Will a universal basic income make the U.S. better?

To better understand the future of our economy and work, especially in the wake of globalization and automation, there is a growing body of literature worth paying attention to.

One recent book that deserves attention is “Raising the Floor: How a Universal Basic Income Can Renew our Economy and Rebuild the American Dream” by Andy Stern. As the former president of the Service Employees International Union (SEIU), Stern grew SEIU by 1.2 million members to make it one of the fastest growing unions in the world – an anomaly in an increasingly non-unionized economy.

Drawing on these experiences as well as a wealth of data, Stern makes a persuasive case for how rapidly our economy is changing.

Until 2000, there were four key indicators of economic growth: Gross Domestic Product (GDP), productivity, employment, and wages. Yet at the turn of the century, Stern argues, there was a “great decoupling” between GDP and productivity from employment and wages. For example, in 2014 median income was $2,500 lower than 1999 when adjusted for inflation even though GDP, corporate profits, and the S&P index were all up significantly.

This shift is related to the changing nature of work. In 1960, the top three employers were IBM, AT&T and Ford. Today they are Walmart, McDonalds and Yum! (owners of KFC, Taco Bell, and Pizza Hut). In 2009, 24 percent of all jobs in the U.S. were low-wage. By 2020, the Bureau of Labor Statistics predicts 48 percent will be low-wage, and 75 percent of all new jobs will be low-wage.

Full-time jobs are in decline while part-time work is increasingly defining our labor landscape. Today, 34 percent of our workforce is freelance. By 2020 it is estimated that the majority of the workforce will be part of the “gig economy” – working several different part time gigs to get by (such as an Apple “Genius Bar” employee who gets paid $11.25 per hour while helping sell $472,000 worth of product annually). In fact, the International Labor Organization estimates that only 25 percent of the world’s jobs are permanent. Fully 37 percent of our potential workforce (56 million people) is not working or looking for work and there are now more men on disability insurance than working in manufacturing jobs.

Though globalization plays a role, a major driver for the reduced number of jobs and stagnating income is productivity gained through technology. In 2013, an Oxford University study estimated that 47 percent of current U.S. jobs are at risk of being automated. A recent study by consulting firm McKinsey says that 45 percent of all tasks (or $16 trillion in wages) being done by humans can be automated with available technology. With advances in artificial intelligence these numbers are expected to jump dramatically. The advent of driverless cars and trucks, for instance, stands to eliminate the top employment engine in 29 states.

Automation is not just a threat to low-wage manual labor. From hospitals to law firms to newspapers, the “digital revolution” is shifting from empowering humans to replacing them.

So how should we prepare for this future? Stern thinks there is merit to short-term fixes such as raising the minimum wage and investing in better education/workforce pathways (as we have written about) as well as medium-term strategies like a massive infrastructure jobs stimulus. But he argues that these don’t fix the long-term structural challenge of under-employment.

The real solution, he says, (along with a growing bi-partisan chorus), is to create a guaranteed Universal Basic Income (UBI) of $12,000/year for every adult age 18-64 and seniors earning less than $1,000 a month on social security. Estimated to cost approximately $2.7 trillion annually, it could be paid for by eliminating 126 welfare programs (and the costly bureaucracy to manage them), ending tax deductions that disproportionately benefit high earners (such as mortgage interest), and a value add tax of 5 to 10 percent on the consumption of goods and services.

There is precedent for UBI. In 1996, the Eastern Band of Cherokee Indians in North Carolina opened a casino and distributed $6,000 annually to its 8,000 tribal members. According to a Duke study, poverty declined by half, crimes declined, graduation rates improved, and mental-health and substance abuse issues declined.

Whether UBI would work nationally is clearly open for debate. What is not debatable, is that the future of work and our economy is rapidly changing. We need some creative thinking to help us transition successfully to this new reality.

This story was originally published April 22, 2017 at 4:26 PM with the headline "Will a universal basic income make the U.S. better?."