by Daniele Fabbri | Dec 2, 2018 | News
Credit Picture: Green European Journal 2018
The Green European Journal launched the Green Observatory on Basic Income, asking to experts in a series of interviews about the status of universal basic income (UBI) in the political discourse of their country, and the stance that Green, and other progressive parties, show towards it.
The Green European Journal is an editorial indipendent publication of the Green European Fundation (GEF), which is funded by the European Parliament.
The Journal is “a platform to help debates and ideas to travel across Europe’s cultural and political borders, and of contributing to the construction of a vibrant European public space.”
Being UBI something which always interested green circles and movements, for its potential in enhancing individual freedoms and capacities, the Journal decided to investigate the current status of the debate across the political spectrum in Europe.
Interviews:
Belgium – Kim Evangelista
England & Wales – Natalie Bennett
Greece – Constantine Dimoulas
Germany – Wolfgang Strengmann-Kuhn
Finland – Ville Ylikahri
France – Lucile Schmid
Italy – Giuseppe Allegri
Poland – Adam Ostolski
Portugal – Jorge Pinto
Scotland – Jamie Cooke
Spain – Julen Bollain
Switzerland – Irina Studhalter
More information at:
“Green Observatory: Basic income”, Green European Journal, October 17th 2018.
by Daniele Fabbri | Nov 23, 2018 | Research
Photo Credit: CC(Cindy Woods)
The last world development report from the World Bank is out. It investigates the changing nature of work and suggests what governments could and should do to address the phenomenon. Among the proposals there is the enhancement of social protection, to a degree disjoining it from formal wage employment, considering Universal Basic Income (UBI) as one of the options.
Digital transformation allows firm to grow rapidly, escaping the traditional patterns of production, and the rise of digital platforms make people more susceptible to the effects of technological change. The landscape of work is evolving and the skills required by employers around the world are changing: skills such as complex problem solving, adaptability and teamwork as central requisites. This in turn modifies how and at which terms people work, and short-term work is on the rise, bringing challenges to the existing welfare state, the report says. The World Development Report goes on suggesting three solutions governments should put into practice: investing in human capital, through the guidance provided by the Human Capital Project; enhancing social protection; and increasing revenue mobilization as a mean of financing the two aforementioned solutions.
The changing nature of work
Fears of technological based unemployment have their roots in history, spanning from the introduction of knitting machines in England in the XVI° century, to the Luddites distruction of textile machinery in the 19th century, but the overall effect of industrialization was to stimulate economic growth and to raise the living standards. This fear is also contemporary, supported by the trend of declining industrial employment in high-income economies in the last two decades. The Republic of Korea, Singapore, Spain, and the UK are among the countries in which it dropped by more than 10 percentage points but, on the other hand, millions of industrial jobs have been created in developing countries since the late 1980s.
Technology is disrupting, unevenly, the demand for skills, and its potential for the amelioration of living standards manifests heterogeneously: workers in elected sectors gains from technological progress, whilst others see themselves left facing displacement. The wealth created by the platform economy is huge, but its placed in the hands of a few, and A.I. raises concerns about the advent of a jobless economy following the rapid growth in the number of robots operating worldwide: if they are 1.2 millions in 2018, they will be 2.6 millions in 2019, an increase of 1.4 milion units in just one year. It should be noticed how, in the countries with higher robot density – Germany, Korea, Singapore – employment rates remain high, but in Germany the effect was a reduction in the hiring of new, young entrants; young workers, and economies anticipating larger numbers of entrants, may be more affected than others.
The extent to which robots replace workers remains unclear, with automation of routine work estimated to have also created 23 million jobs across Europe starting in 1999, and evidence suggesting that its overall effect is that of raising demand for labor, specifically in the technology sector, by providing the tools necessary for online work, or for taking part in the gig economy. It’s sure that jobs based upon repetition, which are “codifiable”, are those more endangered by automation, but estimates of the number of jobs at risk varies widely, for the US from 7% to 47%, the latter figure the result of automation probabilities developed by machine learning experts at the University of Oxford, a speculation which cannot account properly for the rates of technology absorption, which have been observed to vary greatly depending on the kind of technology, both internationally and intranationally.
The effect of automation on skills demand and on the production process is somehow more discernable. On the skills side, the demand for cognitive abilities which allow workers to be more adaptable, as critical thinking and socio-behavioural skills, is increasing; on the side of the production process there is the rise of global value chains, the changing nature of the boundaries of firms, and the fluid geography of jobs. The process has favored the more educated, and human capital seems the more effective protection against automation driven unemployment: “A big question is whether workers displaced by automation will have the required skills for new jobs created by innovation”. Innovation has the greatest impact on low and middle-skilled workers, either because they are more suceptible to automation, or because no complementarities with technology (human-machine cooperation) manifest.
