💸 Turning UBI on its head

Technological advancements often dominate the discourse around Universal Basic Income. Many at the forefront of the technology transition are singing the same tune: as artificial intelligence and automation reshape our world, UBI will become not just desirable, but inevitable. In this version of the future, UBI emerges as a lifeline, a way to distribute the wealth generated by AI and keep society from fracturing.

Elon Musk said in 2017

I don’t think we’re going to have a choice, I think it’s going to be necessary. There will be fewer and fewer jobs that a robot cannot do better.

Sam Altman wrote on his blog in 2021 

Software that can think and learn will do more and more of the work that people now do. Even more power will shift from labor to capital. We need to design a system that embraces this technological future and taxes the assets that will make up most of the value in that world–companies and land–in order to fairly distribute some of the coming wealth.

And Geoffrey Hinton said in May this year 

I was consulted by people in Downing Street. I advised them that universal basic income was a good idea. It [AI] is going to increase the gap between rich and poor.

I understand the reasoning behind these arguments.

But, what if they got it backwards?

UBI should not be just about survival or consumer spending. Instead, it should be seen as a catalyst for driving technological change. A kind of long-form state support could shore up social cohesion and lead to better governance. That would have a halo effect.

People are more likely to participate in the technological transition positively if they feel secure and supported, including reskilling, upskilling, or even becoming entrepreneurs, thereby creating complementary services and products.

In this view, UBI is a requirement for, not a consequence of, technological transition.

via Midjourney

The surprising evolution of welfare

State support is not new or radical, but looking at history could help change attitudes towards UBI – considering it instead as a step-change in the evolution of state support. 

In the UK, a significant percentage of the population are net recipients of welfare transfers. In 2018, social benefits to British households as a percentage of GDP was 12.66%. Covid hit home, and in the first year of the full-blown pandemic, in 2021, 54.2% of the population received more in welfare than they paid in tax – similar levels to the years after the 2008 financial crisis, when over 53% of Brits received more support than they paid in tax. 

This pattern is not unique to the UK. Similar trends are observed in Finland, Sweden, Germany, France and the US.

Why is this happening? The role and scale of the state relative to the economy have grown significantly over the past 150 years, particularly in countries like the US and Europe. We now have foundational welfare programs, labour laws, and public health initiatives in the US and Europe. The UK, where I live, has the National Health Service (founded in 1948); the US expanded Medicare and Medicaid under the Great Society program. And in challenging times, the state steps up. In response to the 2008 financial crisis and the Covid pandemic, welfare support increased significantly.

These reforms stem from diverse rationales, each rooted in different aspects of societal need and governance. Politically, they reflect a desire for social stability. Economically, they acknowledge that robust economies require a certain level of human capital, and that many interventions, such as public health initiatives, provide positive externalities. Finally, and perhaps most subjectively, these reforms are driven by moral and ethical considerations about the kind of society we wish to create and sustain.

Each time these reforms take place, they stick around, becoming politically difficult to reverse. Giving people benefits is far easier than taking them away. 

This happens for good and for bad, of course. Richer advanced economies — consider France and the UK — are struggling with the unrealistic expectations of older demographics, demanding retirement at 60 or 65 and pensions untethered to the realities of a changing world. 

But the reforms are also a sign of a richer society. Look at China’s trajectory shown in green in the previous chart above. Between 1995 and 2022, its GDP per head rose twenty-fold. As it got richer, the proportion of GDP paid as benefits grew roughly 3.5 times (or in absolute terms about seventy-fold). Social benefits are a good that richer countries can afford.

I’m not justifying or challenging any particular social programme or arguing for a vast retrenchment of programmes. I’m making the case that as societies get richer they [a] tend to invest in growing layers of social programmes, [b] for better or worse, richer societies tend to expand rather than contract programmes over time, [c] countries can wind down programmes, such as Covid support, when they are suitably targeted and [d] most importantly, for all the moral and ethical considerations, states support social programmes because they can provide economic and political stability and deeper human capital for the states’ own self-interest. 

A non-technological rationale for UBI