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Joseph Stiglitz on UBI and the future of work

Credit picture: CC(Andrew Newton)

Nobel Laureate economist Joseph Stiglitz speaks about inequality, automation, and Universal Basic Income (UBI) in a conversation at the New York Stock Exchange.

The economist says that, as many people fear, it is entirely plausible that the problem of inequality will get worse if countermeasures are not undertaken. Although he recognizes that a single program such as UBI may offer some advantages, he is not a big fan of the idea. Instead, he thinks that the main responsibility a society has is to provide everybody with a job (a Job Guarantee).

Stiglitz states that if jobs with decent salaries were available, the need for UBI wouldn’t exist, even though some social programs to protect the needy would be needed. But in his opinion many people find dignity in their job, and so the focus of the attention should be to make the labour market work properly.

A goal that could become more and more difficult to attain as technology advances, with machines threatening an ever-increasing number of professions. As automation proceeds, the risk is that inequalities will increase, as a result of growing unemployment and AI undermining the very basis of the market.

Artificial Intelligence (AI), Stiglitz states, makes it possible to alter the functioning of the market economy, making everybody pay a different price, appropriating consumer surplus and adding it to the profit of the wealthiest, thus further polarizing the distribution of wealth.

The solution should be, in the economist view, twofold: on the one hand, the economy has lost its balance because workers lost their bargaining power, and thus it should be reestablished. On the other hand, the core of innovation is government funded research and government funded education, but too little of the proceeds go to the public, and a better system of sharing the benefits need to be designed.

While Stiglitz states he is not a big supporter of UBI, what he proposes in order to reduce inequality is what UBI itself is designed to do: provide workers with bargaining power and redistribute the wealth of society in a more equal manner.

More information at:

Andrew Davis, “Joseph Stiglitz weighs in on Universal Basic Income and the future of work“, CNBC, May 5th 2019

About Daniele Fabbri

Daniele Fabbri has written 18 articles.

The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.

5 comments

  • Stiglitz’ attitude toward UBI is one of several reasons I think the version of “progressive capitalism” he is promoting in his latest book is both too timid and too short-sighted, IMO. For example, it seems Joe has little or no awareness of–or interest in–the following ideas, among others:

    1) “Bullshit jobs and the yoke of managerial feudalism”–“Not since Dilbert has truth been spoken to power in soulless work settings. But the cartoon character’s successor may be David Graeber. In 2013 he achieved viral fame with cubicle zombies everywhere after he published a short essay on the prevalence of work that had no social or economic reason to exist, which he called “bullshit jobs”. The wide attention seemed to confirm his thesis. Mr Graeber, an anthropologist at the London School of Economics, has expanded on the ideas in a recent book.”

    https://www.economist.com/open-future/2018/06/29/bullshit-jobs-and-the-yoke-of-managerial-feudalism?

    2) “Whatever national rule eventually emerges for defining gig workers, they’ll need a different system of social insurance than was the case when steady full-time employment was the norm. For example, they need income insurance rather than unemployment insurance. One model: If someone’s monthly income dips below their average monthly income from all jobs over the preceding five years, they automatically receive half the difference for up to a year.

    “They’ll also need a guaranteed minimum basic income – a subsistence-level cushion against earnings downturns. And universal health insurance and more generous social security, to make up for the unpredictability of work. All of this should be financed by higher corporate taxes, ideally in proportion to a corporation’s use of gig workers. Gig work is making capitalism harsher. Unless government defines legitimate gig work more narrowly and provides stronger safety nets for gig workers, gig capitalism cannot endure.”

    https://www.theguardian.com/commentisfree/2019/jun/02/gig-economy-us-trump-uber-california-robert-reich?

    3) “A Boost for the Worker-Owned Economy”–“Employee ownership has been favored by people as diverse as Ronald Reagan and Bernie Sanders, and business owners looking to sell their companies to their employees just got a helping hand from the federal government. It’s the first such measure that’s passed Congress in more than 20 years. Tucked into the omnibus National Defense Authorization Act signed by President Trump in August 2018 was language directing the U.S. Small Business Administration to help retiring owners sell their businesses to their employees, either as a worker cooperative or as an Employee Stock Ownership Plan.

