility). With a UBI, we can hope to smooth the consumption patterns of most households, which in turn provide a reliable source of demand, which is the basis of private-sector profits.

Left Marxists and other types of socialists always suspect that every barrier and contradiction in capitalism justifies the terminal demise of the capitalist system. In this case, we could either argue that the profit squeeze theory following UBI is accurate, and we should quickly work on devising an alternative economic system, where profits and economic growth are no longer priorities but only the byproduct of rational economic planning. We could also argue that the Keynesian solution to the underconsumption problem is only temporary. Maybe capitalist animal spirits will die down if every person gets a UBI, and there will no longer be incentives for investment and innovation. Lack of innovation results in economic stagnation. (Keynesians could counter that constant and guaranteed demand will raise animal spirits because of the secure basis of the market.)

Luckily, this discussion is still based on heavy theory, and to test whether the predicted outcomes are true or not we actually have to introduce UBI to see what happens. Maybe we can square UBI with labor discipline, international competition and capitalism, maybe we can’t. The uncertainty of what the outcome of UBI is going to be is a sufficient justification in itself why we should experiment with the UBI. Andre Gorz writes, “Let us make no mistake about this: wage labor has to disappear, and with it capitalism.” (Gorz 1999:  77)

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4 Responses to Should We Support a Universal Basic Income?

  1. I’ll jus chase down your main argument for ubi, given your extensive geneaology of “labour”
    First, the technological advancement like automation, and robotics creating underconsumption due to reduntant labour. Let’s not forget that they required intensive capital and human resources in the first place. By breaking the cycle of investment you essential are stepping backwards interms of advancement and future development.
    Second, about ubi providing basic income to meet the neccesity of life while absorbing the production. Yes, intially it would but once it hit’s a plateau it can cause situation similar to perestroika.
    Third, Ubi does not cause laziness but can drive personal indepedent interest. If, this is what we want. Then, we have to discuss the purpose of our production. We have to be a self sustianing nation that does not require international trade to meet all our needs.
    Lastly, you bring up the lax government regulation that drive big corp to seek labour in those countries therfore ubi can reduce poverty and as such few mechanism left to reduce povery. Sounds good, but does it really solve the issue of fleeting capital. Tied to point is the issue of Ubi can create a strong labour union. Yes. But with many developing nation around the world with cheap labour that would not be easy. Microsoft invest in education and various development project in india so it can develop skills for production as well as consumption. How do you stop these corporations fleeing strong union and making efficency their goal.
    I might have missed some other points in your opinion. But, let me know.

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