Automation and labor market polarization – do we need a universal basic income?

No mass unemployment, but job polarization and an individualization of the ways of life. How technological change is changing our world of work and why unconditional basic income is not a universal solution.

The process of automation and digitalization is advancing at a rapid pace. In the public discussion, both utopian visions of a future without work and gloomy visions of the future are being drawn. It is often argued that an unconditional basic income should be introduced as a consequence of the threat of mass unemployment – i.e. a fixed amount that is the same for everyone and that all adult individuals receive without conditions or control. But do we really have to fear mass unemployment? And is an unconditional basic income the right answer?

All in all, the available studies and data indicate that the current technological change has brought surprisingly few benefits to many employees so far. Productivity and average real wages have increased only slightly in recent years by historical standards. However, mass unemployment – caused by technological change – is not emerging. Especially in technologically advanced countries such as Switzerland or Germany, the unemployment rate is currently low and there is a shortage of skilled workers in many areas. Technological changes often lead to new professions and – at least in the past – more jobs were created than destroyed in the long term. However, current technological change could lead to greater polarization in the labor market and greater inequality in income. We have seen the first signs of this for several years. In several countries, some people benefit greatly from technological change, while others do not seem to benefit and have to accept low-paid jobs.

Against this backdrop, it is questionable whether we need such drastic alternatives to the current social systems as the unconditional basic income. Since there is currently no sign of mass unemployment, an unconditional basic income would not be targeted enough; everyone would receive the basic income, regardless of whether they needed it. One advantage of the unconditional basic income, however, is that it takes account of the individualization of the ways of life. For example, many people want to choose the transition to retirement more flexibly and decide more freely about the balance between family and work. In a constantly changing world, people also need to be able to undergo continuous training and further education. More limited variants of a basic income could therefore make sense – such as a kind of time-out income. Such variants would give every individual the opportunity to finance training and further education, childcare or the care of relatives to a certain extent in a non-bureaucratic way. With such models, the financial resources that each person would have at his or her unconditional disposal in life would be considerably less than with an unconditional basic income. Above a certain amount, the continued payment of such a time-off income could be linked to conditions and proof.

Whether such a time-out income, an unconditional basic income or simply a slight modification of the existing systems is the better solution depends largely on how technological change will affect our life and work in the coming years. It is the task of science and society to increasingly investigate and experiment with different types of basic income or time-out income. This would provide our societies with more experience and facts to make decisions about the future of work and social security systems.

The German version of this text can be found here.

Further Reading

Adler, G., R. Duvalet al. (2017): “Gone with the Headwinds; Global Productivity,” IMF Staff Discussion Notes 17/04, International Monetary Fund.

Andrews, D., C. Criscuolo et al. (2016): “The Best versus the Rest: The Global Productivity Slowdown, Divergence across Firms and the Role of Public Policy,” OECD Productivity Working Papers 5, OECD Publishing.

Acemoglu, D. and P. Restrepo (2017): “Robots and Jobs: Evidence from US Labor Markets,” NBER Working Papers 23285, National Bureau of Economic Research.

Autor, D. and A. Salomons (2018): “Is Automation Labor-Displacing: Productivity Growth, Employment, and the Labor Share”, Brookings Papers on Economic Activity, Spring 2018, 1-63.

Hoynes, Hilary W. and J. Rothstein (2019): “Universal Basic Income in the US and Advanced Countries,” NBER Working Papers 25538.

Murphy, E., and D. Oesch (2017): „Is Employment Polarization Inevitable? Occupational Change in Ireland and Switzerland, 1970–2010.” Work, Employment and Society.

Murray, C. (2016): “In our Hands: A Plan to Replace the Welfare State”, American Enterprise Institute; Revised and updated edition.

Stern, A. (2016): “Raising the Floor: How a Universal Basic Income Can Renew Our Economy and Rebuild the American Dream”, Public Affairs.

van Parijs, P. and Y. Vanderborght (2017): “Basic Income: A Radical Proposal for a Free Society and a Sane Economy”, Harvard University Press.

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