    The measure was backed by an array of nonprofit advocates of employee ownership, including the ESOP Association, the National Urban League, the American Sustainable Business Council, and the U.S. Federation of Worker Cooperatives. According to Melissa Hoover of the nonprofit Democracy at Work Institute, it is the first federal legislation ever to explicitly name worker cooperatives as an SBA priority.

    The help appears to be timely, as retirement looms for a “silver tsunami” of business owners. According to the Harvard Business Review, 2.3 million companies are owned by baby boomers, half of whom are expected to retire in the next 10 years. Those companies employ 25 million people.

    As that wave of retirees breaks, business owners don’t have many options. Most do not have children who want to run the business, according to Joseph Blasi and Douglas Kruse, professors at the Rutgers School of Management and Labor Relations. Studies show that many will simply close up shop, with their employees losing their jobs. Some may sell to a competitor such as another local company, a larger publicly traded corporation, or a private equity fund—options that also can trigger job losses.

    “That makes selling their businesses to the workers who helped create all the value in the first place one of the best options available,” Blasi and Kruse wrote in The Conversation. “It not only helps secure the owner’s retirement but also leaves behind a legacy in the local community.”

    https://www.yesmagazine.org/new-economy/a-boost-for-the-worker-owned-economy-20180925?

    4) “How Democracy Collaborative Will Create 50 Million Employee Owners by 2050”–“Launched in early-2016, ’50 by 50′ is a project of the The Democracy Collaborative, in partnership with the Democracy at Work Institute and the National Center for Employee Ownership. Initial funding for the project was provided by Citi Community Development, a Citigroup program focused on “financial inclusion and economic empowerment.”

    https://democracycollaborative.org/content/how-democracy-collaborative-will-create-50-million-employee-owners-2050

    5) “What if Uber was owned and governed by its drivers? What if Airbnb was owned and governed by its hosts? We don’t have to wait to find out. Platform coops combine a cooperative business structure with an online platform to deliver a real-world service. This article describes 11 platform co-ops changing the way people organize, run businesses, create value, and share the wealth. There are many more. A growing number of platform cooperatives are making their presence known on a global scale.”

    https://www.shareable.net/11-platform-cooperatives-creating-a-real-sharing-economy/?

    6) “Emerging technology was a recurring theme at the International Summit of Co-operatives in Quebec last month, where delegates looked at how it can be used by co-ops.”

    https://www.thenews.coop/110675/sector/retail/blockchain-technology-put-co-ops-front-digital-revolution

    7) “Tax incentives are proposed to provide shareholders a bigger, quicker less risky short term profit in return for changing corporate constitutions to transfer their property rights to stakeholders (e.g. local employees and/or taxpayers) over 20 years.”

    https://www.academia.edu/30782591/The_Case_for_Introducing_Stakeholder_Corporations?

    8) “With Liberty and Dividends for All: How to save our middle class when jobs don’t pay enough.” (2014). “There are not enough well-paid jobs to sustain a large middle class, and Peter Barnes offers as a solution the idea that co-owned wealth could pay dividends to everyone. The Alaska Permanent Fund is the model, and the inspiration is Thomas Paine’s ‘Agrarian Justice’ (1798).

    “Paine proposed equal distribution of income generated by property belonging to all of us. This is the ‘co-owned property’ is the heart of Barnes’ proposal; he extends the meaning of the economist’s term ‘rent’ to include payments made to all of us in recognition of the uses that are made of our co-owned wealth.

    “Drivers of the changed outlook for the US middle class – and the middle classes of all developed nations – are globalization, automation, and deunionization. The effect of all three of these is to reduce the proportion of the proceeds of production going to labour, and to increase the proportion going to the owners of capital ( – the main point made by Thomas Piketty in his book Capital).

    “Economic stimulus, education, and job creation, might ameliorate the situation slightly in the short term, but automation, globalization and deunionization will defeat them in the end, as will the fact that the economic system quickly magnifies small differences in wealth into sizeable inequalities.