The paper identifies how technology has disrupted the demand for skills: firstly, the demand for non-routine skills (i.e. cognitive and socio-behavioural) is increasing both in advanced and emerging economies; secondly, the demand for job specific-skills is declining; thirdly, payoffs to combination of different type of skills, allowing for greater adaptability and easier transfer among different jobs, appear to be increasing. The risk is growing inequality, as the report states:
“In advanced economies, employment has been growing fastest in high-skill cognitive occupations and low-skill occupations that require dexterity. By contrast, employment has shifted away from middle-skill occupations such as machine operators. This is one of the factors that may translate into rising inequality in advanced economies. Both middle- and low-skill workers could see falling wages ⎯ the former because of automation; the latter because of increased competition.”
Technology changes the way in which people works and the term under which they work. The gig-economy and jobs based on on-demand services, arising in an environment created by the advance of technology, don’t rely on long-term contracts but rather on extreme flexibility. There is a minimum productivity level at which firm find it optimal to employ workers formally before resorting to globalization, this means that informality is prefereable for everyone exept for the most productive workers.
If globalization and automation were to act simultaneusly, increasing the productivity of workers, the number of informal workers may decline, but if more requirements –minimum wage, required benefits – are imposed on firms, the positive “formal employment effect” may be reversed, and informality actually rise. The management of risk through employers doesn’t fit well with the new nature of jobs, and the use of payroll taxes to finance pensions and social insurance may no longer be sustainable, even for advanced economies, as the percentage of the workforce taking part into the formal economy decreases. Indeed, the changing nature of work stimulates informality, as taxation, ragulation, and social protection schemes don’t provide businesses with incentives to grow, particularly in developing economies. The issue is present in both emerging and advanced economies, and convergence is occurring among them, with increased informality in the advanced ones, leaving workers without access to benefits or protections and making the case for direct intervention of the government through benefit provision. “If automation pushes up the cost of distorting labor markets, and development improves the efficacy of the public sector, government should move away from regulation-based redistribution to direct social welfare support.”
Lifelong Learning
“Skill acquisition is a continuum, not a finite, unchangeable path”.
The advance of automation increases the demand for high-order cognitive skills, while simultaneously decreasing the demand for repetitive, job-specific skills. At the same time, the retooling of existing jobs make adaptability a fundamental requisite: the idea of a career for life seems no longer plausible, and shifts between jobs will be the norm. Thus, the profile of the ideal employee changes, as a single job may require the combination of skills from multiple disciplines: jacks of all trades will surclass the masters of one. How well countries respond to the changing demand for skills depends on how fast the supply of skills can shift, but the education system is traditionally adverse to change, and adjustment occurs predominantly out of compulsory education. Tertiary education, given its flexibility, allows for enrollment whilst participating in the workforce, and so will be the main provider of the cognitive skill-set required. Government should take action in enhancing instruction during youth, the period in which the learning capabilities are higher, and simultaneously helping to shape a better framework for adult learning as a complement to schooling, in order to “inoculate against job uncertainty.”
A new social contract
Old and new pressures calls for a renovation of the social contract, which the report defines as “a policy package that aims to contribute to a fairer society.” The changing nature of work is costly for workers and adjustments are needed: a global new deal is necessary. This new deal should be different from the one adopted in the US after the Great Depression, as the Depression was a transitory shock, whilst the advance and automation and informality are here to stay. Any social contract should be tailored to the specific country context, but some core elements remain: following the indications of Amartya Sen in “Development as Freedom”, the instruments for equality of opportunity are political freedoms, freedom of opportunity, and economic protection from abject poverty.
“The labor market is increasingly valuing advanced cognitive and socio-behavioral skills that complement technology and make workers more adaptable. This means that inequality will increase unless everyone has a fair shot at acquiring these skills.”
Strengthening social protection
Social protection should be enhanced through the improvement of its three main components: a guaranteed social minimum, social insurance and market regulation.
A guaranteed social minimum, with social assistance at its core, should be based on the concept of progressive universalism, with programs providing financial support to the largest possible share of the population, in order to account for the risks in the labour market. Social assistance needs to be reformed, as the Bismarckian model is no longer satisfying, and should be coupled with subsidized social sinsurance, not strictly based on participation in formal wage employment, financed through mandatory earning based contributions limited, at least initially, to the formal market. In order to provide equal opportunities, a social contract should also include means to provide education and upskilling, necessary for navigating the job market, starting from early childhood development, as knowledge is cumulative and pays more the earlier it starts.
