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21st century governance challenge

Is it Time for Guaranteed Annual Income?

By July 18, 2014No Comments

As we move further into the 21st century, a technologically-driven transformation is starting to take hold that will challenge our current economic model for distributing income in society.

The key driver for this transformation is the rapid growth of machine intelligence, which is now poised to radically reduce capital’s dependence on human labor. According to David Autor, an economist at the Massachusetts Institute of Technology who has studied the loss of middle-class jobs to technology, “It will be harder and harder to find things that people have a comparative advantage in versus machines.”

The impact of replacing workers with machines, coupled with a globalized labor market, is already having a profound impact on the workforce in the OECD, displacing millions of middle class jobs. In the US, half the 7.5 million jobs lost during the Great Recession were in industries that pay middle-class wages, ranging from $38,000 to $68,000. Only 2% of the 3.5 million jobs gained since the recession ended in June 2009 are in mid-pay industries, while nearly 70% are in low-pay industries. Labor force participation has fallen steadily, and only 62% of Americans over 16 are now employed in the workforce.

Among the challenges facing governments will be how best to ensure income distribution in society where paid employment may no longer be the primary means for income generation for the majority of citizens. What will drive economic growth and demand if income from labor decreases and the middle-class consumer economy stagnates? Can we replace the postindustrial society with a new “creative” economy and generate a new wave of middle-class jobs? If so, is it realistic to think we can prepare everyone in an aging workforce for this economy, or do we need to rethink how we distribute income so that everyone has the means to meet basic needs and ensure their well being? Is it time to bring ideas like a guaranteed annual income back on the public policy table and undo the tangled web of government agencies managing a myriad of income transfer programs?

In response to these questions, we are starting to see more media and public discussion on what the solution should be. One recent opinion piece, Should The Government Pay You to be Alive?, provides a strong argument for a fundamental rethink of how we distribute income to those without work or in need.

To learn more about HMI’s position on this issue, click here.