    “As Barnes suggests, the system needs to be fixed, not the symptoms. One particular change that is required is that means-tested benefits need to be replaced by universal ones, but the most important change is that the rent that owners extract from assets that belong to all of us (‘extracted rent’) should be distributed to everyone (‘recycled rent’) as a Citizen’s Income.”

    “Barnes suggests several types of co-owned wealth that could be made to generate the income to pay for a Citizen’s Income: the money infrastructure, the electromagnetic spectrum, sovereign wealth funds generated by extraction royalties (as in Alaska and Norway), and the atmosphere ( – rather than ‘cap and trade’, Barnes recommends ‘cap and dividend’, in which anyone who pollutes the atmosphere has to pay, and in which what they pay is redistributed as Citizen’s Incomes).

    https://basicincome.org/news/2015/08/book-review-peter-barnes-with-liberty-and-dividends-for-all-how-to-save-our-middle-class-when-jobs-dont-pay-enough/?

    9) “The Zero Marginal Cost Society” (2014): NY Times bestselling author Jeremy Rifkin describes how the emerging Internet of Things is speeding us to an era of nearly free goods and services, precipitating the meteoric rise of a global Collaborative Commons and the eclipse of capitalism. The paradox at the heart of capitalism, which propelled it to greatness, is now taking it to its death—the entrepreneurial dynamism of competitive markets that drives productivity up and marginal costs down, enabling businesses to reduce the price of their goods and services in order to win over consumers and market share. (Marginal cost is the cost of producing additional units of a good or service, if fixed costs are not counted.)

    While economists have always welcomed a reduction in marginal cost, they never anticipated the possibility of a technological revolution that might bring marginal costs to near zero, making goods and services priceless, nearly free, and abundant, and no longer subject to market forces.

    Now, a formidable new technology infrastructure—the Internet of things (IoT)—is emerging with the potential of pushing large segments of economic life to near zero marginal cost in the years ahead. Rifkin describes how the Communication Internet is converging with a nascent Energy Internet and Logistics Internet to create a new technology platform that connects everything and everyone.

    Billions of sensors are being attached to natural resources, production lines, the electricity grid, logistics networks, recycling flows, and implanted in homes, offices, stores, vehicles, and even human beings, feeding Big Data into an IoT global neural network.

    Prosumers can connect to the network and use Big Data, analytics, and algorithms to accelerate efficiency, dramatically increase productivity, and lower the marginal cost of producing and sharing a wide range of products and services to near zero, just like they now do with information goods.

    The plummeting of marginal costs is spawning a hybrid economy—part capitalist market and part Collaborative Commons—with far reaching implications for society, according to Rifkin. Hundreds of millions of people are already transferring parts of their economic lives to the global Collaborative Commons.

    Prosumers are plugging into the fledgling IoT and making and sharing their own information, entertainment, green energy, and 3D-printed products at near zero marginal cost. They are also sharing cars, homes, clothes and other items via social media sites, rentals, redistribution clubs, and cooperatives at low or near zero marginal cost. Meanwhile, students are enrolling in free massive open online courses (MOOCs) that operate at near zero marginal cost.

    Social entrepreneurs are even bypassing the banking establishment and using crowdfunding to finance startup businesses as well as creating alternative currencies in the fledgling sharing economy. In this new world, social capital is as important as financial capital, access trumps ownership, sustainability supersedes consumerism, cooperation ousts competition, and “exchange value” in the capitalist marketplace is increasingly replaced by “sharable value” on the Collaborative Commons.

    Rifkin concludes that capitalism will remain with us, albeit in an increasingly streamlined role, primarily as an aggregator of network services and solutions, allowing it to flourish as a powerful niche player in the coming era. We are, however, says Rifkin, entering a world beyond markets where we are learning how to live together in an increasingly interdependent global Collaborative Commons.

    In 2011, Jeremy Rifkin published the New York Times bestseller, The Third Industrial Revolution, which captured the attention of the world. His vision of a sustainable, post carbon economic era has been endorsed by the European Union and the United Nations and embraced by world leaders including Chancellor Angela Merkel of Germany, President François Hollande of France, and Premier Li Keqiang of China.”

    http://www.thezeromarginalcostsociety.com

    10) “The Conversation About Basic Income is a Mess. Here’s How to Make Sense of It.” – Evonomics.

