Could Free Money be the answer to the Automation Apocalypse on the horizon?

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Free Money?!

This is the full version of a post which appears on the Yorkshire Party website with full references.

In 2015 I became the Yorkshire Party’s first directly elected representative when I was elected to Penistone Town Council, a role I still proudly hold today.  For the last 23 years I’ve taught mathematics at an inner city secondary school in Sheffield and I’m passionate about how education can unlock the future prosperity of our region and committed to helping young people fulfil their potential and break the grip that poverty and deprivation still has over far too many people in our wonderful county.  The levels on inequality we see between Yorkshire and the South and the intransigence of the Westminster elite anger me greatly. I believe that we have everything we need in our region to turn our region into an economic powerhouse, doing this whilst treating all our citizens humanely and given them all, whatever their age, a decent and respectable standard of living.

Earlier this year the Centre for Cities brought out a report which makes frightening reading for anyone who cares about the future prosperity of Yorkshire and its people.  The report looks at the rise of robots and the effect of this on jobs and prosperity. The news for Yorkshire is not good.  The think tank say that by 2030 about a quarter of all jobs in Yorkshire could be lost because of a future ‘automation apocalypse’ as some are calling it and globalisation.  Sheffield and Leeds could lose up to 100,000 jobs each with up to 30% of the jobs in Wakefield at risk. If nigh on half a million people lose their jobs in the next 10 years or so in our county imagine the exponential growth in the inequality gap and the impact on living standards in households across our region.

I believe that Universal Basic Income (UBI) has the potential give our citizens a safety net and time to retrain and refocus our economy and prevent significant social problems whilst we adjust to the certain rise in automation across our region as well as providing a standard of living and level of dignity for all our citizens that morally we must strive for.  UBI, or ‘free money’ as some call it has been in the news recently. It was part of the Green Party manifesto in 2015 (page 54) and Labour have now said they will look into its feasibility.  It is not a new idea.  It was outlined in Thomas More’s book Utopia in 1516.  It also has some very curious proponents through time from the liberal left such as Martin Luther King and Bertrand Russell to those on the right such as Milton Friedman and President Richard Nixon (who almost got a version of UBI through congress in the early 1970’s). (You can view more about its history here It has been tried in limited forms in various countries across the world such as Canada (in the 1970s  and recently in Ontario, the USA , Finland, Namibia and other places

What exactly is UBI?  There are many forms but in a basic sense it is an amount of money given to all citizens with a legal right to reside in a country.  There are no strings attached to the money – it would be tax free and given to people unconditionally with no restrictions on what they spend it on.  A Basic UBI would be an amount that would be sufficient for a person to cover their basic needs of food, clothing and shelter. UBI would replace many of the benefits currently paid out to people.

The idea has many benefits.  It would simplify the welfare system and drastically cut bureaucracy.  This of course is its big appeal to those on the right who want smaller government and less complexity.  It would lower inequality and poverty and should lead to lower infant mortality, better health and educational achievement and potentially great degrees of both entrepreneurship and volunteering.  Consider the current welfare system, a system which designed by well meaning people, often traps people in poverty, subsidises employers paying decent wages and promotes passive behaviour. If someone is unemployed they gain certain benefits.  However there are strings attached. Someone in receipt of these benefits would need to show they are actively seeking work by applying for x number of jobs per month, they may have to attend numerous courses or training sessions which are often a waste of time and money and are ways of getting unemployed people to jump through hoops to demonstrate they are looking for work.  They may be forced into accepting any job offered despite how good a fit it is or what it pays. If someone receives let us say £500 per month in benefits and gets a job paying say £550, they of course lose their benefits and with taxes and travel the probability is that they would have less money at the end of the month than they did when on benefits. For many people the welfare system simply doesn’t make work pay.

UBI could not be touched – any money earned on top of it would not reduce the level of UBI.  Work really would pay. Think about all those people on poorly paid, possibly zero hours contracts where working conditions are poor.  UBI could give people the leverage needed to demand better wages and better conditions if they are to do these jobs. Those who are being controlled by the strings of the welfare system are also restricted from volunteering opportunities because they have to show they are available for paid employment.  Imagine if volunteering could be enhanced because doing it will not have a detrimental effect on the money you have. Volunteering can be an essential way into paid work, lifting self esteem and self confidence and the benefits to the local community are many and obvious.

There are three major arguments used against UBI.

Argument against 1 – UBI would be exorbitantly expensive.

Yes it won’t be cheap.  However it is estimated that at least half the cost would be achieved from savings in the current welfare system and the reduction in bureaucracy.  Other sources could be taxation on automation, financial transactions, cutting tax incentives and loopholes for those on the largest incomes and companies with the largest turnovers – yes a real attempt to cut the inequality gap between the richest and the poorest in society (there isn’t a direct correlation between how hard a person works and the money they earn believe me!).  Look at it from another angle. In the USA a study by the Institute for Policy studies was done which found that for every $1 extra given to a normal wage earner added $1.21 to the national economy. However if $1 is given to a high income earner this only results in an addition of 39 cents to the national economy.  There is no evidence to suggest things would not be different in the UK.  Paying UBI would actually GROW the economy through people spending more and producing greater demand.

Argument against 2 – UBI promotes laziness.

The small scale studies done so far show this to be untrue.  The schemes run in Canada  showed that only 1% of recipients actually stopped working and the vast majority of these were those staying at home to look after children or those going back into education.  Evidence suggests that on average UBI would reduce working hours by less than 10% (less than 4 hours a week) and that this extra time is usually used to go back to education and/or looking for better jobs.  Not only will it promote volunteering opportunities but it allows people to start their own businesses promoting entrepreneurship.

Argument against 3 – people would spend their UBI foolishly.

The obvious (and Libertarian) answer to this is that we should trust people to spend money in their own way.  Not persuaded? A 2013 World Bank study found that poor people DO NOT waste their benefits money on alcohol, cigarettes and drugs.  The concept of the lazy, drunk poor person is a stereotype rather than a reality. A small scale UBI themed study was done with a small number of homeless men in London.  They were given a proportion of money each week with no strings attached. At the end of the study it was found that this money wasn’t spent on alcohol or drugs but that well over half then men now had a roof over their head and were making active strides to improve their health and wellbeing.  The Economist magazine said “the most efficient way to spend money on the homeless may be to just give it to them”.

Of course there are many questions to be answered before a potential UBI becoming a reality.  Extra support would still be needed for those who are disabled, there may need to be different levels for areas with a higher cost of living and at different ages but if UBI could be done right it really could be the 21st century answer to our broken welfare system, improving physical and mental health, promoting work, entrepreneurship and volunteering, totally turn the tables on the rogue employers that pay peanuts or use zero hours contracts and improve working conditions.

UBI offers a floor that people cannot drop below rather than a ceiling that traps them.  It is possibly the most ambitious social policy of our time.  Some would say a Utopian ideal – but eliminating slavery, equal rights for men and women and democracy were once said to be Utopian dreams.  Sometimes these dreams come true. Oscar Wilde once said that “stronger than a thousand armies is an idea whose time has come”. I would suggest that UBI could be an idea whose time has come and for the future of thousands of Yorkshire families in the future its adoption could be essential to keep them out of the poverty trap and give us all the decent standard of living we all deserve.

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Wayne Chadburn

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