Book review: Raising the Floor - making the case for UBI

Profile picture for user gonzodaddy By Den Howlett October 13, 2016
Summary:
UBI is not a new concept but in the hand of Andy Stern it takes on a fresh meaning in a world where the nature of work is undergoing seismic shifts.

 

raising-the-floor-book

Having listened to Andy Stern at the Next:Economy event and run into him afterwards, I felt it was worth making the investment in his new book, Raising the Floor - how a Universal Basic Income can renew our economy and rebuild the American Dream.

It should be required reading by anyone who is concerned about the future of work, regardless of whether you are based in the US or not. Stern's arguments are compelling and I encourage anyone with an interest to approach the book with an open mind.

I'm no fan of unions and Stern, who was once the leader of SEIU, would not be a natural traveling companion. But in his argument and writing I found someone whose thinking is well researched, inquiring, thoughtful and persuasive.

The book requires patience. It's not until you get roughly two thirds of the way through that Stern makes his central argument but the lead up is important because it provides an insight into how Stern came to his conclusions.

As a labor organizer for close to four decades, Stern comes with a mindset that values the American Dream while at the same time retaining a keen sense of social justice.

The cynic in me I expected a slightly left of Karl Marx exposé about the horrors of greedy capitalists but instead I read a vision of work 30 and 40 years out in a world where there is far less work of the kind we understand today and which will likely not be replaced.

Stern's concern is manifold. It is not just the lack of work but the impact this has on maintaining poverty at levels that are unique to the US, and the lack of dignity that unemployment brings.

This latter point is fundamental to understanding the thinking behind UBI and what it can stimulate. Stern's journey to UBI is rich with the recounting of first hand, often long and detailed conversations with academics, captains of industry, leaders in social programs, technology leaders and those in government. Everyone is given an equal voice, a tone that's rare in books of this kind.

The American Dream - shattered

Stern's argument starts with the thought that the American Dream as currently understood,  is irrevocably broken. In Stern's definition, a person who works hard and plays by the rules can expect to build a better life for his/her family, own a home, send children to college and enjoy a relatively comfortable retirement. The implied social contract comes from the idea of job stability, something which everyone agrees has all but disappeared. In that context, I may be part of the last generation that could expect a 'hire to retire' environment.

Stern examines how automation and the encroachment of robots and AI are eating away at work. While he doesn't fully subscribe to the apocryphal predictions of a sudden collapse in the workforce, he believes that McKinsey provides a good lens through which to understand what is happening:

The McKinsey study suggests that the best way to understand and track the progress of automation in the near term is to shift the focus from the automation of jobs to the automation of activities within jobs. As Berkenfeld pointed out, that distinction is extremely important to his evolving ideas, because it more accurately reflects how a number of businesses are currently thinking about enhancing productivity. The conclusions of the McKinsey study are as staggering as those of the Oxford study although different in their approach. Most notably, 45 percent of all activities that workers take on in the US economy can be automated using available technologies. This represents nearly $ 2 trillion in annual wages of American workers. If AI progresses and is able to process and understand natural language a little better, that number quickly jumps to 58 percent of work activities that are automatable."

Stern is referring to Steven Berkenfeld, Managing Director, Investment Banking Division at Barclays Capital. Berkenfeld invests in the technologies of the future and specifically those that can reduce costs in larger supply chains. Berkenfeld views automation as representing a granular shift in tasks, something that the panelists in the creative track at Next:Economy also believe is happening. Viewed that way, you can argue that automation is occurring much more slowly than people imagine. But then when we see how quickly Uber has gone from ride sharing to driverless car experimentation then you have to wonder what other jolts to our perceptions about work are around the corner.

You're fired

Perhaps more worrying in Stern's analysis, it doesn't matter what type of job is under consideration, automation is coming. We've seen this in reference to some aspects of lawyering, the basic work of accountants and other professions. In many cases this is leading to a 'do more with less' situation but there are plenty of examples where genuine job losses are either already in the books or a-coming.

Based upon the conversations Stern had with the likes of Andy Grove, the iconic leader of Intel, Dave Cote, CEO Honeywell and many others, it seems the erosion of jobs at every level is irreversible. Quoting Cote, Stern says:

“I even view a thermostat as a piece of plastic with a computer chip.” Again, it’s a matter of conscious positioning: “These days, if you want to make products that move the world forward, they need to be able to think.”

It reminds me that Benioff's toothbrush, while mildly amusing at the time, was prescient.

