Nova workboard

a blog from young economists at Nova SBE

Poverty challenges in the future

The development of technology is rapid and irresistible. We have already seen that humans are being replaced by more efficient machines in basic jobs for which no formal education is required, such as in manufacturing, retail or call centers. In the wake of the advancement of artificial intelligence, even those sectors that still employ the majority of people in our society are in danger. Driverless cars are forecasted to make up 75% of traffic by 2040, rendering millions of taxi, bus or truck drivers obsolete.

What does all this have to do with poverty? The simple answer is that by most scientific consensus today there will be less work in the future, in a world that is still facing a growing population. We have to ask ourselves how we are going to distribute our resources in a world without work. Stephan Hawking noted that “everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine owners successfully lobby against wealth redistribution.”

Thus, a new form of social protection will be an imperative answer to support dislocated workers. This new welfare program could come in the form of a basic income guarantee which works as a single monthly payment to give someone the chance to live reasonably well. It would range somewhere between the official poverty line in each country, which is currently around $25,000 for a family of four in the US up to the minimum wage ($15 an hour or about $30,000 a year).

However, the amount that will be distributed is a crucial factor for which nobody seems to have found a clear answer yet. Just giving out $10,000 to each of 300 million American would almost equal the current federal tax revenues of $3.3 trillion. Health care and defence spending cannot be left out of the equation. In addition, it remains unclear who (and if anyone) will be left out of the program. Therefore, it comes as no surprise that the Swiss largely rejected a referendum last year, with 77% voting against the proposed basic income.

Apart from the unresolved financing issue, we have to alter our opinion about how we think about work in our society. Nowadays, work is not only a source of income but just as important as a source of status. Work organizes people’s life and offers opportunity for progress. Professor Lawrence Katz from Harvard University proposed to expand arts and culture for leisure time to find “a new artisanal economy… an economy geared around self-expression, where people would do artistic things with their time.” An economy based on self expression instead of consumption.

In conclusion, the concept of a universal basic income still needs better public policy calibration in order to make it work. Further field experiments in cities will bring evidence how it can be implemented most effectively. We may not be able to alter the speed of technology, but history has shown time and again that we are able to alter the way we are organized as a society.

Alexander Wisse

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Author: studentnovasbe

Master student in Nova Sbe

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