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International Internet Magazine. Baltic States news & analytics Saturday, 16.12.2017, 03:37

Modern complex social problems: robotics, basic income and safety nets

Eugene Eteris, Eugene Eteris, BC’s International Editor, European Studies Faculty (RSU), Riga/Copenhagen, 22.11.2017.Print version
EU and global economies are facing “labour problems”: in various states angry workers denounce both a shortage of jobs and low wages. Besides, robots already appear to be a threat to workers being able to replace millions of humans. Another issue is that of the basic income: the idea attracts attention around the world providing potentials for a universal social safety net implementation.

Recent “Social Summit for Fair Jobs and Growth” (17-20 November 2017 in Gothenburg, Sweden) concluded the second stage of European states’ efforts to find a solution to urgent labour market’s issues. For example, in 2016, just below 40% of employed people in the EU were in non-standard employment or self-employed, half of whom are at risk of not having sufficient access to social protection and related employment services, according to estimates

See: Commission Staff Working Document: 'Analytical document' accompanying the Consultation document: 'Second phase Consultation of Social Partners under Article 154 TFEU on a possible action addressing the challenges of access to social protection for people in all forms of employment in the framework of the European Pillar of Social Rights'. 

 

In modern changing labour market, new forms of work are emerging and people change more frequently between jobs and employment statuses. The share of non-standard employment and self-employment is increasing in the labour market, especially among young people. Due to their employment status, persons such as those in non-standard employment and self-employment have insufficient access and are, as a consequence, exposed to higher economic uncertainty and lower protection against social risks.

 

Making the most of the future, the Commission is asking the opinion of the social partners by launching the second stage of the social partner consultation. The social partners now have seven weeks to let the Commission know if they are willing to negotiate. In parallel, a wider public consultation is also open to collect the views of all relevant stakeholders such as public authorities, companies, the self-employed, platform workers and the civil society.

http://www.socialsummit17.se/


Robotics’ threat

Leading economists in the world have already pointed out at all sorts of automation’s threats to employment and humans’ lives. And so did political elites at the 2016-Davos’ forum arguing about the 4th industrial revolution with robotics, big data and artificial intelligence’s effect.


Robotic is becoming a major issue; one of the first studies in the US have “quantified” large, direct and negative effects of robots as the issue is most affecting manufacturing. According to two researchers, Daron Acemoglu of M.I.T. and Pascual Restrepo of Boston University, for every robot per thousand workers, up to six workers lost their jobs and wages fell by as much as three-fourths of a percent. The analysis is significant in a sense that researchers had been quite sanguine about the effect of technology on jobs.


The researchers argued that it was likely that increased automation would create new, better jobs, so employment and wages would eventually return to their previous levels. Just as cranes replaced dockworkers but created related jobs for engineers and financiers, the theory goes, new technology has created new jobs for software developers and data analysts.

 

The effect of industrial robots in local labor markets in the US has shown that robots have led to about 670,000 lost manufacturing jobs between 1990 and 2007; and that “lost figures” would rise because industrial robots are expected to quadruple. Source:

https://www.nytimes.com/2017/03/28/upshot/evidence-that-robots-are-winning-the-race-for-american-jobs.html?_r=0


Global elites’ reaction

At the 2017 annual gathering in the Swiss resort of Davos, global elites debated “nicer capitalism” vision and options in defusing populism. In many states around the world, growing number of people have been enraged at economic, financial, industrial, etc. elites in their efforts to use globalisation in their favour. This wave of anger has delivered Donald J. Trump to the White House, sent Britain toward the EU’ exit and brought numerous leaders to power in Europe on the waves of populism.  Generally, these trends can threaten the future of global trade; however, global elites have enjoyed positive aspects of globalisation for economic policies in recent decades with a growing share of wealth landed in the coffers of people having bank accounts in off-shore states, while earnings stagnated and declined for low- and middle-class households.  

 

Negative effect is seen in the decline of trade unions: in 2016, only 10.7 percent of American workers were represented by a union, down from 20.1 percent in 1983, according to the US Labor Department data. Many economists see this decline as a key to a chance for employers to pay lower wages, phenomena familiar to EU states as well.  

 

Discussions are going on around the world and in the EU focused on finding best ways to “reform capitalism,” make globalization work and revive the middle class. Worries about shortcomings of globalization are numerous: from deepening anxieties of the middle class in many developed economies to threats of trade protectionism, which hit economic growth, to fears that robots are on the verge of sowing mass unemployment, etc.

 

What is left for “response” to globalisation’s threats is discussing more entrepreneurialism, mindfulness training and education focused on the modern ways of technology, i.e. 4th industrial revolution.

 

The global elites’ message is: people who have not benefited from globalization need to try harder to emulate those who have succeeded. However, any sincere suggestion would have to include items that involve transferring wealth and power from elites to ordinary workers via more progressive taxation, increased bargaining rights for labor unions, and greater protections for labor in general, etc.


