Date: 2024-08-16 Page is: DBtxt003.php txt00017965
Thought Leaders
Andrew Yang
Andrew Yang & The Freedom Dividend ... Is Andrew Yang’s Universal Basic Income Proposal A Good Idea?
Peter Burgess
Andrew Yang & The Freedom Dividend
As we move closer to November 2020, the upcoming presidential election will take center stage, both on traditional and social media, and at water coolers around the nation. Much of the chatter will be a cacophony of rumors, accusations, and on rare occasions, a serious policy debate.
Entrepreneur, attorney and philanthropist Andrew Yang is running for the Democratic nomination. To describe Yang as a dark horse candidate would be an overstatement. In a field crowded with boldface names like Joe Biden, Bernie Sanders and Elizabeth Warren, Yang’s chances appear miniscule.
However, Yang has garnered considerable attention, thanks to a unique signature proposal. He wants to offer a form of Universal Basic Income (UBI), which Yang calls the Freedom Dividend, of $1,000 per month, for every adult citizen. No tests or work requirements would apply to receive UBI. As Yang’s campaign website puts it “..you and everyone you know would get another $1,000/month every month from the U.S. government, no questions asked.” Yang would allow recipients of government cash assistance programs, such as food stamps, Section 8 housing vouchers and Social Security Disability, to choose between receiving existing benefits, or switching to the Freedom Dividend.
Yang proposes paying for the Freedom Dividend through a Value-Added Tax (VAT). VAT provides for taxing each stage of the supply chain, when producing a good for sale.
Let’s say a manufacturer purchases the raw materials to produce a good for $1.00. With a VAT of 10% (that is, 10 cents), the manufacturer would have total expenses of $1.10. Suppose the manufacturer sells the good to a retailer for $4.00. Since 10% of $4.00 is 40 cents, and 10 cents were already paid by the manufacturer, the retailer would pay a VAT of 30 cents. This means that to earn a profit, the retailer must sell the good for more than $4.30. As Yang sees it, VAT would make it more difficult for large companies like Google and Amazon to avoid taxes.
He argues that the total cost of the Freedom Dividend will be reduced, since those on government cash assistance programs will have to choose between continuing to recieve government benefits, and receiving the Freedom Dividend. Some might choose to remain on government funds, reducing the cost of the Freedom Dividend, while others might select the Freedom Dividend, cutting current public assistance expenditures.
Yang also cites a study from the Roosevelt Institute, a progressive economic think tank, suggesting that UBI will stimulate economic activity, since those most likely to benefit from UBI are relatively lower income earners, and so will spend more of their newfound funds on goods and services. Lastly, Yang believes that the Freedom Dividend will reduce some of the social toll of poverty, such as homelessness and incarceration, by putting money in people’s pockets.
Yang argues for the Freedom Dividend in large part due to technological and labor market trends. He points to research indicating that automation has eliminated millions of jobs in recent years, and that 1/3 of all American workers are at risk of losing their jobs in the next 12 years, due to similar trends. With a labor force participation rate of just 63.2% (which is low by historical standards), and 31% of men having left the labor force, Yang sees dark clouds on the horizon.
He fears that innovations like self driving vehicles will put more people, particularly working age males, out of work. Yang cites rising death rates (often due to substance abuse and suicide) amongst white males from working class backgrounds, as just one of several concerning trends. In short, he sees the Freedom Dividend as a potent solution to a growing crisis.
Yang’s signature proposal has drawn considerable attention from some unexpected places. Tucker Carlson of Fox News, who rarely praises Democrats, lauded Yang for being someone who “thinks deeply” about issues of automation and economic dislocation. Appearances on Joe Rogan’s and Ben Shapiro’s programs also generated considerable attention, and exposed Yang to an audience outside of the traditional progressive base. Some on the alt right have embraced him, as have individuals on the left who supported Bernie Sanders. Technology & Labor Markets
This brings us to an important question: Is the Freedom Dividend a good idea? More broadly, is UBI a policy worth pursuing, in the United States, in 2019 (and beyond)? As I see it, UBI could make sense in the future, but not today. For that reason, we must vigilantly watch job and employment trends, and be prepared to act, if events move in the direction Yang (and other experts) predict.
When it comes to automation and job loss, there are two schools of thought. One says that automation will displace some jobs (often those which require less complex skills, and are more unpleasant or dangerous), but ultimately create new opportunities for workers. The other argues that automation, driven by disruptive technologies, such as artificial intelligence, machine learning and deep learning, will upend entire industries, lead to mass unemployment, and alter the fabric of society.
Which interpretation is correct? A study from economists at consultancy firm Deloitte, studying employment trends in England and Wales since the 1870’s, found that “technology has been a ‘great job-creating machine.” The study noted a surge in the number of people in occupations like bartending or hairdressing, even while agricultural and manufacturing work shrank. In some sectors, including “medicine, education and professional services — technology has raised productivity and employment has risen at the same time…” In essence, technology eliminates some jobs (often those which are dangerous or physically strenuous), increases productivity and creates new work, often more service-focused.
