One issue that all countries around the world, including Barbados, must address urgently is the changing nature of work and the growing disconnect this is gradually creating between employment and a living income.
The technologies of the digital revolution – robotics, artificial intelligence, and machine learning – are having a devastating effect on economies in five ways.
First, automation is replacing workers at a rapidly increasing rate, and unlike during the industrial revolution, new jobs are not being created at a pace that would absorb the unemployed. For example, in the US, one-third of workers are expected to be displaced by automation by 2030. The problem is not globalization as many on the populist right argue, but automation. And once that genie is out of the bottle you can’t get it back in: driverless vehicles, cashier-less supermarkets, banks and lawyers driven out of business by blockchain technology, etc.
Secondly, we see the growth of what is called a ‘gig’ economy characterized by short-term contracts or freelance work, with few or none of the usual worker benefits and protections.
Thirdly, automation is producing growing social inequality because most of the financial benefits are going to investors, capital and the highly skilled. Lower wage levels are generally stagnant.
Fourthly, the automated economy will be able to produce more and more goods and services while generating greater unemployment. So how will these good and services be sold if the majority of people don’t have the money to buy them?
Fifthly, apart from the moral repugnance of poverty in the midst of wealth, social inequality will result in political unrest that can lead to disastrous consequences. Just look at the damage that right-wing Trumpian populism in the US is doing as more and more aggrieved people are willing to place their trust in the hands of a ruthless, narcissistic leader who is hell-bent on undermining democratic forms of governance.
We also see the left variant of this populism in Venezuela under Maduro, who has exploited the dissatisfaction of the populace and created a social and economic disaster and remorselessly violated human rights as he has established an outright dictatorship.
In Barbados we have been blessed, as much by accident as by the philosophical temperament of our people, with two parties that are committed to social democracy, i.e. the principle that the engine of growth of our economy is private entrepreneurship but that the Government must ensure that the benefits of growth are equitably shared.
One of our parties has temporarily destroyed itself, but will surely rise again. It has learned the hard way that in Barbadian politics there is a premium placed on visionary leadership. The other party now controls the reins of government. While the main preoccupation of the BLP at present is, understandably, to restore the health of our ailing economy, it too will have to address the changing nature of work and the crises that this provokes. As will the trade union movement. Trade unions can no longer be in the business of protecting jobs but must find innovative ways of protecting working people. Indeed this issue is ideally addressed by the Social Partnership. Many people have proposed education and re-training as a way of coping, but that’s always going to be a game of catch-up and will only be a partial remedy. Barbados, to be successful, must be a perpetually innovative knowledge-driven economy. What we need therefore is a robust safety net and opportunity web.
There is one solution to the problem that a couple of decades ago was dismissed out of hand as utopian nonsense. Now it is attracting serious attention around the world. New small-scale trials in countries such as Canada, Finland, Scotland, Uganda and Kenya highlight the growing interest. This is the idea of a universal basic income.
Simply put, this is an unconditional cash transfer to every individual citizen (not in prison) to cover the basic cost of living – or, looked at negatively, to keep people above the poverty line, which in Barbados is probably about $10,000 a year – to be claimed by income tax return. Some people call it universal basic security or a negative income tax.
The main objections are threefold: how would you pay for it? Why should the rich receive this handout? And wouldn’t it be a disincentive to work for those at the bottom? The most credible objection is the cost to taxpayers of a basic income. You can do the math yourself.
But hold on. You could set the level the Government could afford and increase it gradually. You could also claw it back by using a reduction rate. For example, if the basic income in Barbados were set at $10,000 a year and the reduction rate were 30 per cent, the basic income would be reduced by 30 cents for every dollar of earned income to the break-even point where anyone earning an income of $40,000 or over would not receive any of the benefit.
You could also require that persons between the ages of 18 and 25 must either be working, be currently enrolled in an institution for further education or have completed such further education, or be enrolled in a volunteer/apprenticeship/internship programme approved by the Barbados Youth Service.
The basic income in the form of a reverse tax credit would also replace all the current welfare transfers, tax concessions and credits, unemployment benefits and old age pensions, but not health and education, which are rights. This basic income would be an incentive to get more young people to acquire work skills, learn social values and undertake community team work. It would also be an investment in human capital. Of course, all certified disabled citizens of any age would receive the basic income without any conditions attached. Then there are the hidden benefits in better health and education and lower crime that would help reduce the societal costs.
In terms of a disincentive to work, in the small experiments which have previously been done, the opposite proved to be the case: young people feel safer to launch an entrepreneurial career. The problem here is one of ingrained perceptions in a market society: the poor deserve to be poor because they are lazy and good-for-nothing schemers, who, at the most, deserve charitable handouts.
The advantages of a basic annual income are:
· it targets the needy without stigmatizing them.
· it supports the creation of social capital, so critical to a services economy like Barbados.
· it leads to a more equitable and cohesive society.
· it provides a better social safety net.
· it suits the changing nature of work from long-term to short-term/part-time.
· it eliminates poverty, the poverty trap and dependency.
· it improves women’s options, especially single mothers.
· it recognizes and rewards unpaid or underpaid work such as that provided by caregivers and volunteers.
· it encourages entrepreneurship.
· it draws income earners from the informal economy into the tax net, since in order to receive the basic income they would have to make a tax return.
Let us at least discuss it.
(Dr Peter Laurie is a retired permanent secretary and head of the Foreign Service who once served as Barbados’ Ambassador to the United States)