Jobs, Basic Income, Post Scarcity, and all that Jazz

There have been a smattering of wealth inequality/economics articles lately:


Economics Has Failed America

Scott goes on about the unrealistic expectations of trying to teach everyone high-IQ skills, when biology imposes barriers to such hopes:

The QZ article warns that it might create a calcified “perpetually under-employed stagnant underclass”. But of course we already have such an underclass, and it’s terrible. I can neither imagine them all learning to code, nor a sudden revival of the non-coding jobs they used to enjoy. Throwing money at them is a pretty subpar solution, but it’s better than leaving everything the way it is and not throwing money at them.

It’s hard enough teaching young people algebra; coding is many magnitudes harder. A frequently voiced concern that the cognitive requirements to perform entry-level labor may rise to a sufficiently high threshold that it excludes too many people from the labor market. This may mean that while the total number of jobs does not fall, the IQ requirement rises. Another issue is the ‘hollowing out‘ of the middle, where there are too many low-paying jobs and lucrative creative-class jobs, but not enough middle-income ones. ‘Luddite Fallacy’ and ‘Lump of Labor’ may ignore job pay or cognitive demands.

As I explain in The Economics Debate: Jobs and Automation and Coming to Terms With Our New Economy, however, there is reason for hope:

New technologies seem to spawn jobs for all skill levels. Cars are much more complicated the carriages, yet there are jobs for all intelligence levels, from people who clean the interiors of cars to those who solve differential equations to model airflow. Also, the fruits of economic progress tend to be shared with everyone, even with rising wealth inequality, in the form of better technologies, larger social safety nets, and rising standards of living, as “Nathaniel_Bude” points out (this is such a good comments that I pasted the entire thing):

“Cost of living” is a misleading term, because the cost of staying alive has gone up much less. 1 kg of rice still costs about $1 in rich areas, rich people only choose to buy much more expensive food. And similar reasoning applies to all the other “necessities” that people somehow manage to spend so much less on in poor areas than in rich areas
But this increase in spending has absolute benefits. Homes with screen windows, non-leaky roofs, clean tap water, and flushing toilets – that are all factored into “cost of living” here – really can make the difference between early death and long life. It is not a “red queen’s race”. Rich people do not need these things any more than poor people. Poor people need them just as much, but can’t afford them.
So there have been huge benefits from rising GDP, and there would be huge benefits to raising levels of consumption in the poorest areas toward the levels typical in the developed world. Which is why it frankly offends me to discuss handing out more money to the poorest people in the richest areas.

Especially when there is a better alternative. Negative income taxes at the low end (like the earned-income tax credit) are not zero sum! They directly redistribute to the relatively poor, while incentivising more work and greater labor force participation rate, which raises their total income even more; and fuels economic growth, which produces a bigger pot of money that we can tax and redistribute as we see fit (like, say, to the absolutely poor).

The poor benefit as much as rich from new technologies, and new technologies create deflationary forces on prices and raise living standards. There’s perhaps a misconception that capitalists only cater to the rich. However, capitalists want to make their innovations and services as accessible to as many people as possible, provided capitalists can turn a profit. Consider an experimental cancer drug, for, say, liver cancer. Should it become successful, the potential market is enormous – tens of billions of dollars a year or even more. It does drug companies no good to restrict cures to the very richest.

From QZ: QZ: The universal basic income is an idea whose time will never come

I’ve written about the UBI here and here.

Regarding the UBI, some thoughts and ideas:

1. Means testing the basic income: those who are deemed unsuitable for a UBI are excluded.

2. Compliance: those who abuse or fritter their income are bumped back to regular welfare. If a UBI is supposed to replace most welfare, a UBI recipient going on welfare indicates a failure of the program.

3. Find ways to reduce living expenses, making a UBI more effective.

In “Average is Over”, economist Tyler Cowen floats the idea of the unemployed, unable to adapt to a changing economy, moving to low-cost regions or ‘camps’, subsiding on inexpensive food and cheap entertainment. Automation wrought by technology may make enough goods cheap enough that such a post-scarcity society may be possible. These ‘camps’ may be a much cheaper alternative to rent, which can be very expensive.

People could leave the camps when they have the financial means or motivation to do so, but the location of the camps may make getting work difficult unless the work is online or on the camp itself. It may end up resembling something like Kiryas Joel.

The resurgence of nuclear families are another possibility. Millennials living with their parents longer to save money, for example. Families would form multi-generational domiciles or clans, passed-down from one generation to the next, rather than everyone splintering off.

4. Unfortunately, a UBI will not make much of dent in healthcare or education, given that those can easily cost tens or even hundreds of thousands of dollars a year for a single person.

5. Will a UBI replace the minimum wage? Eliminating the minimum wage could be deflationary, auguring well with #3.

The future will be one where there is an abundance of free time, for all socioeconomic levels, with fewer hours worked, a shrinking labor participation rate, and possibly even a shorter workweek. There is a tendency among some on the ‘left’ to want to ‘put everyone to work’ when it’s not necessary or possible.

Even if there is enough abundance created by technology and a generous, paternalistic ‘elite’ to give everyone, both working and permanently unemployed, a comfortable standard of living that would rival that of kings 500 years ago, people may still complain about wealth inequality and lack of fulfillment, because someone will always have more. Studies have shown that relative wealth is as important, if not more, than absolute wealth (also known as big fish in a little pond vs. being a small fish in a big pond). That’s why a solution involving camps may be effective, by lumping everyone together and thus eliminating class envy.

Post scarcity also won’t provide status, ‘ownership’ ,or ‘participation’. The paradox, I suppose, is that you have all this technology and economic expansion, but the average person’s contribution to the process is becoming less and less. People generally want to believe that they are valued, that they have some sort of ‘agency and purpose’, that they have some sort of ‘stake’ in society, that they are contributing, and that they have some form of control. A post-scarcity ‘system’ will need to provide and or emulate those things.