The economy, jobs, and basic income

By Alan Gummo 

The economy is in trouble so we’re in trouble. We’re worried about a general slow-down in activity, job losses, high personal debt levels, inequality, precarious employment, the hidden costs of underemployment and poverty, and so on. There’s a lot of debate going on about what to do. While many and varied prescriptions are being put forward, everyone from left to right seems to agree that more jobs should be created. 

Fair enough. We definitely need more jobs. Jobs are useful in supporting individual livelihoods. 

The focus on job creation, while widely agreed upon, is nevertheless problematic. It is problematic because in its simplicity it distracts us from talking about the more nuanced challenges we are experiencing with the economy and with employment. These challenges threaten individual livelihoods in ways that need to be recognized and acted upon. Reliance on job creation isn’t going to solve all our problems. 

Less than full employment 

The economy has never operated (with the possible exception of wartime) on a full employment basis. There has never been a time when there was a job for everyone. By all accounts this observed reality will be extended into the foreseeable future. By many accounts – which factor various structural changes, precarious employment, technology invasions into the workplace, and so on - things are moving toward a much less than full employment economy in the very near future. Relatively recent observations of a jobless recovery reinforce these accounts. 

Change and uncertainty 

The economy never behaves predictably or consistently. It changes constantly. It has its cycles. It booms and busts. It grows at high rates and it grows at low rates. It stagnates. It mutates internally. Employment behaves similarly. For every job we create it seems likely we will lose one later. Those displaced from jobs that are destroyed take time to find new ones, and those that do typically see their earnings reduced considerably. 

Uncertain growth and the distribution of its benefits 

We need to consider the reality of growth scenarios that can range from high to low or even to nil and negative. Each scenario will have its unique context (for example, rate of population growth) and drivers (for example, rate of productivity growth). Job creation strategies must be based on a clear understanding of both context and drivers, and how they interrelate.

Absent significant levels of direct public sector job creation, as were achieved by the Works Progress Administration in the United States during the Great Depression, we tend to rely on the private sector to create new jobs. This reliance can have unpredictable results. 

In addition, since we are also concerned about incomes we must be clear on where the benefits of growth (including productivity growth) are accruing.  Recently these benefits have been accruing disproportionately to the upper income groups. The lower income groups have been falling farther and farther behind. 

The policy issue that cuts across all growth and job creation scenarios has to do with the distribution of the benefits of growth. Basic income has a place in the distribution solution. 

Growth and its ecological limits 

We need to free ourselves from our addiction to high rates of growth. For one thing, they don’t seem to be sustainable. Nevertheless, our addiction has driven us to the desperate optimism that in order to grow employment all we need to do is grow the economy, and the faster the better. Not only is this approach prone to failure in economic terms, it is decidedly failing in ecological terms, witness the damage being caused to ecosystems everywhere. This suggests that reliance on unlimited economic growth, particularly when combined with expectations for high rates of growth, is self-destructive. We should be more careful. 

The Productivity Paradox 

We are hamstrung by what I call the Productivity Paradox. We like to encourage higher productivity across our economy. We like to think of higher productivity as arising from such factors as improved work processes and technological innovation. These are good things. But we don’t like to think about the people who lose their jobs because of these improvements. 

So here’s the paradox: at the same time as we try to devise effective job creation strategies we routinely encourage and reward productivity improvement through workforce reduction. Corporate CEO’s receive magnificent bonuses in the same time periods in which they downsize, outsource, export, or in other ways reduce the size of the corporate workforce. Public sector managers who contract out or downsize by attrition in order to do more with less receive analogous rewards. 

The demand for workforce reduction is the direct cause of challenges like the technology invasion mentioned above, not simply its effect. Unfortunately the replacement of workers by automation often results in workers dropping down to lower-paying sectors. Dropping down from the manufacturing to the service sector is a case in point. Similar downward mobility is now being forecast within the service sector itself by way of computer technologies that replace lawyers, writers, editors, and so on. 

Attempting to grow jobs in an economy where success is measured by shedding them is a bit tricky from a public policy perspective. Indeed it sounds like a hopeless Sisyphean scenario. But no matter. As we continue living with the productivity paradox we still have to do something about its impact on the people who lose their jobs because of it. A basic income bridge between jobs would help. 

We also need to create room for more discussion of uncompensated work. Caregivers, volunteers, interns, moms and dads who look after kids all do work but get no pay. They add value socially and economically without compensation. Simply creating more jobs will certainly not solve this problem. 

There will always be people who are not employed, and there are good reasons for not insisting that everyone be employed. Focusing public policy primarily at putting everyone to work is much too narrow. Moreover, basic income does not just apply to those not working. It also applies to those working for less than a living income, both full time and part time. As the precariat grows the need for remedial action grows with it. And, nothing in basic income precludes policies to facilitate finding work or getting training,

As suggested above, reliance on job creation isn’t going to solve all our problems. We need a broader policy framework. 

Basic income can be a powerful tool in such a framework. It would provide for greater individual and family security independent of employment and economic change. It would support predictable flows of consumer spending. It would compensate for uncompensated work and provide support during job search and training periods. 

Basic income would solve many problems at the same time. It would get us out of a lot of trouble. 

-- Alan Gummo is a retired city and regional planner. Gummo was also a public policy researcher and worked in municipal administration. He is active in the basic income movement.