    I have been a student of economic democracy for more than 30 years, and this topic was a big part of my doctoral dissertation. I think this article provides a useful taxonomy that can help first-time readers begin to wrap their minds around the various possibilities. I have used similar categories in my past writing about this, but would add the following seven ideas to the three categories used by the author of the following Evonomics article:

    1. Various “internet micropayment” proposals that would utilize crypto-currencies and blockchain (which also would not necessarily be truly “universal” and unconditional, because they could vary from one recipient to the next–IF such payments were linked in some way/s to the quantity and/or quality of individual internet usage);

    2. Using monetary policy–instead of, or in addition to, fiscal policy and/or income-producing public assets–to fund UBI and/or universal capital ownership investment accounts for all citizens (e.g. Helicopter money and Capital Homesteading);

    3. Baby bonds and/or stakeholder accounts (which could be considered a form of basic income, but restricted to lump sum allocations or investments at one or more stages of each citizens life, rather than regular monthly payments);

    4. Some of Marshall Brain’s more whimsical ideas, e.g. funding UBI by selling advertising on currency;

    5. Economist Robert Schiller has proposed both public and private versions of “livelihood” insurance, which would compensate those who lose a job and cannot find another that offers equal or better pay. A publicly-funded version of this could act as at least a supplement–or perhaps as a transition–to UBI, since it also is not truly “unconditional.”

    6. And, of course, it does not include tax incentives and/or tax subsidies to cover all or part of the cost of installing practices and techs that can increase individual energy, water, food, and/or housing self-reliance, which I would regard as a conditional form of UBI that could gradually reduce the need for–and dependency upon–income from all other forms (wages, welfare, charity, investments, and/or UBI).

    This could also take a more “in kind” form by making cheap or free DIY open-source software available–or at least not restricting its availability–to allow individuals to provide more of their own goods and services without needing a medium of exchange to “buy” them from others.

    7. Also not mentioned–but which I suspect may have been an intentional oversight by the author–were tax incentives encouraging businesses to share profits and/or ownership with employees. Not only are these not new ideas, they also obviously would not be truly “unconditional” forms of income.

    While fed and some state tax incentives for both have existed for more than 40 years in the US, I think it may be too late for these alone to do much good in anything other than a continued growth/full employment scenario.

    In any other scenario, e.g. jobless growth and/or mostly low-wage job growth, not to mention various types of stagnation, decline, and collapse scenarios, profit sharing and employee stock ownership could not only be useless, but could also result in employees losing income (especially in the case of stock ownership).

    However, had either become the norm, rather than the exception, in corporate America at least 30+ years ago, they may have reduced the increase in income inequality resulting from the combo of automation and outsourcing (job exportation to cheaper labor markets) over the same time period.

    Such incentives MIGHT still be useful before automation runs its potential full course, but probably less so for the growing number of gig economy workers who are being legally classified as independent contractors rather than employees to reduce and/or transfer more of the firm’s operating expenses to its labor force.

    But the incentives that encourage the retiring owners of small privately-owned (as opposed to publicly-traded) family businesses–who have no successors willing or able to take over and continue the business–to sell the business to its employees might still be useful even in a steady-state economic future.

    I think such incentives could also be created to encourage “stakeholder” corporations, i.e. reducing taxes upfront for large absentee-owned businesses (such as most hotels in Hawaii) which agree to gradually transfer ownership to local employees and/or other local stakeholders over a 20-year period (which could also be made conditional upon becoming “triple bottom line” B corporations in the process).

    http://evonomics.com/basic-income-conversation-make-sense-charlie-young/?

    • Andre Coelho

      Hi Thomas,

      Please try to keep posts shorter.

      Thanks,

      André

    • Will do. Next time I will try to keep all summaries of any attached links to a paragraph or less, and let readers decide if they want to read any of them in their entirety.

    • Thomas Brandt

      As background, I have been a policy and foresight analyst since 1984, with master’s and doctoral degrees in political science, specializing in political economy, public policy, and “Futures Studies.”

  • Thomas Brandt

    Please delete my postal address from previous comment. Thanks.

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