February 27, 2017      

As fears of automation continue to be stoked worldwide, some pundits have responded with proposals for a universal basic income. But what are the numbers behind UBI schemes, and do they add up?

Parts of the news media and politicians have expressed concerns that robots and artificial intelligence will replace millions of jobs in the coming years. Automation threatens an average of 57 percent of all jobs in Organization for Economic Cooperation and Development (OECD) member countries, according to a report from the University of Oxford.

The OECD’s members include Australia, Canada, Germany, Israel, Japan, South Korea, and the U.S. The university and Citigroup Inc. published the widely cited study in January 2016.

If that’s not enough to jolt you, then look at Africa. The same Oxford report predicted that 85 percent of jobs in Ethiopia and more than 50 percent of jobs in Angola, Mauritius, South Africa, and Nigeria are susceptible to being automated.

How might different nations deal with millions of people put out of work by automation, and what are the social, economic, and geopolitical ramifications? More immediately, how are governments responding with UBI proposals, and how will these affect robotics businesses?

Business Takeaways:

  • All countries, regardless of their socioeconomic status, supposedly face a high risk of automation. For example, 57 percent of jobs in OECD states could be automated.
  • Many governments are considering universal basic income and new tax policies in preparation for increasing adoption of robotics and AI.
  • Geopolitical consequences of automation could include social instability, bans on automation, and the challenge for robotics businesses to prove such assumptions wrong.

Canadians consider UBI an automation safety net

Pick a spot on the map, and you’ll find a universal basic income scheme. In Canada, the province of Ontario plans to issue a basic income to people living below the poverty line in three cities. The province will choose the cities later this spring. One criterion is how much a city has been affected by losses in manufacturing jobs.

Universal basic income experiments worldwide

Universal basic income is catching on as an idea worldwide. Source: Business Standard

Prince Edward Island, a maritime province in eastern Canada, has approved the development of a UBI program.

Meanwhile, in British Columbia, the Green Party has proposed a basic income for at least five years. UBI proponents are also emerging in Alberta and have existed in Quebec for years.

Is robotics forcing Canadian provinces to investigate universal basic income?

Last June, the Brookfield Institute for Innovation and Entrepreneurship, located at Ryerson University, projected that 42 percent of Canadian jobs are at risk of being automated over the next two decades. The jobs that face the highest level of automation include retail employees, cashiers, and truck drivers, said the report.

Global experiments in universal basic income

It’s not surprising that UBI is popping up in Scandinavia, where the “Nordic Model” tries to combine capitalism and socialism.

Finland recently launched an experiment that will provide 2,000 unemployed people €560 ($594) per month for the next two years — no strings attached. Are fears of robotics and AI behind this experiment? According to one report, 35 percent of jobs in Finland are at risk from automation.

It isn’t just the developed world that is looking at basic income schemes. So are emerging economies. For example, a government report in India has backed the idea of a universal basic income.

During the 2017 World Economic Forum meeting in Davos, Switzerland, an Indian economic official said an estimated 20 million people could receive free money, which could be 1,000 rupees ($15) a month.

What might start out as 20 million people could increase. Consider that almost 30 percent of India’s population, or almost 400 million people, live in poverty. Will the government turn to UBI to bring a large swath of its population into the middle class, boost its global competitiveness, and grow the economy?

Once again, automation may be playing a role here. According to the World Bank, 69 percent of Indian jobs are at risk from being automated. [Editor’s note: The World Bank is also the source of the map above of 2014 global income inequality.]

Similar debates have emerged in South Korea, France, Scotland, Germany, and elsewhere about whether UBI is the right approach. The underlying fear of automation is a major driver in these proposals.

How will business respond to new taxes?

In addition to the governments considering universal basic income and the people who would receive it, there is a third variable: the businesses that would be affected by UBI in unforeseen ways.

Take the Finnish experiment. Even if some of those 2,000 people find jobs, they would still receive their basic income. If people are no longer dependent on their paychecks the way they once were, what are the incentives for productivity?

In Germany, the CEO of Siemens AG has called for a basic income to protect workers who lose their jobs to robots and AI.

Flow of goods, services

Some corporations may be concerned that if there are massive layoffs and people don’t have a safety net, then social instability would follow, creating unfavorable business conditions.

A major concern around UBI is figuring out how to pay for it. Raising taxes on higher-paid workers is politically unpopular, and Bill Gates’ recent proposal for taxing the automated sources of production will no doubt meet resistance from manufacturers, let alone consumers.

In my book, Next Geopolitics: The Future of World Affairs (Technology), I also proposed a productivity tax on companies that use robotics and AI. But might robotics companies face blowback as people shun automation and use humans instead to avoid such a tax?

Much of the promise of reshoring production to the U.S. and Europe relies on the greater efficiencies provided by robotics. Would taxes negate that advantage and encourage manufacturers to continue moving production and outsourcing overseas?

More on Automation and Policy:

Get ready to manage expectations

Worries about job displacement from automation are leading to a range of policy proposals, including universal basic income, production taxes, and some retraining.

Robotics suppliers and end users face two challenges. First, if your employees receive basic income regardless of whether or not they are employed, how will this affect your business?

Second, your robotics products are being used to automate factories and other workplaces. Are you prepared for some governments to outlaw your products in an attempt to protect human workers?

The robotics industry will have to formulate a consistent response to universal basic income and other policies based on perceived threats from automation.