If we believe these trends will hold true in the future, then the concerns of Yang and other observers are overblown. In the long run, fears of an automated, jobless dystopia aren’t likely to become a reality. Prominent thinkers including futurist Ray Kurzweil and leading venture capitalist Marc Andreessen, share this outlook .Even if trucking jobs are lost, they will be replaced, and human work will continue to flourish.
Then, there are those who view artificial intelligence (an umbrella under which I’ve included technologies like machine learning, deep learning, neural networks and so on) and automation in general, as a threat to numerous jobs and industries. Artificial intelligence expert Kai Fu Lee warns that around 40% of jobs, both blue and white collar occupations, will be replaced. Lee, like Yang, sees jobs involving driving, as facing particularly acute risks of automation. Elon Musk warns that “robots will be able to do everything better than us” and sees artificial intelligence as a “fundamental risk.” Musk also believes that some sort of universal basic income will eventually become a reality.
A study from consultancy McKinsey suggests that by 2030, as much as 30% of the world’s human labor will be automated, a shift rivaling earlier transitions from an agricultural to industrial economy. McKinsey sees at least 50% of current work activities as being technically automatable, with a possibility of between 400 million to 800 million jobs being automated.
A piece from think tank Brookings, analyzing other studies around potential workplace disruption, argues that if job losses occur at the 38% median rate estimated by these forecasts, “Western democracies likely could resort to authoritarianism…..in order to keep their restive populations in check.” Brookings’ research further argues that even if automation-driven job loss occurs at a smaller scale, the accompanying social and political consequences could be massive.
McKinsey and Brookings are not led by wild-eyed radicals — rather, they are quintessential establishment institutions. If they fear the consequences of automation and similar changes, then perhaps we should pay attention. Maybe the predictions of Musk come true, and technology-driven automation results in social upheaval.
Or, possibly, events transpire differently. Society adjusts (gradually and perhaps painfully) to new realities. New occupations sprout up, where old professions once stood. Many of those who were impacted by these changes might never rebound, but future generations adjust. Over the long run, society proves to be resilient.
The reality is, we simply don’t what will happen. It is thus premature to move forward with the Freedom Dividend proposal, on the basis of possible future job losses due to automation.
However, it is important to start having real conversations around these issues. Most analysts agree that society is going to experience a certain amount of disruption, due to technology-driven automation. We need to think deeply about what this means for the nature of work, how income is earned, and the ways in which work is a source of meaning in our lives.
More Arguments For & Against The Freedom Dividend
This raises another question: Are there other reasons, aside from automation-driven job loss, to support the Freedom Dividend? In other words, is the Freedom Dividend, on it’s own, a good idea? Yang has argued for allowing individuals to choose between receiving the Freedom Dividend, and other forms of cash assistance (i.e. welfare programs). Perhaps this is an idea worth exploring, even if the Freedom Dividend does not become universally available.
What if we allow those receiving food stamps, or Section 8 housing vouchers, to instead recieve an equivalent amount of cash and spend the money as they please? If we believe that people know their own needs better than anyone else, then this idea makes some sense.
Also, how might $1,000 extra in pocket change each month, alter the lives of our citizenry? The oft-cited statistic that 40% of Americans cannot cover a $400 emergency expense comes to mind. As Yang noted on the Freakonomics podcast, the Freedom Dividend could make a real difference for individuals trying to get a business off the ground, save a little extra for retirement, or simply cover personal expenses. With a crisis in affordable housing and health care costs, an extra $1,000 a month could be a boon for many Americans.
There are also potentially serious negative consequences of the Freedom Dividend. Some observers argue it would cause large scale inflation, and is not affordable, given the size of our national debt. Others fear it will incentivize people not to work, and undermine our existing safety net for the poor. These concerns must be explored in depth.
While UBI has been tested on a small scale, as with Finland’s experiment with unemployed individuals, or an ongoing initiative implemented by Stockton mayor Michael Tubbs, we simply don’t know how UBI will function on a national or semi-national basis, in a country as large and varied as the United States. Ultimately, it makes sense to conduct as many experiments as possible, and learn more.
Some Final Thoughts
Technology will continue reshaping many aspects of our lives, with work and employment being amongst the most prominent of them. For this reason, it makes sense to begin a real debate around UBI, and other potential solutions, in the event of large-scale job loss. Mr. Yang should be commended for bringing this discussion to prominence.
With that said, it does not make sense to move forward with the Freedom Dividend right now. If we exclude automation-related reasons for universal basic income, the arguments for and against such a policy are considerably less clear cut. We are still unclear as to whether it will prove to be a boon for the many Americans struggling with financial issues, or lead to inflation, and a demotivated labor force.
We should continue testing UBI at a small scale, gleaning as much data as we can, while vigilantly watching how labor markets shift as new technology, especially around automation, takes hold. Policymakers and citizens alike need to be radically open-minded, because creative thinking will be required. The time for UBI might come someday. Someday, however, isn’t today.
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WRITTEN BY Shiva Bhaskar Follow Enjoy reading and writing about technology, law, business, politics and more. An attorney by training, I’m a native of Los Angeles, and a former New Yorker.
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