“As social contracts are reimagined, subsidizing a basic level of social insurance — especially for the poor — could be considered. Such a reform could also equalize the costs borne by different factors of production, such as capital and labor, as the financing of the system is at least partly shifted away from labor taxes toward general taxation.”
Universal Basic Income
Universal Basic Income is being hotly debated as a mean to expand the guaranteed social minimum, the report says. It wouldn’t be a substitute for health, education, or other social services, but a supplement to existing social programs, and could end up replacing some programs with income support functions, increasing efficiency by reducing programs fragmentation. It’s monetary nature is an advantage: analysis of cash transfer programs showed advances in school enrollment rates, test scores, and cognitive development, food security and use of health care facilities, especially when combined with forms of intervention. The available evidence seems to disprove one of the main concerns related to UBI, that of work disincentives, as the Alaska dividend program shows no impact on employment (if not for the increase in part-time employment), and a study on the Iranian basic income program found that it did no harm to employment. The regular provision of welfare benefits granted by UBI would contrast with the arbitrarity of means-tested anti-poverty measures, which facing the dynamism of poverty ends up generating winners and losers.
The costs of UBI would depend on the level at which it is set, and its effects would depend on how it is financed. Simulations setting UBI at the level of existing cash transfer programs show that it would have significant fiscal impact, costing an additional 13.8 percent of GDP in Finland, 10.1 percent in France, 8.9 percent in the United Kingdom, and 3.3 percent in Italy. The taxation of UBI alongside regular income and the elimination of tax allowances were then used as sources of revenues for covering the additional costs: “in Finland and Italy, these measures were more than adequate to cover the additional costs of a UBI. In France, those revenues almost offset the cost of such a program. In the United Kingdom, taxing cash benefits and eliminating tax allowances were not enough to cover the UBI.” Simulations for developing countries found significant distributional effects: in Nepal most people would gain, in Indonesia 40% of the poor would be worse off and in South Africa most of the elderly and the poor would be worse off. This is due the structure and performance of the existing schemes, UBI being set at their level. A debate remains around whether some of the “cousins” of UBI, as a Job Guarantee or a Participation Income, conditional to the fulfillment of public jobs, or to volunteering, could be more beneficial, the report states.
Financing social inclusion
A basic social minimum package which uses UBI, set at the average poverty level, and aimed at adults would cost 9.6% GDP in low-income countries, 5.1% in medium-income countries and 3.5% in upper middle income countries. If the UBI was to be for everyone, the figures would be in the double digits in the poorest countries, 9% of GDP for middle income countries and 5.2% in upper-middle income countries. And the invesment for UBI should be coupled with investments in the creation of human capital, the report mantains. A significant mobilization of capital becomes necessary. Taxation patterns diverge from low income countries to high income ones; if the former rely mostly on indirect taxation –consumption and trade taxes – the latter rely on direct taxation. The paper analyzes sources of potential revenues to finance the global new deal, as excises taxes on tobacco and alcool, that even if considered regressive, have usually a long term positive impact on health. Value added tax could have a significant role in developing economies, whilst they are already diffused among advanced ones. A carbon tax may have strong impact, with a study finding that for the top 20 carbon emitting countries, optimal taxation could rise almost 2% of GDP, and be paired with the elimination of energy subsidies, which globally amouts to $333 billion. Personal and corporate income taxation may be aided by technology in avoiding tax avoidance.
“The virtual nature of digital businesses makes it even easier to locate activities in low-tax jurisdictions. The provision of goods and services from abroad without a physical presence in countries where consumers are located escapes the traditional corporate tax.”
Digitizing property registration systems will improve the collection of property taxes, and withholding taxes on payments of services will become more important in economies with strong digital presence and a prevalence of intangibles. Social protection should be enhanced keeping in mind financial costraints, and expanded as more resources are mobilized through improved taxation.
More information at:
World Bank. 2019. World Development Report 2019: The Changing Nature of Work. Washington, DC: World Bank.
Human Capital Project: https://www.worldbank.org/en/publication/human-capital
This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by the World Bank
by Andre Coelho | Nov 1, 2018 | News
In spite of its right-wing government, spearheaded by Prime Minister Viktor Orbán, there is already a seed of activity for basic income advocacy in Hungary. A recently formed group, named First Hungarian Universal Basic Income Association, has an active social media profile and has organized meetings and conferences to present and discuss basic income, the latest of which will be held next 23 to 25th of November in Budapest. The Progressive Hungary Foundation is also participating in the event.
