Back in my teaching days I would use the seriously wrong answers on student exams as valuable information telling me what concepts I need to explain better. Charles Lane's Washington Post column on a universal basic income can be used the same way. Lane clearly does not like the idea of a universal basic income (UBI), but his confused rationale ties together many common misunderstandings.
First, the whole idea of job-killing robots is more than a bit bizarre for a couple of reasons. Robots kills jobs in the same way that technology has always killed jobs. They displace human labor. We used to need far more workers to make a car than we do today, or a ton of steel, or to harvest a ton of wheat. In all of these cases we were able to use technology to accomplish more work with fewer people.
Robots are part of the same story. What possible difference can it make if a job is displaced by a robot or a more efficient assembly line? We have seen whole industries, like photographic film, wiped out by digital technology. Would the former workers at Kodak somehow be worse off if they had lost their jobs to robots than to digital cameras?
The point is that robots are productivity growth. Say that a few thousands times until it sinks in. The impact of robots on the economy is nothing more or less than any other innovation that produces the same amount of productivity growth.
And on this account the story is not terribly impressive. Lane cites an analysis by Carl Frey and Michael Osborne that claims that 47 percent of U.S. jobs are at risk due to technology over the next two decades. Now they just said these jobs were at risk, but lets assume we lose them all. That would translate into 3.1 percent annual productivity growth. That is roughly the same rate as we saw in the 1947-1973 golden age, a period of rapid wage growth and low unemployment. Are you scared yet?
But the other more important part of this story is that our problem with productivity growth over the last decade has been just the opposite, it has been extremely slow. In fact over the last five years it has averaged less than one percent annually. There is much debate about the cause of this slowdown and whether it will persist, but it is more than a bit strange to be designing policies for the mass displacement of workers by technology when productivity growth has slowed to a snail's pace.
(My own theory is that the slow productivity growth is the result of a weak labor market leading to low wages. Businesses will hire people for very low productivity jobs if they can get away with paying very low wages. For example, Walmart can hire people who stand around as "greeters," convenience stores can have people working the graveyard shift, and airports have salespeople in clothes stores. These jobs may make sense if wages are low, but if these workers all had better paying options, the jobs would disappear and productivity would rise.)
Okay, but let's assume that we do have the world of rapid productivity growth and massive job displacement, is a UBI a good idea? Well Lane doesn't like it because it will reduce work incentives. Lane tells readers:
"Even after the robot-overlord takeover, someone will have to work, which means society must encourage people to try, even if the ultimate rewards aren’t certain."
This one is chock full of confusion. We are faced with a situation where the demand for labor is plummeting because of technological innovation and Lane is worried that we won't have enough people who want to work? That one is confused even by Washington Post opinion page standards.
In terms of incentives, the point of a UBI is to provide a floor that would serve as a subsistence level, let's say $30,000 to $40,000 for a family of three. Would most people consider this sufficient so that they would not want to work? Would our doctors, who average more than $250,000 a year now, be content to get by on their UBI of $40,000 a year. Would Bill Gates and Donald Trump be satisfied with $40k? How about Washington Post editorial writers?
In fact, it is likely that most people will want something in excess of their UBI grant to survive in our brave new robot world. If we try to imagine the size of plausible disincentive effects, suppose they are 10–20 percent (this would huge), that comes to 3.3 to 6.6 years of our 3.1 percent annual productivity growth. In other words, if we're talking about phasing this in over a 10–20 year period, the gains in productivity growth will swamp the impact of any loss of labor due to disincentives.
The other point that Lane somehow misses is that we have a lot of good research indicating that a guaranteed income is likely to have a very positive effect on outcome for children of low income families. Children in families that struggle to pay the rent and put food on the table do far worse in school and life than children whose families have a stable income. This is important not only for ensuring these kids a decent life, but also for folks worried about having enough skilled workers in the future.
But then we get to my favorite:
"If government paid a $10,000-a-year guaranteed income on top of the existing safety net — Medicaid, the earned-income tax credit, Social Security and the rest — it would have to raise taxes and cut other spending by $3 trillion per year, according to Robert Greenstein of the Center on Budget and Policy Priorities."
Now the problem with a UBI is that it will create a massive budget deficit, if we didn't raise taxes by a huge amount. Let's get back to reality. The problem we were dealing with is an economy that is incredibly productive because the robots are displacing all the workers. Why on earth would we be looking to raise taxes in this world?
Suppose we ran massive budget deficits and just printed the money. Right, Zimbabwe! Weimer Germany!
Put your thinking caps on. Those countries are stories where we had too much money chasing too few goods and services. But the picture of the economy we are describing is one where the robots are doing everything, they run the factories, cook our food, mow our lawns, clean our houses, and just about everything else imaginable. If we have more demand, we will make the robots work faster or build us more robots. We don't have a shortage of goods and services. See, in this world there is no need for Washington Post editorial writers to warn us about the evils of budget deficits because they cannot plausibly be a problem.
So at the end of this discussion do I favor a UBI? I guess I prefer the real world. Right now we are trying to keep the Federal Reserve Board from raising interest rates to throw people out of work. When we no longer have to fight battles like this one I will consider the merits of a UBI.