Individuals should be encouraged to seek work, employers should be encouraged to provide it

The robots are rising, but don’t assume a jobless future


by James Pethokoukis

Yesterday, I wrote about an interesting speech from Obama economist Jason Furman where he argued for more technological progress but was against a universal basic income. One reason UBI proponents typically offer for such a policy is that lots and lots of redistribution will be needed for our future of mass technological unemployment/underemployment.

Along the same lines comes this Foreign Affairs piece by Andrew McAfee and Erik Brynjolfsson. They see automation “radical[ly] reshaping” the world of work, a change which “will call for new policies to protect the vulnerable while reaping the gains of the new age.”

But a universal basic income shouldn’t be one of them, McAfee and Brynjolfsson argue. Rather than preparing policies for a jobless economy — which probably isn’t imminent — government should think about how to help workers adapt to this new reality.

 Two guidelines here.

The first: encourage flexibility and experimentation:

More broadly, as technology transforms the economy, policymakers will face all manner of new and unpredicted choices. In making them, they should return to the basics: remove rigidities, provide flexibility, and boost resilience. Should schools have greater freedom to reward their best-performing teachers and remove their worst? Yes, espe­cially in light of re­search showing how much teacher quality influences lifetime stu­dent earnings. Should entry-level workers have to sign restrictive noncompete agreements? No. Should the federal govern­ment experiment with extending student loan guarantees to nontra­ditional job-preparation programs, such as “nanodegree” courses and “coding boot camps,” even if they’re offered by unaccredited institutions? Yes.

Second, “encourage work instead of planning for its obsolescence.” And on that subject, an alternative to UBI:

Because work provides benefits to individuals, households, and communities that go far beyond the money earned, policy should encourage employment. Unlike a universal basic income, wage subsidies do just that. In the United States, the Earned Income Tax Credit, which is administered through annual tax returns, offers a maximum yearly benefit of $6,242 for a family with three or more children. Whereas a universal basic income would be given unconditionally, the EITC is available only to people with wage income and therefore provides a direct incentive to work. … But for now, efforts to raise the minimum wage enjoy more popular momentum … Raising the rewards for work is a laudable goal, but significantly higher minimum wages are not the best way to accomplish it. When labor becomes more expensive, companies tend to use less of it, all else being equal … The safest combination of policies, therefore, is a moderate minimum wage together with a substantially expanded EITC or similar wage subsidy. Just as individuals should be encouraged to seek work, employers should be encouraged to provide it, and much higher minimum wages have the opposite effect.

Source: www.aei.org