Weak wage’s issue

Economists puzzle over the fix for persistently weak wage growth: even in reach Norway, global forces are exposing growing numbers of workers to new forms of competition that limit pay. The threats are evident: immigrants from Eastern Europe are taking jobs, temporary positions are increasing. In theory, Norwegian workers are insulated from such forces. Under Norway’s elaborate system of wage negotiation, unions, which represent more than half of the country’s work force, negotiate with employers’ associations to hash out a general tariff to cover pay across industries. As companies become more productive and profitable, workers capture a proportionate share of the spoils.

 

Employers are supposed to pay temporary workers at the same scale as their permanent employees. In reality, fledgling companies have captured slices of the construction industry, employing Eastern Europeans at sharply lower wages. Some firms pay temporary workers standard wages but then have them work overtime without extra compensation. Unions complain that enforcement is patchy. Source: The New York Times, 7.x.2017, at: https://www.nytimes.com/2017/10/07/business/unemployment-wages-economy.html?_r=0

 

Globalization and development professor at Oxford University, Ian Goldin once said: “You can’t stop managing an entangled environment by disconnecting. This is the fundamental mistake of Brexit, of Trump, and of so many others. We are not simply connected; we are entangled: our lives, our destinies are intertwined. What happens in China, what happens in Indonesia, what happens in India, what happens across Europe, and what happens in North America, across Africa and Latin America will affect all of us in dramatic new ways. The idea that somehow we can forge our future in an insular way, even for the biggest countries like the U.S., is a fantasy. We need to make the choices to ensure that globalization is sustainable, that connectivity is sustainable, that we deal with the intractable problems that are worrying people”. Source:  

https://www.nytimes.com/2017/01/18/business/dealbook/world-economic-forum-davos-backlash.html


Basic income’s issue: a popular idea

As a concept, basic income has been discussed in various levels for centuries, gaining adherents across a strikingly broad field of ideological spectrum, from the English social philosopher Thomas More to the American revolutionary Thomas Paine.

 

The populist firebrand Louisiana governor Huey Long, the civil rights icon Martin Luther King Jr., and the laissez faire economist Milton Friedman would presumably agree on “small version”, yet all advocated some ideas of basic income.

 

In a clear sign of its modern-day currency, the International Monetary Fund, which is far from any utopian ideas, recently explored basic income as a potential salve for economic inequality.

See: http://www.imf.org/en/Publications/FM/Issues/2017/10/05/fiscal-monitor-october-2017

 

Stark reality of globalization is that bargaining rights for workers are reducing and corporations have taken advantage of it. In a new economic order based on globalisation, working people are at the mercy of their employers, as trade unions are losing bargaining’s abilities and clout. Companies are relying on temporary and part-time workers while deploying robots and other forms of automation in ways that allow them to produce more without paying extra. Globalization has intensified competitive pressures, connecting factories in Asia and Latin America to customers in Europe and North America. For example, in Norway and in Germany, modest pay raises are the results of coordination between labor unions and employers to keep costs low to bolster industry. That has put pressure on Italy, Spain and other EU states to keep wages low so as not to lose orders. But the trend also reflects an influx of dubious companies staffed by immigrants who receive wages well below prevailing rates, undermining union power.

Famous Nordic model places a premium on social harmony; it underscores the global forces that are at work. Jobs that require specialized, advanced skills are growing along low-paying and low-skill jobs. Positions in between are under perpetual threat. Latest crisis accelerated the adjustment, the restructuring away from goods producing jobs and more into the service sector; many of those who lost jobs and went back to work landed in jobs that pay less. Source:

https://www.nytimes.com/2017/10/07/business/unemployment-wages-economy.html?_r=0

 

The idea of universal basic income is gaining attention in many countries as a proposal to “soften the edges” of capitalism. Though the idea’s details and philosophy vary from place to place, the general notion is that the government hands out regular checks to everyone, regardless of income or whether people are working. The money ensures food and shelter for all, while removing the stigma of public support.

 

Some position basic income as a way to let market forces work their ruthless magic, delivering innovation and economic growth, while laying down a cushion for those who fail. Others present it as a means of liberating people from wretched, poverty-level jobs, allowing workers to organize for better conditions or devote time to artistic exploits. Still others see it as the required response to an era in which work can no longer be relied upon to finance basic needs.

 

Advocating universal social safety net, one has to see that basic income gives increasing precariousness of employment the worker decreasing their willingness to work.

