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26 October 2017

Transfer: Could a basic income stabilise the digital economy?

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In his recently published article in the August 2017 issue of the ETUI’s quarterly journal Transfer, Ville-Veikko Pulkka argues that in an increasingly digitalised labour market, unemployment and precariousness will increase in the short and medium term, at the very least, and basic income could be a means of guaranteeing sufficient purchasing power for those losing out from these developments. However, there are serious limitations to this idea which need to be tackled first.

According to the author, the currently applied activation policies, based on strict means-testing and obligations, will not be flexible enough to guarantee adequate purchasing power for unemployed, underemployed and precarious workers if technological unemployment and labour market insecurity increase. However, he also argues that a basic income financed within the current social security system and from higher taxes on labour and capital income is an economically unfeasible option and has serious limitations as an economic stabiliser. Reconsidering monetary policies such as functional finance, helicopter money and quantitative easing for people, but also a moderate tax on robots, would make it possible to boost the disposable income of those falling behind in the digital economy. These tax and monetary reforms would facilitate a more generous social security system and in this context also finance a higher basic income, while at the same time making work pay.

The article therefore concludes that from an economic perspective the most sustainable solution to dealing with the digital transition would be to gradually move towards a more generous and less conditional social security system. If it turns out that these reforms are insufficient, the idea of a universal basic income will still be there.

The article by Ville-Veikko Pulkka A free lunch with robots – can a basic income stabilise the digital economy? can be downloaded for free from the SAGE website of Transfer until 25 November 2017.

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