Guaranteed Income – Viability and Potential

I have been reflecting on the role an unconditional basic income could play in the transition to a freer and more equal society. One set of considerations concerns the viability of the policy. Would it be technically feasible? Would it destroy the currency? Another set of considerations concerns the beneficial dynamics the policy might be expected to set in motion. By liberating individuals from the fear of poverty, everybody would be freed to focus on the all-sided development of human capabilities.

My purpose here is to draw together some disparate arguments of recent posts. I have been following the discussions in the related threads with great interest. Although I do not address most commentators’ arguments in this particular post, I appreciate the quality of the contributions being made on all sides. The various arguments are never far from my mind and I may address some of them more directly in the future.

We Could Be Working Much Less For the Same Material Well Being

Currently, a large portion of society’s labor time is directed at activities that arguably do not produce net social benefits for the community. For example, it could be argued that much of the activity conducted in finance, insurance and real estate adds zero to negative net benefit. Certainly, services of various kinds are produced in these sectors, and some of the activities involve highly educated and skilled workers. But in terms of net benefits for the community, probably little to nothing is added. The activities in these sectors are mainly aimed at redistributing – not increasing – claims on real wealth. The same can be said for sales and marketing. A lot of highly talented and hard-working people are being drawn into industries that do not add much in the way of real net social benefits. And, of course, there are other examples.

In a society organized differently, these activities could cease without reducing the amount of beneficial consumer items, housing, social infrastructure, education, health care, and so on, produced by society. In other words, none of the components of output required for the provision of a basic income to all would be jeopardized by the disappearance of these sectors.

At the same time, there are activities that many people would regard as contributing negative net value, even though measures of GDP suggest otherwise. The most obvious example is military activity and armaments production, but there are many others. The blowing up of a building or the killing of a human being do not subtract from GDP, whereas reconstruction of the building and burial costs of the war victim do. But in a rational society, war and destruction would not have a neutral effect on our assessment of social productiveness.

None of this is to suggest that these sectors provide no benefits. There is technical knowledge developed in military research, mathematical ingenuity in finance, and creativity in the advertising industry. Some of these work roles are personally rewarding or challenging for the employees involved. Nevertheless, it is doubtful that these beneficial aspects more than offset the negatives, especially when it is considered that the talents of employees in these sectors could be employed and further developed elsewhere in the economy.

In the future, society’s capacity to provide everyone with an unconditional basic income will be enhanced – dramatically – by continued technical innovation and increasing mechanization of production. We have the choice, as a society, to opt for more leisure time if that is what we want. Or, rather than increased leisure, we might opt for a similar amount of productive activity only more broadly defined to include intellectual, creative, physical or spiritual pursuits. Ultimately, productiveness could become synonymous with the production of life itself. A smile, in the right circumstances, from a happy and fulfilled individual can be worth more than a widget once narrow material needs have been met.

Possible Objection: People Might Opt Out of Work

One objection to an unconditional basic income is that people will opt out of boring or unpleasant low-paid jobs. In view of the literature in psychology, sociology and related disciplines, it is not clear to me that this would be the case.

For the sake of argument, suppose for a moment that it is the case. I would consider this to be a good thing. Employers offering lousy jobs would either have to pay more, reorganize production, mechanize or go out of business. If they refused to take one of the first three options, society is likely better off without their activities. If these ex-employers were unable to find employment in the regular economy and there was no Job Guarantee, they would have the unconditional basic income to fall back on while they thought of a less antisocial use of their time than offering lousy jobs to wage-slaves. Hopefully, they would also have the option of a guaranteed job in the event that they preferred this to free time and the self-determination of their own productive activities.

But it is not obvious that people would opt out of all unpleasant work after the introduction of an unconditional basic income. Additional monetary rewards over and above the level of the basic income are likely to have more motivational impact when it comes to lousy jobs than roles offering greater autonomy. Neil Wilson linked to an interesting video summarizing some of the research results in this area. The bottom line of this research is that money is not a major motivating factor in more highly skilled jobs but is when it comes to menial tasks. In fact, the research suggests that performance can actually drop as monetary reward increases in the case of tasks requiring skill, intelligence or creativity. The reverse tends to be the case for menial tasks.

If these research results accurately reflect reality, employers offering lousy jobs might well succeed in retaining workers through the offering of sufficient pay rises. If the pay rises needed to retain personnel were too extreme to be viable, mechanization or reorganization of production might become more cost effective in comparison. In cases where none of these actions were sufficient, my view would be good riddance to the enterprises involved.

When it comes to justifying the salaries and bonuses of often outrageously incompetent CEOs, it is frequently claimed that the higher pay is necessary to retain quality staff. At the moment, no such logic is applied at the lower end of the wage scale, even though the relevant research suggests that it is here that monetary rewards are a more effective motivator. Rather than allowing this dynamic to play out, governments have chosen deliberately to create unemployment to tilt the playing field to the disadvantage of low-wage earners. This enables quality staff to be retained at lower wages than would be possible in the absence of the government’s rigging of the bargaining outcome. Introducing an unconditional basic income would help to bring this dynamic back into play by giving workers more bargaining power.

Possible Objection: The Value of the Currency May Be Decimated

Another objection to an unconditional basic income is that it might destroy the currency and result in hyperinflation. In my view, this is based on an incorrect view that the value of the currency under capitalism is determined at the margin. I have argued that, to the contrary, it is the average labor time required to obtain a unit of the currency that matters, not the marginal labor time. After all, it is already the case in numerous countries (though not in the U.S.) that unemployment benefits are paid without requiring a labor-time commitment. Holding other factors constant, particularly the level of taxation, such welfare policies certainly do reduce the value of the currency, because they reduce the average amount of labor time required to obtain a currency unit. But the value does not plummet to zero just because some people receive money without engaging in wage labor.

