Basic Wage

[David]

A basic wage is a min wage payment independent of labor hours. In a basic wage system, a person receives a regular weekly/monthly/yearly (depending on how it's set up) payment of a predetermined amount whether the person worked a 60/h week or not at all.

The idea behind the basic wage is straight forward: It's more useful than welfare, it's cheaper than welfare (the assumption being that the welfare state is dismantled) and it lessens or eliminates the need to work for a wage.

The last point is vital to consider as automation increasingly eliminates jobs and driving unemployment during a period of record economic growth. If the Welfare state was limited to Medi/Medacare, SS and WIC with other programs eliminated and replaced with a basic wage of $1k/m per household, the cost of the program would only be $14B as opposed to the $2T price tag associated with the current Welfare state.

This is an idea gaining traction on both sides (at least among the tech and economic savvy) as it promises to drive down Fed spending while making unemployment less of a personal and economic problem.

Thoughts?

For more details on what I'm talking about:
Why the Tech Elite Is Getting Behind Universal Basic Income | VICE | United States

 

[DodgeFB]

Wow! There is something to ponder. So these people want to "adopt" the sick,the old and the lazy? Makes me wonder what the catch is. Where do I send my information to sign up for the free money?


I think over time there would not be enough workers to pay the non-workers.

 

[David]

Wow! There is something to ponder. So these people want to "adopt" the sick,the old and the lazy? Makes me wonder what the catch is. Where do I send my information to sign up for the free money?


I think over time there would not be enough workers to pay the non-workers.

Just tax the tech companies that are eliminating jobs. The techcorp taxes will pay for it all making the system independent of a reduced labor tax base. And it's not really free money so much as more accurate and in turn cheaper welfare. Putting 70 million people on SNAP, SS, Unemployment, etc. isn't something the system could handle no matter how much reforming you did. A Few billion dollars on the other hand is manageable on the Fed level and does a better job keeping people out of poverty than the current system anyway.

 

[myp]

We are a while off until this really becomes a concern, but it is important to think about. I think eventually it could be good social policy as we enter the point where machines can think or outthink humans. Even outside of that though, there have been some interesting studies suggesting that in certain situations it may have a benefit in increasing social mobility and overall outcomes to the point where the ROI is worth it even today.

It is amusing to think that one of the first proponents of this sort of thing was none other than Milton Friedman.

 

[David]

We are a while off until this really becomes a concern, but it is important to think about. I think eventually it could be good social policy as we enter the point where machines can think or outthink humans. Even outside of that though, there have been some interesting studies suggesting that in certain situations it may have a benefit in increasing social mobility and overall outcomes to the point where the ROI is worth it even today.

It is amusing to think that one of the first proponents of this sort of thing was none other than Milton Friedman.

I disagree. Based on historical norms, there's no reason for the current unemployment rate with an economy as vibrant as ours is currently. Only when taking into consideration automation and our education systems' lack of focus on high tech jobs does it start making since. While we're not at the point where human jobs are truthfully scarce, this is due more to cost effectiveness then technical limitations. The Robots already rule, it's just not obvious yet and waiting until 1/2 the workforce is not just unemployed but unemployable to deal with the decline in consumer spending is unwise. We should have been thinking about this 10 years ago, now is the time to act.

 

[myp]

I disagree. Based on historical norms, there's no reason for the current unemployment rate with an economy as vibrant as ours is currently. Only when taking into consideration automation and our education systems' lack of focus on high tech jobs does it start making since. While we're not at the point where human jobs are truthfully scarce, this is due more to cost effectiveness then technical limitations. The Robots already rule, it's just not obvious yet and waiting until 1/2 the workforce is not just unemployed but unemployable to deal with the decline in consumer spending is unwise. We should have been thinking about this 10 years ago, now is the time to act.

There is a natural rate of unemployment due to churn in the market. Do you agree or disagree with that statement?

 

[David]

There is a natural rate of unemployment due to churn in the market. Do you agree or disagree with that statement?

I fully agree, but it's traditionally around 3-4%, not 5.6%. Not with record economic growth and companies with more money then they know what to do with. Automation is driving up the 'natural' unemployment rate and while the wave is only just starting to build, it's going to snowball rapidly. We're going into another depression in 10-15 years if we don't act to blunt automation's negative impact on the economy now.

 

[myp]

I fully agree, but it's traditionally around 3-4%, not 5.6%. Not with record economic growth and companies with more money then they know what to do with. Automation is driving up the 'natural' unemployment rate and while the wave is only just starting to build, it's going to snowball rapidly. We're going into another depression in 10-15 years if we don't act to blunt automation's negative impact on the economy now.

Most Fed officials put natural rate around 5-6% right now, which is pretty in line with what we are seeing. Furthermore, we have a strong downward trend, so the unemployment rate might go down further yet.

If automation affects the natural rate, it is more of a short-term thing and not long as it drives the churn- the demand for jobs is the more relevant factor longer term (i.e. a reduced supply of jobs due to automation won't affect the natural rate long term because the natural rate is due to churn (which is temporary) - the actual unemployment rate would be affected by supply, but not the natural rate). But I'll admit I am not too familiar with how they officially estimate it.

I don't think there is much that points to the depression you predict either. Again, automation probably won't rid of jobs that fast- look at predictions even by people like Gates, Musk, etc. and they don't see it that soon. Of course no one has a crystal ball, so we'll see.

 

[David]

Most Fed officials put natural rate around 5-6% right now, which is pretty in line with what we are seeing. Furthermore, we have a strong downward trend, so the unemployment rate might go down further yet.

