The brave new world of artificial intelligence is at our doorstep. The technology promises to revolutionize the workplace. However, some fear that AI will create mass unemployment.
OpenAI CEO Sam Altman of the Silicon Valley elite argues that the United States should implement a program of universal basic income to address the problem of unemployment. Populists from the Left and Right also advocate a UBI program to reduce income inequality for low-wage, low-skill workers further, but the majority of voters oppose the introduction of a UBI system.
With UBI, everyone would receive a basic minimum income, typically $12,000 a year or $1,000 a month. In theory, UBI would help everyone live more easily, free of worries about hunger, shelter, healthcare, and the friction of everyday life. Of course, UBI advocates don’t seriously address the matter of cost, especially in the context of the existing federal deficit of about 6% of GDP.
Without very large tax increases, UBI would break the Treasury. Raising taxes and increasing the role of government in our daily lives would be a significant drag on economic growth and impinge on our liberty. Moreover, several recent academic studies demonstrate that guaranteed income transfers, which are similar to UBI proposals, modestly disincentivize work and change nothing about human behavior.
Emotional well-being does not change. Healthcare problems continue. UBI would be a disincentive for hard work and grit. National UBI would harm the economy and society.
In Compton, California, over a two-year period from 2021 to 2023, 695 households received income transfers averaging about $500 per month. Researchers said that “receiving guaranteed income had no impact on the labor supply of full-time workers, but part-time workers had lower labor market participation by 13%.” In other words, people in the program who had jobs kept them, but people who worked part time used part of the income transfers to work less. The labor supply was reduced. Recipients in the program did pay down debt. Otherwise, there were “no overall effects on indices of psychological and financial well-being.”
Nothing fundamentally changed for the households participating in the program. The participants just received free money.
Other recent research finds the same conclusions. People who receive cash transfers work less. Academics studied 1,000 people with an average annual household income of $29,000 living in Illinois and Texas who received income transfers of $1,000 per month for three years. The cash transfer recipients in the program worked less. They reduced their earned income by $1,500 each year. The extra time gained because they worked less was used primarily for leisure. For example, a participant in the program was a single mother with eight children. With the added income, she worked less and spent more time watching movies.
In America, we have rights and duties. Our fundamental right is liberty. Our basic duty is the responsibility to self, family, and community. Responsibility is derived from modeling behavior. Children who grow up in a traditional two-parent household, where at least one of the parents is working full time, model responsible behavior.
The data are clear: Rather than focusing on UBI to address poverty or social meaning, the government, through schools, should teach the Success Sequence: graduate from high school, get a good job, and then get married and have children. Essential to the Success Sequence is the commandment not to have children out of wedlock. People who follow the sequence are not poor: Their poverty rate is just 3%.
There is no historical evidence to support the view that AI will make work obsolete. In 1900, 40% of people worked in agriculture. Today, that number is about 1%. Agriculture is more productive with dramatically fewer workers. Creative destruction is necessary for long-term economic growth and shared prosperity. AI will open up new employment opportunities. Workers with skills in science, technology, engineering, and math will be in demand. Society should focus on improving America’s education system so that children are prepared for the AI world. That is the magic of capitalism. Jobs are destroyed, and new jobs are created. The economy becomes more productive. Wealth increases. Everyone benefits.
It is also a fallacy that poverty is a continuing affliction of scale within society. Professors Bruce Meyer and James Sullivan have written extensively on real poverty, as defined by consumption. Consumption-based measures of poverty demonstrate that the true poverty rate in the U.S. is under 5%, and that very small part of the population that is truly poor is principally afflicted with mental illnesses. This group of the population needs healthcare, not welfare.
Top line: People do not like free riders. UBI transfers would increase free riding. That is evident from the above-cited National Bureau of Economic Research data. Recipients of income transfers work less, and their fundamental states of well-being do not change. They get money from someone else: hardworking taxpayers.
Research from the kibbutz communities of Israel shows that free riding is commonplace. Some members of the kibbutz are less responsible, letting others do the heavy lifting. The research shows that the more responsible and ambitious who do the heavy lifting leave the kibbutz. But free riding would be commonplace with UBI. The members of society who pay for the income transfers work more so that UBI recipients can work less. Social and ethical responsibility would be undermined.
America’s problems with relative poverty can be attributed to the disintegration of family and community. In 1960, before the War on Poverty, 95% of children were born in a traditional two-parent household. Today, over 40% of children are born out of wedlock. Being born out of wedlock is a highway to a low-income future. An out-of-wedlock birth is a marker for future incarceration. A child born out of wedlock is 2.5 times more likely to be incarcerated than a child born to married parents.
Culture determines the out-of-wedlock birth rate. The out-of-wedlock birth rate is highest in black communities of poverty, whose residents are trapped by welfare. The out-of-wedlock birth rate in these communities is 70%. The out-of-wedlock birth rate for Asian Americans is around 10%. To reduce relative poverty, culture must change. Again, however, UBI would not change culture.
Professor Raj Chetty of Harvard University is arguably the country’s preeminent expert on the culture of poverty and how to escape it. His research shows that people who move at a young age from a community of poverty to an aspirational community escape poverty. An aspirational community is a community in which adults work. Children see adults going to work every day. When such children become adults, they model behavior. They go to work.
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By contrast, children who grow up in a community in which many adults don’t work model that behavior. A national UBI program would further entrench the culture of poverty.
We should not pursue a flawed UBI policy as a reflexive solution to a dramatic but broadly exciting and opportunity-based technological and economic revolution.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be reached at [email protected].
This article was originally published at www.washingtonexaminer.com