The erosion of work

Throughout the book, I see a man on a quest to discover what happens next. He constantly asks the question - does a good education hold the promise it once did for future generations? The answer is a depressing 'no.' Stern looks at examples from Topcoder, Upwork, Task Rabbit and many others, where the technology has encouraged competition at a global scale and in which we are all in a race to the bottom.

This is something to which I can relate having watched members of my family toil through years of education, accumulating debt, only to find there is nothing on the other side and then having to pivot to something else. It's not a recipe for success and, according to Stern, one that is discouraging some sections of society from sending the next generation to higher education.

More shocking is the discovery that:

Peter Cappelli, a professor of management at Wharton, reports that only about a fifth of recent graduates with STEM degrees got jobs that made use of that training. “The evidence for recent grads,” in Cappelli’s analysis, “suggests clearly that there is no overall shortage of STEM grads.”

What? Haven't we been told that solving for a lack of STEM education is an urgent need? In deprived areas, there are pockets of hope but even there, the outlook is not good.

In 2015, 100 former Promise Academy students graduated from college: 70 with four-year degrees and 30 with two-year degrees. Only about half of them had jobs six months later. “The kids thought it would be easy to get jobs once they had the degrees. It’s not,” (Geoffrey) Canada says. “It’s really hard for my kids to get internships, or to connect with the labor market and find a career path...

...But I’ve given up trying to predict which jobs will be around ten years from now because, in every single industry, I know entrepreneurs who are trying to figure out how to do those jobs without people.”

Having exposed the problem of work as a fractured concept and life long full time jobs as an illusion both now and into the future, Stern then sets about coming up with solutions. He 'gets' the gig and on-demand economies, enthusiastically viewing them as a net good. Even so, he wonders whether the 24x7 'always on' life is something to which people truly aspire or whether it is a symptom of falling living standards that force the American middle class into two or three jobs. It's a fair question.

Do nothing - wait for emergence of work

Vinnie Mirchandani, in his book Silicon Collar doesn't deny the problem (The problem with the arguments that Mirchandani puts forward are that they are rooted in variations of the economic status quo, regardless of whether you are ‘left’ or ‘right’ leaning in your assessment of economic theory. In that sense, Mirchandani doesn’t consider alternatives to those theories, recusing himself on the grounds that he doesn’t have a good answer to that or, the emerging question of ethics in technology.) but asserts that the abundance of choice should mean people are free to build their own destiny. I disagree with that hypothesis for several reasons with which I am sure Stern would agree.

Stern makes the point that many of the industry leaders he meets are optimistic that as in the past, there may be some displacement but that the future will be bright as new jobs emerge.

There is a fundamental problem with that argument that some of Stern's interviewees and Mirchandani fail to address. It's all well and good looking back at history but that doesn't help when considering the here and now where the middle class, by all accepted measures, has fallen back. Mirchandani et al's argument does not hold up when examined against the lens of stagnating growth and decline incomes.

In other words, it doesn't matter if there is an abundance of choice if the amount that can be earned only serves to pay the current bills. It doesn't for example go unnoticed that when my electricity bill came in this month, SDG&E asked in a survey whether we had trouble paying our bills in the summer and if so, what did we sacrifice.

Even if you don't choose to believe that the problem of declining income is that big of a deal, then how do you explain the fact that spending is stagnant and of concern to business and government alike? Add in the fact that in the gig economy, there is no safety net and it becomes apparent that fear for the future is understandable. For the first time, I am hearing parents of young children expressing concern that there may be no productive work for them in 20 years' time.

What's more worrying, those who make the 'business as usual' argument are at a loss to explain what those jobs will look like other than 'we can't imagine that today, but they'll be good.' That's not an intellectually satisfying argument.

Tinkering round the edges

Stern identifies a second camp that believes some adjustments to the welfare and education system will ameliorate the jobs problem. That argument may well work in the short term and Stern welcomes some of those proposals as a way of softening the blow. But as Stern is trying to look out 30-40 years, he finds the 'hope and pray' plus 'tinkering' arguments unsatisfactory. I agree.

The road to UBI

That leaves him with UBI. He martials an unlikely group of supporters:

The leading voices amongst this group include Andrew McAfee and Erik Brynjolffson, Albert Wenger, Steven Berkenfeld, Martin Ford, and myself. To be clear, no one in this group thinks these solutions need to be applied today, but we all feel the pressing need to consider, debate, and better understand these policies for when they may be needed.

