Universal Basic Income may not be a new idea, but it’s gaining traction through an experiment in the Bay Area. (Courtesy photo)

Silicon Valley is experimenting with a Universal Basic Income — and we should pay attention

“We’re about to experience a change in our economy on the scale of the agricultural or industrial revolution,” announced Sam Altman, the president of Y-Combinator, to a San Francisco audience.

Due to artificial intelligence, 62 percent of American low-skill jobs are at risk. The median probability of automation replacing the lowest-paid jobs is about 0.83, while jobs in higher-wage classes have a 0.31 to 0.04 chance of being automated. According to a 2013 report from Oxford, 50 percent of jobs could be replaced within the next 10 to 20 years — a claim supported by a McKinsey report that suggests the technology we have today could replace 45 percent of jobs right now.

If Altman is right, and this economic shift can be equated to the industrial revolution, this change will be an overwhelmingly positive phenomenon for future generations. In the meantime, we’ll face mass technological unemployment. This is why Altman is exploring the Universal Basic Income as a way of alleviating a problem that he, in part, helped to create.

Providing a guaranteed income is not a new idea and has enjoyed cyclical popularity, first suggested in the United States by Thomas Paine in “The Rights of Man.” But right now, Y-Combinator is conducting the first UBI experiment in the U.S. by paying $1,500 per month to 100 families living in Oakland and studying how having guaranteed income changes people’s lives and habits.

All of this raises the question: Are we approaching UBI’s tipping point?

UBI would provide an income safety net for those facing technological unemployment by providing a cash grant for basic living expenses while still encouraging full-time work and investment in education and technical training.

Every study completed so far on UBI demonstrates that receiving a basic income does not cause a drop-off in work. Although these studies are not infallible, they were done in small homogeneous communities and the participants knew they were being studied, they are a good indication of UBI’s potential

A study done in Canada demonstrated that UBI barely caused a decrease in working hours (less than 1 percent on average) and productivity increased. In a Namibian village, an experiment showed that people receiving “no strings attached” money from the government don’t squander it. Instead, the number of children attending low-cost private schools rose to 92 percent, and the rate of malnourishment among children plunged from 42 to 10 percent. People were likely to make capital investments in their small businesses and become entrepreneurs.

When you consider basic human behavior, this makes sense. UBI creates a floor, rather than a ceiling, so recipients are incentivized to make investments to increase their long-term earning potential.

It is also an elegant solution because it’s simple and transparent. The federal government funds about 126 anti-poverty programs, the majority of them entailing in-kind benefits. Not only do these programs carry administrative costs that could be eliminated by UBI, they also are complicated and dehumanizing for recipients to navigate.

UBI honors the agency of low-income people, allowing them to participate in the mainstream economy by freeing them from complicated benefits that often incentivize welfare over work.

It’s still too early to know the results of the Oakland experiment. Opponents write off UBI as being cost-prohibitive, but if the impending economic shift is of the magnitude Altman predicts, technology could lower the cost of living dramatically, making UBI within reach.

It’s clear that the future of work is going to be vastly different from what we’ve grown used to and we do not have a clear idea of what will replace our current 9-to-5. We’re already feeling the strain of this change and we’re going to have to react with truly innovative ideas.

Katie Modesitt is the development manager at the Independent Institute, a nonpartisan public policy think tank in Oakland. She is based in San Francisco.

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