A FREE LUNCH WITH ROBOTS

Transcription

1 A FREE LUNCH WITH ROBOTS Can a Basic Income Stabilise the Digital Economy? Ville-Veikko Pulkka ville-veikko.pulkka@helsinki.fi A Free Lunch with Robots 30 March

2 STRUCTURE OF THE PRESENTATION Does the digital working life have a human face? Is basic income an efficient stabilisation grant? Conclusions Free Lunch with Robots

3 DOES THE DIGITAL WORKING LIFE HAVE A HUMAN FACE? at the technological level possible to minimise the need for many jobs which currently provide wide employment likely that deregulation in labour markets will increase since digitalisation enables a more flexible organisation of work via different digital platforms however, necessary to note: political, social, legislative, organisational and macroeconomic factors may falter the development long-term estimations varies dramatically Free Lunch with Robots

4 A CONSERVATIVE SCENARIO 1/2 given the technological possibilities: at the very least short- and mid-term disruption in labour markets also the case during the earlier industrial revolutions it is important not to dismiss the costs (social and economic) of the many displaced workers the more widespread the disruption will be, the more serious will be the challenges even smaller disruption can create major challenges at both micro (poverty, income equality, hysteresis, social exclusion, faltering social mobility) and macro (insufficient consumer demand, economic stagnation, budget constraints) level of the economy Free Lunch with Robots

5 A CONSERVATIVE SCENARIO 2/2 the most obvious macroeconomic problem will be insufficient consumer demand less income less consumption less profits less output firms do not invest and people change their consumption in relation to their expectation of long-term incomes vicious cycle also: increased unemployment, underemployment and/or the fragmentation of work competition over the jobs left the downward elasticity of salaries less consumer demand and a more unstable macro-economic situation the future policies ought guarantee sufficient consumer demand in a socially and economically sustainable manner Free Lunch with Robots

6 IS BASIC INCOME AN EFFICIENT STABILISATION GRANT? 1/2 numerous basic income advocates have argued that basic income would be an efficient measure to guarantee sufficient purchase power and aggregate demand in the digital economy (e.g. Ford, 2015: ; Reed and Lansley, 2016: 21; Santens, 2016) to achieve macroeconomically significant effects on purchasing power, a basic income should increase disposable income of unemployed, underemployed and precarious workers in relation to the present situation Free Lunch with Robots

7 IS BASIC INCOME AN EFFICIENT STABILISATION GRANT? 2/2 in basic income literature direct (options 1 and 2) and indirect effects (options 3 and 4) how a basic income is expected to increase people's disposable income. 1) lifting the current level of social security (i.e. implementing a full basic income scheme) 2) diminishing economic disincentives (i.e. making work always pay) 3) improving workers' bargaining power over their conditions of employment and 4) diminishing bureaucracy traps/increasing labour market flexibility (i.e. easening work on a part-time basis and facilitating self-employment and retraining) Free Lunch with Robots

8 LIFTING THE CURRENT LEVEL OF SOCIAL SECURITY a budget neutral basic income of 1000 a month requires flatrate tax of 60%, whereas a basic income of 1500 a month would already mean a flat-rate tax of 79% (Kangas and Pulkka, 2016) if fewer taxpayers, the tax burden is naturally even heavier negative income tax is also unconditional and this leads mathematically into similar after-tax/after-transfer distribution of income full basic income faces challenges either at micro- (high income taxation) or macroeconomic (budget constraints) level Free Lunch with Robots

9 MAKING WORK ALWAYS PAY traditionally one of the most essential arguments in favour of a basic income difficult if not impossible to improve economic incentives coherently without diluting the current level of social security or without budget contraints replacing housing allowances and earnings-related unemployment benefits with a single universal benefit is complex housing costs can vary drastically between municipalities and earnings-related benefits form an essential part of social security in many European countries also, replacing earnings-related benefits with a lower basic income, would reduce people's disposable income increased freeriding would have negative effects on people's disposable income Free Lunch with Robots

