Unconditional financial support measures – important in a crisis, but probably not useful in the long term

The outbreak of the coronavirus pandemic has led to an increased interest in measures such as the unconditional basic income. So far, this concept has been discussed mainly against the background of technological change and a possible greater polarization on the job market. Unconditional financial support measures are indeed an important policy instrument at present for combating the economic consequences of the pandemic. In the longer term, however, it is important for a society to create sufficient and adequately paid jobs and hopefully not need an unconditional basic income. Technological change is not only exogenous, but can also be shaped and serve people.

Variants of the unconditional basic income are increasingly being discussed against the backdrop of the Covid-19 outbreak and the associated economic crisis. The reasons for this are obvious. When consumption collapses and many other economic policy measures only have a delayed effect or – as in the case of monetary policy – reach their limits, unconditional or unconditional payments to households are a suitable means of distributing financial aid quickly and helping people and the economy.

In the longer term, it is less clear whether unconditional payments are a good approach to cushioning structural changes in the economy and the job market. It is clear that the process of automation and digitization is advancing at a rapid pace; the pandemic may well accelerate it again. In the public debate, 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 is mass unemployment threatening at all? And is an unconditional basic income a suitable means of combating it?

All in all, the available studies and data indicate that the current technological change has so far brought surprisingly few benefits to many employees. Productivity and average real wages have increased only slightly in recent years by historical standards. However, mass unemployment – caused by technological change – is not yet emerging. Technological upheavals often lead to new occupations and – at least in the past – more jobs have been created than destroyed in the long term. However, we must bear in mind that this may look different in the future. The characteristics of digitization – such as the processing and global exchange of huge amounts of data or automation – are different from the technological upheavals of the past. However, especially in technologically advanced countries, at least until the outbreak of the coronavirus pandemic, the unemployment rate was low and there was a shortage of skilled workers in many areas. However, the current technological change could lead to greater polarization in the labor market and higher income inequality. We have been seeing the first signs of this for some years now. In several countries, some people are benefiting strongly from technological change, while others have to take low-paid jobs.

However, it is questionable whether we need such drastic alternatives to the current social systems as the unconditional basic income. As there is no sign of mass unemployment at present, an unconditional basic income would be too little targeted; 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 increased individualisation of living conditions. Many people, for example, would like to be more flexible in their transition to retirement and would like to be able to decide more freely on the right balance between family and career. In a constantly changing world, people also need to be able to continually retrain and further educate themselves. Weakened and time-limited variants of a basic income could therefore make sense – for example, a kind of income from time off. 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 an unbureaucratic 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 made subject 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 up to science and society to do more research and experiment with different types of basic income or time-off income. This would provide our societies with more experience and facts to help them make decisions about the future of work and social security systems.