More generally, there is already a very tenuous relationship between income and labor time in all capitalist societies. Rentiers receive interest income. Some workers are paid very high amounts, others very little, for the same amount of labor time. These differences cannot be explained solely by reference to skill level (i.e. complex versus simple labor).

The relationship between productive contribution and income is even more tenuous. A huge amount of important productive work (e.g. unpaid housework, child care, aged care; volunteer work; freeware development; etc.) receives no remuneration. Other work of arguably negative social value receives huge remuneration.

In addition, some real income is provided by the government in the form of ‘free’ goods or services (e.g. school education, health care in non-U.S. developed economies). This means that, at the margin, some services are being received without a labor-time commitment in exchange.

None of these practices, in themselves, decimate the value of the currency, because it is average – not marginal – labor time that matters. In the case of a larger public sector, there would have to be higher taxes. But, again, this is to control the scarcity of the currency in relation to the average – not marginal – labor time required to obtain a currency unit.

The Value of the Currency in Post-Capitalist Society

Defining the value of the currency as the amount of labor time required to obtain it makes sense under capitalism because it indicates how much labor time capitalists, capitalist governments and rentiers can command with a unit of the currency. Because the system is based on the private accumulation of money capital, the owners of the capital – for whom the system operates – care about the command of a currency unit today compared with yesterday and tomorrow. Inflation eats away at the claims of creditors who acquired most of their claims in prior periods.

Workers also attempt to redistribute income over their lifetimes to the extent that there is an emphasis on superannuation and other forms of private saving. This provides further opportunities for the rentier class to transfer accumulated private savings from workers to themselves through financial manipulations. Again, the value of these transfers in real terms is undermined by inflation.

In contrast, in a post-capitalist society, defining the value of the currency by labor time is likely to become less appropriate over time and, ultimately, could be deemed completely irrelevant. The question would then become the more appropriate one of the amount of goods and services, both pecuniary and non-pecuniary, commanded by a unit of the currency. Or, expressed another way, the focus could be solely on the quality of life, irrespective of the currency. Even after a complete separation of labor time and income had been brought about, it would still be possible to define the value of the currency as the average amount of time lived per unit of the currency received. But the far more relevant question would be what that unit of currency commanded by way of quality of life, taking into account all the monetary and non-monetary benefits made available by the society of individuals.

Even under capitalism, we obviously care about the answers to these more appropriate questions. The trouble is, they are not what drive the system and motivate behavior. Capitalists cannot afford to care about the quality of life being produced. This is no reflection on them personally. It is simply that their focus – if they wish to survive as capitalists – must remain on the monetary profit they hope to obtain. What matters in the current system is the accumulation of monetary claims over labor time, not quality of life.

Again, under a different system, we could do much better by focusing on a more meaningful definition of value. It is not even clear that we would need a single measure of value. We could have an array of measures. For example, heterogeneous physical outputs and services could be measured in their appropriate units rather than combined into a single measure. Priorities over services or infrastructure that were best organized centrally could be voted upon. Fiscal transfers and universal rights and responsibilities could likewise be determined centrally and democratically. More local concerns could be handled in a decentralized manner through a mix of democratic, exchange and other mechanisms.

As much as possible unpleasant work could be mechanized, the process promoted when appropriate by government policy, including public investment in research and development, subsidies or tax breaks for innovators, and an unconditional basic income for all individuals. As the mechanization process advanced, individuals would be increasingly freed to opt for work and leisure of their choosing. This would be a recognition that governments and markets, though sometimes, are not always the best determiners of productiveness. As much as possible, individuals could exercise their own judgment in how to make the most of their capabilities.

This relates back to a point alluded to earlier, which I also discussed in my previous post. By giving individuals greater choice in their vocations as well as making it feasible to opt for lower paid work where they deemed this more meaningful or socially beneficial than the alternatives, an unconditional basic income would encourage the emergence of more socially productive enterprises. The willingness of some workers to accept fulfilling roles at lower pay – as suggested by the research on monetary reward and motivation – would make the economic environment more viable for creative, innovative, even idealistic enterprises. These enterprises would be better able to attract committed and able workers because of the competitive advantage afforded to them by the existence of the unconditional basic income.

For individuals who wished to work in isolation or in voluntary combination with others, perhaps initially for no remuneration other than the basic income, access to some resources and especially infrastructure could be provided free of charge (e.g. internet). Other resources or facilities that still needed to be rationed could be allocated on the basis of various criteria such as proficiency or fairness.

4 thoughts on “Guaranteed Income – Viability and Potential

  1. Some physicists have suggested valuing the currency in units of energy rather than units of labor. Both energy (by definition) and labor (by extension) are the potential to do work. The value of human labor is only important to the degree that it is necessary for production. That necessity is constantly declining, and promises to decline exponentially on time through innovation — automation, robotics, AI, and who knows what else in the future. On the other hand, physical energy is the sine qua non for production. While efficiency can reduce the amount of energy required for tasks, there is no good reason to think that huge leaps in efficiency are on the visible horizon, given that so many task are mechanical.

  2. Tom,
    Thank you for explaining that. I had seen that suggestion elsewhere but the reason for using Energy was never made clear. You have just done that. Thank you.

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