Stern cites many more including Marc Andreessen, Vinod Khosla and others. He points to Alaska where there is a form of UBI, to native American Indians who have created a kind of UBI, experiments in other countries like Namibia, the Netherlands and elsewhere. In each case, positive results follow, sometimes startlingly so. To the inevitable criticism of encouraging laziness levied by Mirchandani and others, Stern points to a Canadian experiment run in the 70s:

Their aim was to determine if a guaranteed minimum income acted as a disincentive to work. During the five-year experiment, only two groups of people were found to work fewer hours: adolescents (because they felt no pressure to support a family) and new mothers (because they wanted to spend more time at home with their infants).

Anything else?

There were several other findings: As expected, poverty disappeared. And, unexpectedly, hospitalization rates went down, especially for admissions related to mental health and to accidents and injuries, while high-school completion rates went up, suggesting that a guaranteed annual income, implemented broadly in society, may improve health and social outcomes at the community level.

Why should UBI be a working prescription for solving for a gloomy future of work?

Here Stern traces support for UBI back to Thomas Paine, the 18th century philosopher, follows through with economic theorists like Keynes and brings it up to date with a discussion about how attempts were made to introduce UBI in the Nixon era but which failed in the Senate. Most recently, Robert Reich, former US Labor Secretary has come out strongly in favor of UBI, arguing that on the current trajectory, capitalism will fail. Reich argues that UBI provides the environment in which young people can follow their passions and actively participate in building the gig, artisan and sharing economies.

I would argue that part of what we are seeing in the current presidential election cycle represents early symptoms of that failure and the outpouring of dissatisfaction with a system that has let down millions of Americans to the benefit of a very tiny minority. It's ugly and can only get uglier.

How it works

The idea behind UBI is very simple. Give cash to everyone as a right, not as a handout or as a piece of charity. How does this make sense?

Economists have long thought that the end game for economic growth is a situation where there is abundance and where people are free to enjoy a life that is not defined or dominated by work. In those circumstances and with less need for work as we understand it today, UBI makes perfect sense, providing a floor from which people can build a better life. Right now, and without those safety nets, people at the low end of society are obliged to take on multiple, often low paid jobs.

Stern says that based on the evidence and the likely outcomes, UBI would be good for labor because it would mean - among other things - that labor could refuse crappy rates of pay and conditions in the certain knowledge they had a fall back position. That in itself sets the conditions for a fairer and more prosperous society although I can already hear the screams from industry leaders who are obliged to report ever upward profits.

As he develops his position, Stern returns to the problem of UBI as an unfettered right in the context of the much vaunted Protestant Work Ethic. It is a high hurdle and despite the many references to alternative lives and life styles, I can almost hear the howls of derision from those who will not tolerate even a passing consideration.

Then there is the problem of funding. Stern can be criticized for his lack of economics skills but, quite frankly, he's as qualified as any of the clowns that have tried and failed to set economic policy for the betterment of everyone.

He does comes up with a fuzzy formula that pays everyone $1,000 a month. Total cost? $2.7 trillion. Using my accountant's slide rule, it looks plausible. It would mean cashing out many of the 126 welfare programs, eliminating tax expenditures and introducing some European style taxes that impact the wealthy. The trouble is that while Stern offers a smorgasbord of proposals he doesn't have a fully formed plan and while I get the idea of garnering broad based support, the problem of payment remains the elephant in the room.

My take

I came to UBI because I wanted to understand what happens when a radical approach to alleviating poverty meets rampant technology advances. As a temporary resident alien, I have no dog in this fight but I do have the benefit of watching a society that looks like a lab rat in a colossal social experiment and which can set an example for others to follow.

I am concerned that a society that doesn't care enough about its least able is a poor society and one in which I would not wish to participate. America is at risk of becoming that place. From what I hear, the UK is not far behind. Hearing alternatives has to be welcome.

Stern makes a powerful argument that solves many problems while allowing everyone the opportunity to participate in the abundance that technology is delivering. Paradoxically, UBI supports the economy that Mirchandani envisages and with a degree of certainty that is missing from his arguments. But on order to get there, you have to distance yourself from the pejorative language of laziness and undeserving poor.

UBI preserves the dignity of work but detaches work from the stigma of unemployment. In that sense, UBI holds the promise of recasting the American Dream for a 21st century where the future of work is unfolding before our eyes but where people still aspire to betterment. In that sense, Stern's message is one of hope.

Image credit - Featured image, © gustavofrazao - Fotolia

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