There is also a political party defending the basic income proposal, the Dialogue for Hungary. A working group within this party has produced a concrete basic income implementation proposal for Hungary. According to Sarath Davala, co-chair of the Basic Income Earth Network (BIEN), “there is a great deal of curiosity about basic income” in Hungary. On the 31st of August 2018, Dialogue for Hungary promoted a presentation where Davala spoke about the Indian basic income pilot, a packed event at which several Members of the Hungarian Parliament were present.
Reference research work on basic income has also been produced by Hungarian scholars. Titled “Basic income as a Realist’s Transformative Strategy”, this work is authored by Gabor Scheiring, Miklós Sebők and Bence Tordai (Hungarian Parliament Member). The abstract can be read as follows:
“Progressive politics needs bold new visions that can be contrasted to current processes of erosion. Based on research conducted at the Progressive Hungary Foundation as well as on already existing policy proposals we elaborate a basic income scheme in line with the recent proposal of Iván Szelényi (2014) that could be immediately implemented in Hungary. In this chapter we first analyze the political rationale of the proposal illuminating the careful balance between desirability, feasibility and achievability. The most important moral argument in favor of the basic income is that it allows a basic freedom and a basic sense of security for everyone (Van Parijs, 1995). These general arguments have been laid out in detail already so we concentrate on the politics of our scheme. Next, we describe in detail the working of the scheme as divided into various eligibility groups and we also present detailed financial evidence that the proposal can be introduced immediately without impairing the balance of the budget. We conclude our proposal by pointing out the social effects of the scheme as well as elaborating the first steps towards implementing the proposal at the EU level.“
More information at:
André Coelho, “Hungary: Prime Minister Viktor Orbán speaks harshly against basic income”, Basic Income News, March 21st 2018
Gabor Scheiring, Miklós Sebők and Bence Tordai, “Basic income as a Realist’s Transformative Strategy”, Research Gate, 2015
by Guest Contributor | Oct 31, 2018 | Opinion
The Past – from Ancestral Economy to Capitalism
Tribal groups, in which all men and women on Earth have lived since humanity emerged, have functioned through cooperation and solidarity among their members in tasks such as obtaining and distributing food, building shelters, and family dwellings or taking care of community assets; tasks that today we would call ‘economic’. In fact, over hundreds of thousands of years of human presence on Earth the whole economy was cooperative and supportive. And at the time it was sustainable. About 6,000 years ago things began to change when the first sophisticated civilizations arose and put into practice a variety of new forms of economic organization; from the range of traditional systems based on agriculture or trade to, subsequently, feudalism, mercantilism and everything else after that. Today, however, all the economic diversity that existed over those 6,000 years is virtually nullified, and an (almost) unique model has once again consolidated. It is called capitalism, and it has been going on for about 200 years.
Ancestral economies were based on solidarity and cooperation among people, on a harmony between them and nature and on an orientation towards the mere satisfaction of their needs. Capitalism is characterized by competition among peers, by the predation of the Earth and by an orientation of its agents aiming at unlimited material accumulation. Both modes are hegemonic, each in its own time, but that is about as much as these modes have in common.
Can, like its ancestral homologous form, the present ‘state of the art’ in economic organization – capitalism – last for hundreds of thousands of years? It does not seem possible, given the condition in which it left the planet and humans, after only 200 years. Earth’s soils, rivers, oceans, and atmosphere are now filled with the poisons left over from our economic activity; the climate is changing, the elements unsettled and life as we know it may be doomed, if we do not make deep and rapid changes. As for us humans, materialistic as we have become, we too often forget who we really are and can do: our nature as creators; our ability to generate art, mathematics or philosophy; our potential for freedom, for choosing paths, for changing ourselves and the world as we decide, and the lack of any natural bound between us and what we can achieve or be. By forgetting so much, we reduce ourselves to economic roles, going now so far as to even discuss whether artificial intelligence and robots will make us pointless and expendable one day. The culprit is our current economic culture and system.
However, despite its pitfalls, an important merit can be attributed to capitalism: with the demand for accumulation and profit, it has given us machinery, techniques, and knowledge that can now allow us to access the resources necessary for the material comfort of all. This is only a possibility though since these machines, techniques, and knowledge only provide the capacity, not the guarantee of its use.
