Is A Universal Basic Income A Must-Have In The Digital Economy?

Michael Rander

In my last blog, I mentioned that as much as 47% of the U.S. workforce is at risk of being replaced by automation over the next 20 years. But at the same time, new jobs will be created – requiring some people to transform their careers to fit the needs of the digital economy.

There is a very real risk that whole workforce segments will be impacted by automation on a large scale and struggle to find new employment or access training and education to take on a new career. These changes will bring a profound and potentially catastrophic societal effect. And the time to discuss the possibilities for dealing with this scenario is right now.

The impact of the digital economy on the future of work

This transformative displacement of jobs will be felt across a wide range of industries. Examples include manufacturing workers who are replaced with industrial robots, taxi drivers who are substituted with driverless cars, and retail workers who are made redundant when customers accept digital interfaces over real people in grocery stores, restaurants, and movie theaters. Perhaps even soldiers will be removed from the battlefield as drones take over the fight.

While self-driving cars are currently only in the testing stage, the potential for automation is certainly there. Take taxi drivers, for example. In 2014, there were approximately 233,700 taxi drivers in the United States with a 2015 median annual pay of $23,150. If New York can be used as a benchmark average, the average age of a driver is 46. No formal education is needed to become a taxi driver, even though many have high-school degrees. In the event of a future large-scale automation, this middle-aged group will not only have no or little formal education, but also no training that directly positions them for the new jobs in the digital economy. While some will undoubtedly rebound, get creative, and start over in new jobs, it is a tough challenge. Unfortunately, many will find the transition hard, if not impossible, to overcome.

As a society, how do we deal with the masses of unemployed drivers, financially, morally, and ethically?

A potential solution: Universal basic income

Governments spend massive amounts of money on social security, unemployment programs, food stamps, housing initiatives, and other social benefits as well as the resources and administration needed to support these programs. As the digital economy’s wide-reaching impact on the workplace looms, such costs may become prohibitive. However, we still cannot allow whole segments of the population to fall between the cracks.

An alternative solution being discussed is the universal basic income (UBI), which guarantees every citizen an equal-for-all, government-funded income that provides a minimum level of financial security. It is designed to prevent society from dividing into two distinct groups: those who can survive and thrive in the digital economy and those whose jobs are endangered by digitization. While that may sound like a massive expense for any country, you have to consider that UBI would alleviate at least part of the current impact on social and economic expenses related to unemployment.

Instead of managing and paying out social security benefits, Medicaid, and other financial support programs, the UBI would offer a less administrative, more transparent, and effective approach to supporting those in need. Those in favor of the approach would also argue that the UBI would be a way to spark creativity and innovation as people are given an opportunity to pursue real passions, rather than menial, minimum-wage jobs to survive. Additionally, it could be argued that it would offer more people the financial stepping stone needed to get an education and become a productive member of the workforce in the digital economy. The opposing argument would be that such a generic government handout would be outrageously costly, target people who don’t need it, and encourage people not to work while giving out hard-working people’s money to everyone else.

Recently, Switzerland voted on the UBI and rejected it. Meanwhile, Finland is scheduled to start its own UBI experiment in 2017. Countries such as Denmark have for many years provided a government-funded income for students. This is all done with the intention to encourage and support a well-educated workforce. Nevertheless, we have yet to see a full-scale implementation of the UBI.

Because the detailed calculations of the associated costs and savings are incredibly complex, the overall impact can be debated from both sides. Unfortunately, the current structure of the national economy in most countries would not allow for an immediate implementation of the UBI.

How will society react to the changing workforce?

As digitization dramatically changes the construct of the entire workforce, including taxi drivers, factory workers, and service industry employees, we all face a critical decision on what that means for us as a society. Can our current model be sustained? How do we retrain large parts of the workforce? How do we support those in need? How do we prioritize education? How do we foster innovation? How do we avoid a social gap so large that it will be hard to recover from? If nothing else, these issues beg the question: can we afford not to at least consider UBI before the digital economy truly changes the world around us?

To learn more about the Future of Work and the rise of the Digital Worker, read “Live Business: The Rise of the Digital Workforce.”

About Michael Rander

Michael Rander is the Global Research Director for Future of Work at SAP. He is an experienced project manager, strategic and competitive market researcher, and operations manager, as well as an avid photographer, athlete, traveler, and entrepreneur.