If the robots haven’t yet risen, why are we talking so much about a universal basic income?

If the idea of a universal basic income — so long welfare as we know it, hello government check-cutting for all — weren’t an old idea, it would the hot new idea. So I guess it’s an old hot idea. Here is economist Tim Harford in the FT (italics mine):

The first is whether people would simply stop working. Several large experiments conducted in the US and Canada in the late 1970s and early 1980s suggest that a minimum income would encourage people to reduce their hours a little. If such slacking-off undermined the tax base, the entire project could become both economically and politically unsustainable. But the tax base is probably safe enough, because the people who might be tempted to quit work and live on £10 a day are not the people whose taxes pay for most state spending. In the UK, the richest 15 per cent of taxpayers — people who pay at least some tax at the 40 per cent rate — supply about two-thirds of income tax revenue. Few of these people are likely to find the basic income a tempting inducement to leave the labour force. In some cases, we might celebrate a decision to stop work. Some people volunteer; others care for children or relatives; some might use the income to fund themselves as they stay in education or retrain. Some, alas, might use the money to stay alive as they write poetry.

Public Domain.

The second objection is more worrying: if the welfare state is to be replaced by a basic income, it will provide far too little for some. A tenner a day is less than half the new UK state pension, so it’s hard to imagine pensioners embracing the idea with much gusto. On the other hand, if the basic income is to be supplemented by a raft of special cases — people with disabilities, people with expensive rent, people who are elderly — then it may become as complex as the tangle of benefit entitlements it aims to replace, or hugely expensive, or both.

Andrew Hood of the Institute for Fiscal Studies says that compared with current welfare benefits, a basic income would “either be a lot less generous or a lot more expensive”. Take your pick. In the end, the idea appeals to three types of people: those who are comfortable with a dramatic increase in the size of the state, those who are willing to see needy people lose large sums relative to the status quo, and those who can’t add up. A basic income makes perfect sense once we arrive at an economy where millions work for low wages while automation produces a bountiful economy all around them. The debate turns on whether that world has already arrived.

I think the bit in italics is key. The robots may be rising but they haven’t risen all the way, at least not yet. But some wonks are acting as if that day is pretty much here — or at least just around the corner. And while there is no doubt automation is affecting the labor market today and even more tomorrow, some perspective is necessary. Here is economist David Autor:

A final observation is that while much contemporary economic pessimism attributes the labor market woes of the past decade to the adverse impacts of computerization, I remain skeptical of this inference. Clearly, computerization has shaped the structure of occupational change and the evolution of skill demands. But it is harder to see the channel through which computerization could have dramatically reduced labor demand after 1999.  … The onset of the weak U.S. labor market of the 2000s coincided with a sharp deceleration in computer investment—a fact that appears first-­‐‑order inconsistent with the onset of a new era of capital–labor substitution.

Moreover, the U.S. labor market woes of the last decade occurred alongside extremely rapid economic growth in much of the developing world. Indeed, frequently overlooked in U.S.-centric discussions of world economic trends is that the 2000s was a decade of rising world prosperity and falling world inequality. It seems implausible to me that technological change could be enriching most of the world while simultaneously immiserating the world’s technologically leading nation. My suspicion is that the deceleration of the U.S. labor market after 2000, and further after 2007, is more closely associated with two other macroeconomic events. A first is the bursting of the “dot-­‐‑com” bubble, followed by the collapse of the housing market and the ensuing financial crisis, both of which curtailed investment and innovative activity. A second is the employment dislocations in the U.S. labor market brought about by rapid globalization, particularly the sharp rise of import penetration from China following its accession to the World Trade Organization in 2001.

And here is my colleague Michael Strain recently addressing the wisdom of a basic income.