Must Income Still Be Attached To Work?

Before getting to the topic of this post, let me make this observation.  I write these pieces to try to pique the reader's interest, so readers will reframe my questions in their own terms and then consider the questions anew from their own perspective.  I am not trying to give a definitive answer and certainly don't claim to be doing otherwise.

I hope the motivation for this particular piece is obvious.  Recently there seems to be one article after another about how artificial intelligence, either coupled with robotics or as a stand alone, will displace workers from their current jobs.  These pieces cast the situation as a tragedy waiting to happen.  Surely that would be the case if many workers who were displaced from their current jobs then lost their wage income as a consequence, and then they couldn't find other employment so they couldn't find a way to make up that income loss.  This seems to be the narrative that most people have in mind.  

But what if the income loss was minimal or not at all?  The jobs would be gone but the income wouldn't be.  Surely, that is logically possible.  Given that, two questions come to mind.  First, what is to prevent it from happening?  Much of the rest of the post will be spent on considering that question.  Second, are there plausible ways to overcome these restraints?  I'll have a little to say about that too.

The companies that are producing AI have been making massive investments in their products.  The logic for doing so is that they expect there will be quite a large return on investment.  The companies that purchase AI services from these producers likewise expect to do so profitably, either by increasing productivity or by lowering cost.  The latter implies layoffs, which heretofore have not happened when companies are performing well.  But that will no longer be the case.

It is instructive to consider those sources of income which are available at present that recipients get when not working.  One of those is unemployment insurance.  UI is intended to provide bridge income until the recipient can find another job.  In the jargon of economics, there are market frictions.  Job search takes time, to assess available alternatives and find a good fit for the worker.  In the absence of UI, the person might very well take the first available job offer, because the income need has to be satisfied.  But the first offer might not really make for a good match.  Allowing the process to play out for a while will yield better results.  The bridge income that UI provides enables a better way to manage this market friction.  And with that UI is available only to those who have worked previously and paid the UI premiums via a tax on their paychecks.  Further, UI is of limited duration only, to encourage the recipient to meaningfully engage in job search.

Another source of income available to some of those who aren't working is retirement income.  Social Security and Medicare might be the first of these to come to mind.  There are other possible sources of retirement income, private pensions or pensions provided by state government.  Eligibility for retirement typically requires reaching a certain prespecified age and having been employed for some required number of years or becoming disabled while on the job, with the disability significant enough that the individual can no longer fulfill work obligations.  As there no longer is mandatory retirement, the decision to continue to work or to retire is left up to the employee, for those who are eligible.

It is important to observe that for both UI and retirement pay, earnings while previously working matter in setting the amount of the payment, with higher earnings leading to higher non-work pay.  At least part of this is that those with higher earnings contributed more while working, so they should be entitled to receive more on that basis.  But the prior pay-in and the subsequent pay-out need not balance.  So, I'd like to introduce an ethical notion here that I believe matters a lot. It is believed that those who earned more, either through their own hard work or because they were especially talented, deserve more.  In some sense, this is a parallel idea to that good students should get higher grades.  From core beliefs, such as in the Puritan Work Ethic, we have been socialized into these views, which can be regarded as part of the more general "meritocracy" that so many subscribe to.

What should happen then if a good chunk of the workforce will get laid off in the near future with no prospect whatsoever of finding other employment?  If some sort of payment were given to these folks as a source of income, should their prior earnings matter as to the amount of the payment, or are prior earnings irrelevant in this case?  And if prior earnings are irrelevant, are they deserving of some payment nonetheless, even if they are no longer productive?  If they are deserving, then doesn't this point to an egalitarian payment system, socialism if you will?

Before I argue for an answer to that last question, I want to note that there might very well be macroeconomic reasons of the Keynesian kind for making such a payment.  In the absence of such payments there could very well be massive aggregate demand failure, plummeting the economy into a depression.  In this circumstance we'd need something other than the unemployment rate to determine whether this is happening or not, a statistic of the sort:  (Actual GDP)/(Potential GDP).  If this depression were happening, the firms producing AI might not be making large returns and those companies that moved to utilize AI in their business may find their revenues inadequate to continue operation.  This nightmare is foreseeable, so payments to non-workers might then be justified simply to boost aggregate demand sufficiently.

Yet we tend to think of macroeconomic fixes as solutions to business cycle downturns.  Eventually there will be upturns again (or at least one can hope so).   Won't the payments to non-workers halt in this case?  However, the situation where much of the workforce is displaced by modern technology may not be part of the business cycle.  Instead, it might be the new normal.  What then?

This gets me back to ethical considerations.  Should non-workers receive no payment whatsoever, because they don't deserve it?  Or does the simple fact that they are human beings mean they should be entitled to such a payment, sufficiently large to live life decently?  My point here is that it is our ethical beliefs which are apt to provide the greatest barrier toward creating a system of payments to non-workers, which might possibly become a system of payments to all, where a few do work and receive income beyond this generally provided payment.

At this point I think it is worthwhile to consider a couple of references to help lay the foundation for the argument.  One of these is Paul David's well-known paper Clio and the Economics of QWERTY.  The paper is about the economics of lock-in, where we are stuck in a solution that may have been optimal in the past but no longer is, yet we are unable to move to something better.  The QWERTY keyboard provides such a great example of this.  It was designed initially to encourage typing at a slow pace, so the keys wouldn't jam.  Eventually, with improvement in typing technology, particularly the advent of the electric typewriter, and then the personal computer, typing speed was desired.  Yet the QWERTY keyboard persisted.  The explanation comes from the numerous interdependencies that arose, which relied on the QWERTY keyboard remaining in place.  Alternatives, such as the Dvorak layout, were at a huge disadvantage, even if they allowed faster typing for those who mastered that system.  So, the question arises, are we locked into a meritocracy belief system, even if that is soon to be superfluous or already is?  

The other paper is Bertrand Russell's essay from almost a century ago, In Praise of Idleness.  It offers an eloquent argument that an alternative belief system is needed.  I encourage readers of my post to have a go at Russell's piece and see if they find his arguments persuasive.  A question I've been scratching my head about for some time is this.  If you are convinced about the necessity of an alternative belief system, how do you go about convincing others of that as well?

Now I will give a wave-of-the-hands view of our national politics.  We are a plutocracy, where many of the plutocrats have disdain for paying taxes.  It is evident that raising taxes substantially would be necessary to finance a decent-sized payment to non-workers.  Hence, the plutocrats have incentive to maintain the meritocracy belief system intact, to block such payments and hence keep the tax burden on themselves in check.  Their strategy has been to create division among the broader populace and, to date, it has been effective along these lines.  Is there a way to break out of this box that we're in?

It is evident that those future non-workers who would receive payment would vote for such a system.  But, in my view, their support of the idea is not sufficient to make it a reality.  A good chunk of the winners in the meritocracy sweepstakes must also embrace this system, and willingly accept a larger tax burden for themselves to enable it.  They would do so out of a sense of a social obligation.  I wrote about this previously in a post called, Might Members of the Professional Class Embrace Democratic Socialism?  If there are enough within the professional class who do make such an embrace, then I believe it can break the logjam.

But there I didn't consider the impact of AI on jobs.  The fear of that is now front and center making the urgency in doing something significant all the greater.  

Although I'm an idealist at heart, I hope my arguments here are nonetheless perceived as sensible.  If enough others start to ask these questions then maybe something important can be done to address the issues.