 

The universal basic income is clearly an idea with momentum: for example, in 2017 Finland started a two-year national experiment in basic income.

https://www.nytimes.com/2016/12/17/business/economy/universal-basic-income-finland.html

 

In the United States, a trial was completed in Oakland, Calif., with another one in nearby Stockton, a community hard-hit by the Great Recession and the attendant epidemic in home foreclosures. See: http://www.nytimes.com/2013stockton.html

 

The Canadian province of Ontario is enrolling participants for a basic income trial. Several cities in the Netherlands are exploring what happens when they hand out cash grants unconditionally to people already receiving some form of public support. A similar test is underway in Barcelona, Spain, etc. A nonprofit organization, GiveDirectly, is proceeding with plans to provide universal cash grants in rural Kenya. See: http://www.nytimes.com/2013stockton.html

Not everyone loves the basic income idea: conservatives fret that handing out money free of obligation will turn people into dole-dependent slackers.

 

In the US context, any talk of a truly universal form of basic income also collides with arithmetic. It goes the following way: give every American $10,000 a year (a sum still below the poverty line for an individual) and the national economy’s tab runs to $3 trillion a year. That is about eight times what the US now spends on social service programs.

 

Labor-oriented economists in the US are especially wary of basic income, given that the American social safety programs have been significantly trimmed in recent decades, with welfare, unemployment benefits and food stamps all subject to a variety of restrictions. If basic income were to replace these components as one giant program — the proposal that would appeal to libertarians — it might beckon as a fat target for additional budget trimming.

 

“Tens of millions of poor people would likely end up worse off,” declared Robert Greenstein, president of the Center on Budget and Policy Priorities, a Washington-based research institution. If the US political culture would be more like the one in Western Europe, the universal basic income’s idea might be a real possibility in the US. Thu some advocates for working people’s rights dismiss basic income as a wrongheaded approach to the real problem of not enough quality paychecks.

See more on: https://www.cbpp.org/poverty-and-opportunity/commentary-universal-basic-income-may-sound-attractive-but-if-it-occurred

 

Nobel laureate economist, Joseph E. Stiglitz is closer to the US thoughts about basic income meaning that people want to work, they don’t want handouts.

 

Yet some of the basic income experiments now underway are engineered precisely to encourage people to work while limiting their contact with public assistance.

 

For example, Finland’s trial is giving jobless people the same amount of money they were already receiving in unemployment benefits, while relieving them of bureaucratic obligations. The bet is that people will use time now squandered submitting paperwork to train for better careers, start businesses, or take part-time jobs. Under the system the trial replaces, people living on benefits risk losing support if they secure other income.

 

In short, basic income is being advanced not as a license for Finns to laze in the sauna, but as a means of enhancing the forces of creative destruction so central to capitalism. As the logic goes, once sustenance is eliminated as a worry, weak companies can be shuttered without concern for those thrown out of work, freeing up capital and talent for more productive ventures.

 

The trials in the Netherlands, conducted at the municipal level, are similarly geared to paring bureaucracy from the unemployment system.

 

Silicon Valley has embraced basic income as a crucial element in enabling the continued rollout of automation. While engineers pioneer ways to replace human laborers with robots, financiers focus on basic income as a replacement for paychecks.

 

The experiment in Stockton, Calif., (set to become the first US city’s government to test basic income) is underwritten in part by an advocacy group known as the Economic Security Project, whose backers include the Facebook co-founder Chris Hughes. The trial is set to begin in 2018, with an undisclosed number of residents to receive $500 a month.

See more at: https://economicsecurityproject.org

 

The trial in Oakland was the work of Y Combinator, a start-up incubator. Its researchers handed out varying grants to a few dozen people as a simple feasibility test for basic income.

 

The next phase is far more ambitious. The Y Combinator researchers plan to distribute grants to 3,000 people with below-average incomes in two yet undisclosed American states. They will hand out $1,000 a month to 1,000 people, no strings attached, and $500 a month to the rest, allowing for comparisons in how recipients use the money, and what impact it has on their lives.

One key element of the basic income push is the assumption that poor people are better placed than bureaucrats to determine the most beneficial use of aid money. Rather than saddle recipients with complex rules and a dizzying array of programs, better to just give people money and let them sort out how to use it. References in: https://www.nytimes.com/2017/11/15/business/dealbook/universal-basic-income.html

 

Distribute grants is a central idea of GiveDirectly’s program in Kenya, where it began a pilot study in 2016 in which it handed out small, unconditional cash grants (about $22 a month) to residents of a single village. The program is now expanding its sights, with plans to hand out grants to some 16,000 people in 120 villages.


Conclusion

From a purely academic and researcher’s point of view, these are going to be quite early days for basic income’s ideas. Serious experimentation and assessment are needed as well as serious investments to a new model public assistance to employment.


A definite answer, for example has to include all effects on a more active role of state and public sector in modernized and evolving labour relations.


Yet from a political standpoint, basic income idea appears to have found its momentum. On one side, there is an anxiety to “combine working poor” with those of the wealthy; on another, still growing inequality on all fronts giving the elites some potentials of “wielding pitchforks”.


Most important is that the interest to the basic income’s issue is exploding all over the world; and the expected outcomes seem to be extraordinarily fertile for new approaches to universal social safety net ideas. What could be more important for the three Baltic States?! 






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