Föhrenbergkreis Finanzwirtschaft

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Top White House Economist Dismisses the Idea of a Universal Basic Income

Posted by hkarner - 10. Juli 2016

Date: 09-07-2016
Source: The Wall Street Journal

Furman CCJason Furman Says New Technology Creates Challenges, But a Universal Income Isn’t the Solution

Automation and artificial intelligence have reshaped the labor force and raised concerns about incomes and inequality.

The White House’s chief economist dismissed the idea of a universal basic income, saying it would be counterproductive for the labor market and could worsen income inequality.

“We should not advance a policy that is premised on giving up on the possibility of workers’ remaining employed,” Jason Furman, chairman of the Council of Economic Advisers, said Thursday in remarks at New York University.

The concept of a universal basic income has gained traction among economists in the U.S. and Europe in recent years. Essentially, it would offer all residents over a certain age a minimum monthly allowance—regardless of whether they work or how much they make. The idea is to ensure everyone has a chance at a decent life even as technology shifts and the labor market churns, eliminating and creating millions of jobs that often require vastly different skill sets.

“A UBI would present the most disadvantaged among us with an open road to the middle class if they put their minds to it,” American Enterprise Institute scholar Charles Murray said in a Wall Street Journal column last month. “It would say to people who have never had reason to believe it before: ‘Your future is in your hands.’ And that would be the truth.”

The idea has gotten as far as a referendum—soundly defeated last month—in Switzerland.

In the U.S., policymakers appear skeptical. Mr. Furman, in a speech largely focused on the economic opportunities and challenges created by artificial intelligence, wasn’t buying into the idea at all.

“Our goal should be first and foremost to foster the skills, training, job search assistance and other labor market institutions to make sure people can get into jobs, which would much more directly address the employment issues raised by [artificial intelligence] than would UBI,” he said.

Mr. Furman also said a universal basic income would exacerbate income inequality, already a rising concern in the U.S. Instead, he called for reforms to make the existing tax-and-transfer system more progressive.

“Replacing part or all of that system with a universal cash grant, which would go to all Americans regardless of income, would mean that relatively less of the system was targeted towards those at the bottom—increasing, not decreasing, income inequality,” Mr. Furman said.

To be sure, the White House is well aware that the rapidly changing economy is chewing up large chunks of the workforce. A paper last month highlighted the sharp decline in labor-force participation, especially among working-age men with less education and fewer skills.

Labor force participationAnd further automation of routine tasks alongside adoption of increasingly sophisticated artificial intelligence will almost certainly disrupt the labor market, pushing many workers out of a job and potentially out of the labor force. 

A 2013 paper by Oxford University’s Carl Benedikt Frey and Michael Osborne concluded that 47% of total U.S. employment is at risk from computerization.

Mr. Furman’s view wasn’t so dire, though he is worried about potential labor-force casualties. “The concern is that the process of turnover, in which workers displaced by technology find new jobs as technology gives rise to new consumer demands and thus new jobs, could lead to sustained periods of time with a large fraction of people not working,” he said.

Still, the solution isn’t a universal basic income, Mr. Furman said. Instead, he focused on reforming the existing array of programs meant to help the unemployed and the poor.

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