10 PARTICIPATION TAX RATES OF A PERSON LIVING ALONE (A SIMPLE CASE) Salary change Current legislation BI 550/month & tax model BI 750/month & tax model Flat rate tax Current, progressive Flat rate tax Current, progressive No means tested benefits, but eligible for housing allowance and social assistance % 50.2% 31.8% 63.9% 38.5% % 63.6% 47.0% 74.0% 50.3% % 60.8% 45.9% 66.2% 44.2% % 58.0% 44.9% 58.3% 38.2% Ville-Veikko Pulkka ville-veikko.pulkka@helsinki.fi Notes on the Finnish Basic Income Experiment 31 March

11 PARTICIPATION TAX RATES OF A LONE PARENT (A DIFFICULT CASE) Salary change Current legislation BI 550/month & tax model BI 750/month & tax model Flat rate tax Current Flat rate tax Current % 54.4% 28.8% 60.4% 27.7% % 64.7% 43.7% 72.8% 36.6% % 81.2% 64.6% 87.8% 59.9% % 82.7% 71.2% 87.3% 65.8% % 97.8% 85.6% 102.9% 83.1% 94.6% 85.6% 84.5% 86.4% 77.8% Ville-Veikko Pulkka ville-veikko.pulkka@helsinki.fi Notes on the Finnish Basic Income Experiment 31 March

12 PARTICIPATION TAX RATES AND A FULL BASIC INCOME Salary change Current legislation BI 1000/month BI 1500/month % 73.4% 91.1% % 82.9% 85.1% % 71.4% 82.0% % 60.0% 79.0% Ville-Veikko Pulkka ville-veikko.pulkka@helsinki.fi 31 March Notes on the Finnish Basic Income Experiment

13 BARGAINING POWER OF PRECARIOUS WORKERS 1/2 basic income has often been conceptualised as a personal strike pay which would decommodify labour and ease the negotiation over better conditions of employment if the social security system guaranteed an adequate income and did not impose means testing or obligations on unemployed, salaries of precarious workers could increase if labour supply increases, salaries lower, whereas reduction in labour supply would lift salaries Birnbaum and de Wispelaere (2016): the most vulnerable in the labour market tend to face structural restrictions such as short in demand or exclusive skill requirements a probable scenario (particularly in the digital economy) is exiting fully the labour market instead of finding a better job Ville-Veikko Pulkka ville-veikko.pulkka@helsinki.fi 31 March Notes on the Finnish Basic Income Experiment

14 BARGAINING POWER OF PRECARIOUS WORKERS 2/2 Birnbaum and de Wispelaere continues replacing a worker with another can be a cheaper option for an employer than giving a raise or guaranteeing better working conditions in the digital economy facilitating a collective exit option may become an incentive for the employer to replace workers by machines unconditionality per se does not automatically strengthen the bargaining power of workers if the level of basic income and other supportive systems are not adequate for decent living producing robust estimates on basic income's effects on general equilibrium (i.e. on salaries) requires cluster randomised controlled trials Free Lunch with Robots

15 DIMINISHING BUREAUCRACY TRAPS AND INCREASING LABOUR MARKET FLEXIBILITY 1/2 as a result of means and income testing, many bureaucracy traps (i.e. psychological disincentives) to work on a part-time basis, go into self-employment or combine paid work and selfemployment delays, reporting and meeting requirements, recovery of overpayments, and risks of falling through gaps in the social safety net if eligibility for a benefit disappears unsustainable situation particularly in the more fluctuating digital economy partial basic income schemes leave naturally some benefits intact, but many of the pitfalls stated above could be tackled Free Lunch with Robots

16 DIMINISHING BUREAUCRACY TRAPS AND INCREASING LABOUR MARKET FLEXIBILITY 2/2 a flexible start-up grant Peltzman s effect = people are more willing to take risks when their basic security is guaranteed (Ford, 2015: ) Nooteboom (1987): 1) a compensation for diseconomies of small scale 2) facilitate potential wage earners to become entrepreneurs 3) replace complicated current schemes 4) diminish unfair competition presented by informal or formal entrepreneurship by recipients of social security the possibilities for lifelong learning basic income appears to be an efficient measure to reduce bureaucracy and increase workers' ability to adjust to labour market fluctuations Free Lunch with Robots

17 CONCLUSIONS Direct effects Indirect effects Lifting the current level of social security - Better economic incentives - Bargaining power of precarious workers? Less bureaucracy and more flexibility + Free Lunch with Robots