Preparing for a Future with Automation: Debating Basic Universal Income in Finland and Beyond
In the face of increasing automation, the idea of a basic universal income (UBI) has gained traction. This concept, pioneered in Finland, is being discussed as a potential solution to the challenges posed by robotics and artificial intelligence taking over human jobs. However, the viability of such a system is a topic of much debate among economists and policymakers.
User-Generated vs. Mechanized Labor
As robots and AI can perform a wide range of jobs, the future of work is approaching a critical turning point. If we are to prepare for this transition, a phased approach to social security reform is suggested. One potential solution could involve shifting from current social security systems to individual annuity trust funds, which would be invested in large index funds. This seed system would allow each person's fund to grow, with maximum limits on annual withdrawals from stock dividends only.
This approach aims to ensure that every individual eventually achieves part ownership in companies that use robots to maximize profits, essentially eliminating human labor. By investing in this manner, individuals could secure a steady stream of income through dividends, potentially enabling everyone to live off the cash dividends in the future.
Stock Market Dynamics and Wealth Distribution
The current dynamics of the stock market suggest that a small percentage of individuals already benefit exponentially from their investments. According to data, 57% of Americans have no stock market investments, while 43% are watching their investments grow at an extraordinary pace. Assuming that each and every trust fund can continue to grow exponentially without the need for active management, the value of the stock market could reach unimaginable heights in the future.
Given the current trajectory, the trillions of dollars invested in the stock market are on track to double in value multiple times over the next century. By the year 2122, the $30 trillion in stock market value could grow to over 1430 quadrillion dollars. This scenario, while theoretical, underscores the potential benefits of such an investment strategy.
Obstacles and Alternative Solutions
While the idea of UBI holds promise, it is not without significant challenges. Some argue that reducing the labor supply through border closures or eliminating unnecessary licensing requirements could inadvertently exacerbate unemployment issues. Furthermore, reducing employer mandates to lower the cost of labor might actually encourage more companies to automate, leading to fewer jobs.
A more comprehensive approach could be to replace the minimum wage with a combination of a UBI and non-income-tested assistance (NIT). A monthly UBI of $240 could replace several social safety nets like unemployment insurance, SNAP, TANF, and housing assistance. To fund this, tax rates could be increased from 15.2% to 30% on the first dollar earned.
Conclusion
The implementation of UBI in Finland and beyond remains a topic of speculation and debate. While the potential benefits of a phased shift to annuity trust funds and individual ownership are significant, the broader economic landscape presents both opportunities and challenges. As we move towards a future dominated by automation, policymakers must carefully weigh these factors to ensure the well-being of their citizens.