Our collective future is unforeseeable. It will be the result of an infinity of both conscious choices and involuntary actions, taken by billions of individuals and groups, in a chaotic general movement that no one can control or anticipate. And yet, it can be felt that capitalism would make no sense in human history unless it was fated to eventually free us from the shackles of material scarcity. Hence, the great economic question of our time must be: how to accomplish the potential that capitalism offers us? The simple ‘progress’, as currently evolving, does not seem to be the way. Reality shows us, everywhere, that the mere growth of the present economy, without any change or innovation in its logic and processes, will never free us. Neither will the strengthening of the so-called welfare state, in its traditional, bureaucratic, expensive and life-controlling form. It can do no more than mitigate poverty, but at a high cost in dignity to its beneficiaries, and a cost in humanity to all the others. The more unnecessary this becomes the more intolerable it gets.
Each one of us, rich or poor, directly or indirectly is suffering from the lack of a process which guarantees the essentials for all. Clearly, this is no longer a problem of production capacity, but one of economic organization. The satisfaction of the basic needs of all people is not inherent to capitalism, nor has it ever been added to it. However, without such process, we will not rid ourselves from the specter of material poverty, and therefore from this never-enough culture in which we find ourselves in. Mainly reduced to producers and consumers, we are exhausting the energy that could alternatively be spent in higher occupations which our potential allows and claims for us.
And yet, we can immediately introduce such process of guaranteeing the essentials for all: let us recover from our ancestral economic way its core element of solidarity among people.
A Future – the UBI-AA
Solidarity among people is the essential idea behind the alternative resource distribution model here described: the Unconditional Basic Income of All for All, or ‘UBI-AA’.
UBI-AA is a revenue redistribution process, generically designed to operate monthly, providing automatic and unconditional transfers among citizens, from those who have higher incomes to those with lower or no income at all. Built, supported and leveraged by them alone, the process will invite participants to take responsibility and engage in their communities, which will reinforce these.
It works in two stages:
1) As it is acquired, each member of the community discounts to a common fund – a ‘UBI Fund’ – a proportion of their income, at a single and universal rate;
2) At the end of each month, the Fund’s accumulated total is equally and unconditionally distributed among all members of the same community.
This simple process, which demands the same effort from all participants while offering them the same benefit, treats everyone equally. It turns those who, at each moment in time, have above-average incomes into net payers to the UBI Fund, and those who have below-average incomes into net receivers. Thus, the process operates a joint distribution among participants of part of their individual incomes. In addition to reducing inequalities, this solidarity among peers creates an unconditional guarantee of income for all, that is, an Unconditional Basic Income.
It follows from the UBI-AA process that the loss of available income by some will be the gain of others. Importantly, for the scheme to be accepted by the former and really useful to the latter, the losses involved should be moderate and the gains significant. This should not, however, lead to a devaluation in the possibilities of the mutability of all individual positions. As time goes by and while exercising the options which the process itself opens to participants, individual situations of income ‘winners’ or ‘losers’ should always be seen as circumstantial.
To achieve its intended effects, the implementation of the UBI-AA should be accompanied by the release of its participants from the burden of personal income tax. Such tax relief will compensate them for the contributory effort required by the UBI-AA process. However, for those above a certain level of income, such compensation may turn out to be merely partial.
Once the personal income tax is abolished, the moderation of losses for citizens with above-average incomes and, simultaneously, the material significance of gains to those with under-average incomes, will be possible if the rate of contributions to the UBI Fund is set at an optimal level, balancing the two outcomes.
A more complete description of the UBI-AA process, as well as a simulation of the financial effects it would have produced, both in individual citizen spheres and in the State budget, hypothesizing it in force in Portugal in 2012, can be reached here.
UBI-AA differs from most current traditional redistributive processes because it is unconditional. It also differs from most unconditional alternative processes since it is a construct of common citizens, instead of a government, a central bank or any other ‘power’ policy. We see it as a humane alternative to organizing the economy on its distributive side. Operating through the income distribution process described above, it will favor the rehabilitation of values such as solidarity and voluntary cooperation among people, and the creation of an unconditional guarantee of income for all will be a corollary.
We cherish the hope that this may contribute to the flourishing of a new and less materialistic culture. Who knows, if making everybody’s access to essential material resources as simple as breathing, will not end up instilling in people the same attitude towards those resources – money and the things it buys – as the one we have towards the air we breathe: no matter how valuable it may be to us, we do not quarrel with each other for it; we only use it in the quantities we need; accumulating it does not even occur to us. Such a cultural shift would certainly be a great human civilizational progress and a much-needed step towards a reconciliation between us and our environment.
Miguel Horta
André Coelho