If automation affects the natural rate, it is more of a short-term thing and not long as it drives the churn- the demand for jobs is the more relevant factor longer term (i.e. a reduced supply of jobs due to automation won't affect the natural rate long term because the natural rate is due to churn (which is temporary) - the actual unemployment rate would be affected by supply, but not the natural rate). But I'll admit I am not too familiar with how they officially estimate it.

I don't think there is much that points to the depression you predict either. Again, automation probably won't rid of jobs that fast- look at predictions even by people like Gates, Musk, etc. and they don't see it that soon. Of course no one has a crystal ball, so we'll see.

I do hope that you're right but I did warn that the end of Human labor was coming a few years back and we're seeing it happen 5 years sooner than I originally predicted. Eventually the trend will result in a post-scarcity economy in money will be a minor/non-issue but unless we do something about financial security during the transitional period, the change will be vary painful.

Another option I was thinking of: What if a trust fund, not unlike SS but totally voluntary, was set up with interest (not principle) payed out monthly to contributors. Nobody would be forced to part with their money, it wouldn't have to carry the whole population as SS does and the fund would never be depleted as principle would remain untouched. It might take a while to build up if no large government and/or corporate investment was made but once the fund reached a few million dollars, hundreds of thousands of people (more if you restricted it to households) could receive thousands of dollars monthly without any impact on government spending.

 

[myp]

I do hope that you're right but I did warn that the end of Human labor was coming a few years back and we're seeing it happen 5 years sooner than I originally predicted. Eventually the trend will result in a post-scarcity economy in money will be a minor/non-issue but unless we do something about financial security during the transitional period, the change will be vary painful.

Another option I was thinking of: What if a trust fund, not unlike SS but totally voluntary, was set up with interest (not principle) payed out monthly to contributors. Nobody would be forced to part with their money, it wouldn't have to carry the whole population as SS does and the fund would never be depleted as principle would remain untouched. It might take a while to build up if no large government and/or corporate investment was made but once the fund reached a few million dollars, hundreds of thousands of people (more if you restricted it to households) could receive thousands of dollars monthly without any impact on government spending.

I recently read an interesting proposal about something like the fund you talked about which would essentially be government being active in venture capital. I don't remember the exact details, but I'll try to find it and post here.

 

[DodgeFB]

Government just needs to GET OUT OF THE WAY!!! (to allow business to thrive & therefore HIRE).

How about this. Shut half of those big government buildings down and donate them to the Humane Society for no kill pet shelters.

 

[Polydectes]

The bottom line is that "basic wage" is a COMMUNIST idea!!!

Exactly.

 

[myp]

The bottom line is that "basic wage" is a COMMUNIST idea!!!

Do you consider Milton Friedman, arguably the poster boy economist of the right, to be a commie?

 

[myp]

Government just needs to GET OUT OF THE WAY!!! (to allow business to thrive & therefore HIRE).

Well this proposal was to address the topic that David brings up- the point where machines effectively can replace the vast majority of human labor - the point where there are no more jobs to hire for, but people still looking for jobs. It is the discussion of a potential future, not the current market.

 

[myp]

A vast takeover of functions by machines causing significant unemployment will never happen. Just like it was predicted in the 60s that everyone would be flying around in flying cars by the 80s.

Only practical things happen - hello?!

No one has a crystal ball and this has been predicted before (with industrialization, etc.) and hasn't happened, but at the same time we have never had machines that can replicate human capacity in thinking which is what we are moving towards. We don't know for sure one way or another just yet, but it isn't a bad idea to think about it so we at least have some idea of how to handle it.

 

[myp]

Problem is, automation is VERY EXPENSIVE, especially smart automation, making its use very limited.

I worked in engineering at a huge GTE manufacturing plant in Alabama in the early/mid 80s that made business and residential telephones. The plant virtually made EVERYTHING that went into the phones for many years including making screws and winding coils (inductors).

The plant had A LOT of automation in the works. Problem was, pressure from competition from cheap products from China became too great causing the plant to close, not long after I moved back to FL in 1985. So all that money spent on automation was for not.

It might be too expensive today, but again this is looking at trends. Remember Moore's law- the tech is getting much cheaper with each passing day. At the same time, we are seeing trends and likely to see more of a rising middle class in places like China and India, thereby making labor more expensive globally.

 

[myp]

As a process becomes increasingly automated, there is less and less labor to be saved or quality improvement to be gained. This is an example of both diminishing returns and the logistic function.

Sure, but we aren't talking about the extinction of jobs so much as the vast majority of jobs going away. But even then, there might even be a point at which a machine is cheaper than any human - you don't have to worry about things like labor laws with a machine after all.

As more and more processes become automated, there are fewer remaining non-automated processes. This is an example of exhaustion of opportunities.

Right.

BTW: Our counter top ice maker in our RV automates the process, as many RV fridges do not have them. I doubt anyone wants put out of work because of it, and in fact, a few were employed!

But your RV isn't an analogy for the economy

 

[tecoyah]

Unless the Democrats are in charge.

This does not make sense...and is obvious partisan comment.
I think we all get it dude....the Dems suck.

Okay...perhaps it might be time we did something other than complain?

 

[David]

Aufgeblassen, is it more expensive to pay 30 McDonald's employees min wage or put a touch screen on the counter with a money collector/card reader? How about a car that drives itself rather than the $30k+/year a cab, bus and truck driver get's paid? When was the last time you saw a non-reporter on the floor of the NYSE, '99?

Eventually you get to the point where an employee that works 24/7/365 without breaks, without complaint and for free is worth the upfront cost.

 

[David]

So someone who sits on his fat ass all day long is paid the same as someone who works hard?

We already have that. It's called the WELFARE STATE.

This post was devoid of an actual counter argument.