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Saturday, November 19, 2016

The Guaranteed Annual Income

Senator Hugh Segal, badly in need of a haircut.

The American working class is in full revolt. This is for many reasons, but one big one is economic.

The current popular surge for Brexit, for Donald Trump, against immigration, seems at least largely due to the concern that the working class is losing job opportunities.

Shutting the doors to immigration will not work. Neither will trade protectionism. Dog, that’s the wrong tree.

Building walls against newcomers only means jobs will move to other countries, as the developed world becomes less competitive. If you must pay a minimum wage of $15 in Canada, but you can get a Chinese or Indian worker to do the same work for $5, it is hard to see how to keep the work, or the money, in Canada. Better for our economy to have the jobs here, however low-paid.

Nor will trade protectionism work. It will raise prices for consumers, which will be a net loss. Only some of us are producers all of us are consumers. And it cuts us off from markets. You can only go so far on everyone taking in everyone else’s laundry.

Worse, even if these measures worked to protect the unskilled from globalism, they would be doing nothing for the real problem: automation.

In the past, improvements in technology have always led, overall, to more, not fewer jobs. The lower cost of production was cashed in mostly on a higher standard of living, with everyone buying more stuff. But there may be a ceiling to that: economists talk of the declining utility of income or wealth above a certain point, and I am not certain we have not reached it, at least in the developed world. My kids are not too interested in getting any more toys. Too much is available free on the Internet that is a lot more fun.

The same could be said for my old addiction to magazine, newspapers, and books.

Elon Musk, who tends to be a bit of a visionary, suggests most jobs will soon be take over by machine. So does this recent piece. Robots can do the same manual labour humans do at $2 an hour.

Nor can we escape this by concentrating on services rather than manufacturing.

The single most common job in North America is truck driving. That is already obsolete. Self-driving trucks are available now. Taxi driving is also gone. Cashiers can be easily replaced, and already have been in some places. In China, they have begin putting up buildings with 3-D printers.

Its not just blue-collar work either. The bulk of legal work is a matter of consulting past cases, or thumbing through law books. Infinitely easier by computer. The bulk of medical work is diagnosis. Easy, and more accurate, by computer. Bookkeeping, accounting? Easily handled by software. And, of course, the economies of automation here are much more compelling.

So now what happens? After all, the wealth is still there, and growing. It is just all in the hands of investors, not of labour.

The great political danger, too, is that the American working class, having put their faith in Trump's solution of lower immigration and trade protectionism, will not be terribly happy when they discover it makes things worse instead of better. They are mad now, and in a mood to disrupt. Imagine what it will be like then, if nobody has any solutions for them.

Welding robot.

Enter, perhaps, Hugh Segal’s proposal for a Guaranteed Annual Income.

I especially think right-wing parties should embrace it and put it in the forefront of their programmes.

The claim that the right wing does not care about the poor is a powerful argument against the right. It is time to address this. Give a strong push to the GAI idea, and call the left’s bluff.

In principle, GAI would cost less than what we are doing currently. Now, most of the money that is supposed to go to the poor instead goes to salaries for bureaucrats to administer the complex programmes. By simplifying the process, just giving money instead of trying to run the lives of the poor, we can let the poor live better for less. The money gets spent on more important things, and distortions in the market, always inefficiencies, are removed.

I have seen, as an argument against the plan, that it would only cause inflation in the price of basic goods like rent and food basics, so that the poor would end up no better off. But that is a problem with the present system, which the GAI would fix. Inflation happens when the seller can be confident of getting the asking price however high. As when the government commits to pay for housing for the poor, or medicine, or tuition. It is then a sweetheart deal, crony capitalism. It happens even if the government should commit to pay for a specified service up to a certain amount. The price will automatically rise everywhere to that amount.

But if the government simply gives the poor an adequate income, this will not happen, because the free market remains. Individuals, given the choice of renting a comparable apartment at either $600 or $800 per month, are naturally going to choose the $600 offer, and use the additional money on some other want or need. There remains a competitive advantage in building apartments and renting them for $600.

This incentive to go for the cheapest option, of course, declines with greater overall wealth. Then one can indulge in trivialities like preferred colour or neighbourhood.

In other words redistributing to the poor, instead of giving it to bureaucrats, should serve to lower the price of essentials, not raise it.

The next objection is more serious: that many, given an adequate guaranteed income, will stop working. That may be so—this is the main issue any pilot should be trying to determine. However, the incomplete evidence from an earlier trial in Manitoba is that it does not happen. The only people there who stopped working were mothers with small children—and there is a good case that society is better off having them at home in any case. It is an investment in our future.

And here, we should not compare the GAI in its effects with perfection, but with what we have at present. Our current system makes it difficult for those on social assistance to take work: they usually lose their social assistance. And it is not easy, if necessary, to get back on it again. Bureaucracy.

A well-crafted GAI could still make taking a job worthwhile—taking back, say, only fifty cents for each new dollar earned, up to a ceiling. If it did, there is reason to believe almost everyone, given the chance, would take one. Not only do most people find having more money better than having less; most people are not content having nothing in particular to do all day.

In any case, once again, this mat not even be an issue: there may be no more jobs to be had.

Would that be so bad? The ancient Greeks believed leisure was essential to the fully human life. That after all, was why God made slaves. This was also the foundational thought of feudalism and European chivalry. To work for a living was beneath the dignity of a gentleman.

We might all then devote ourselves to what life is really supposed to be about: to the humanities, so-named for a reason. And to the creative arts, the one human activity at which machines cannot replace us.

A renaissance of the humanities and the arts might be the single greatest possible improvement in our general quality of life. We do pretty well already on material things.

At the same time, if any other jobs remain at which humans might be of some special worth, those who already had their basic needs provided for might be happy to take them for a small consideration. They no longer need to make the proverbial “living wage.” Making our industries all more competitive.

There are worse futures to fear.

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