Report Open Access

Basic Income, Automation, and Labour Market Change

Luke Martinelli

The relationship between technology and support for basic income – via the intervening causal mechanism of labour market change – is an obvious topic to examine in the current era of digitisation. Popular accounts suggest that basic income is practically inevitable as automation renders redundant an increasing proportion of the labour force. Basic income turns a dystopian future of mass unemployment into a paradise of robot-assisted leisure.

Recent years have seen significant investments of ‘political capital’ in basic income, with ongoing and upcoming experiments in a number of countries, and mainstream parties (e.g. Labour in the UK) conducting consultations into the merits of the policy. Labour market change, including but not limited to the spectre of technological unemployment, appears at least partly responsible for driving increased public and media interest in the idea.

In this context, several crucial questions emerge:
1. Is basic income a feasible solution to forthcoming dynamics of labour market change?
2. How do automation and associated labour market risks affect public opinions towards basic income, and the potential for constituencies of support to coalesce around the idea?
3. Is basic income affordable, and how do its distributional implications compare with pre-existing configurations of the welfare state?

This report takes a comparative political economy approach to these questions. The political economy approach is concerned with the patterns of winners and losers that basic income might generate, and therefore, the potential emergence of constituencies and coalitions of support and opposition. In this sense, the research aims to contribute to the literature on electoral dynamics, strategic party behaviour and the (determinants of) voter preferences, and more comprehensive integration of the latter within institutional frameworks of analysis (e.g. Häusermann et al., 2013; Beramendi et al., 2015; Manow et al., 2018). In terms of the comparative focus, the IPR’s research suggests that arguments for (different forms of) basic income are likely to vary across specific welfare systems. Following Martinelli and De Wispelaere (2017), the framework has two core conceptual features. Firstly, the idea of basic income as a simple, unified concept is rejected in favour of an understanding of basic income as a multidimensional policy proposal that varies extensively in terms of goals, design features, and implementation trajectories. Secondly, incorporating the comparative literature on the politics of the “new welfare state”, the role of pre-existing welfare state constellations and trajectories in determining congruence with basic income proposals, and thus structuring (delimiting and potentiating) basic income’s political prospects, is explored. The upshot is that welfare states vary with respect to their functions and goals, the structure of existing welfare provisions (and thus, the scope for adjusting them to generate fiscal space to fund the basic income), and the extent to which they alleviate poverty and inequality. Countries also diverge in relation to existing labour market challenges, and the extent of the threat posed by automation. All of these factors are likely to affect the appropriateness of basic income as a response to automation and labour market change in different welfare state contexts.

Ultimately, feasibility depends upon the priority afforded to different goals: the levels of expenditure – and the associated tax burdens – deemed acceptable to attain given improvements in rates of poverty and inequality. Feasibility also depends upon the level and structure of existing provisions, how effectively they tackle poverty and reduce inequality, and the extent to which their adjustment or elimination translates into household losses for specific groups, such as low-income households, pensioners, and unemployed and disabled people. In the context of ongoing labour market change, and if the labour share of value is subject to long-term decline, it is difficult to see how countries that undergo the most profound and widespread risks will be able to afford a basic income, even as they tend to have the highest levels of support for one. Indeed, the uneven nature of technological change suggests that capacities to raise revenue may be diminished in precisely the countries and regions in which the need to adjust to new forms of labour market dysfunction will be most profound.

Generous basic incomes require rather large tax increases and/or cuts to existing expenditure. In either case, powerful constituencies would oppose reforms. This is not to suggest that basic income is not feasible in any of these contexts. A modest, partial basic income is the most realistic option, perhaps as a stepping stone to a more generous full basic income, as most progressive advocates accept (Van Parijs, 2018). Given that basic income is motivated in part by a desire to drastically streamline the benefits system, such schemes may exhibit relatively favourable combined fiscal and distributional outcomes but fall short of achieving some of basic income’s implicit goals and would hardly ‘solve’ profound labour market dysfunction or even very drastically reduce poverty and inequality. Despite these inevitable concessions, such schemes would still require politically difficult tax rises. Furthermore, if the issue is adjustment to new labour market conditions rather than a ‘post-work future’, it is not clear that basic income – or any form of compensatory welfare provision – would be the most appropriate solution. Other policies could be more politically viable given the large fiscal burdens that basic income entails. These include policies associated with the ‘social investment’ agenda, such as lifelong skills development policies, and policies aimed at generating high quality jobs. More generally, inequality between labour and capital would need to be tackled through a combination of measures aimed at the root causes: strengthening labour market institutions; regulating and taxing corporations more effectively; and democratising ownership of capital more generally. Such efforts are not necessarily opposed to basic income, and indeed would arguably be more effective in combination with the latter.

As most progressive advocates accept, basic income is not a ‘silver bullet’ (Haagh, 2019). It would still arguably be necessary to address labour market dysfunction and growing inequality in other ways even were a basic income to be established, and to retain much of the apparatus of existing welfare provisions. Advocates should continue to align themselves with broader progressive policy goals and counter narratives that basic income is a replacement for a comprehensive welfare state, strong labour market institutions, capacitating social services, and broader efforts to redistribute income and wealth. If public demand continues to grow, and advocates can coalesce behind modest and realistic proposals, then basic income could well be part of a broader package of measures to address forthcoming dynamics of labour market change.

JEL Classifications: H55 (Social Security and Public Pensions); I38 (Government Policy; Provision and Effects of Welfare Programs); J24 (Human Capital; Skills; Occupational Choice; Labor Productivity); P16 (Political Economy).
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