Automation Takes Jobs and Universal Basic Income Might Help
Review of Andy Stern's book, "Raising the Floor"
Posted Jul 02, 2016
During his 15 years as President of the Service Employees International Union, Andy Stern was a controversial figure. He suffered his share of criticism from inside and outside the union. There was, however, no disputing his success in making SEIU the largest and fastest growing union in the country and a powerful political machine that was instrumental in getting Obama elected and the Affordable Care Act passed. During Stern’s tenure as national organizing director and President, he introduced and implemented strategies of industry-wide organizing and bargaining to counter the changing reality of employers who were becoming large and international. He took SEIU out of the AFL-CIO and formed a new labor federation called Change to Win, because he felt that the mainstream labor movement was too conservative about organizing and limited its power by refusing to consolidate smaller unions into bigger and more powerful ones. The move failed, as Stern himself admits, because of both a lack of political will and share strategy.
With Secretary-Treasurer Anna Burger, Stern developed plans for a nationwide Service/Call Center that would centralize the back-office functions of locals, as well as service many of their contracts in order to free them up to grow and deepen their relationships with members. He even hired an internationally renown design firm, IDEO, to help SEIU leaders figure out why their members weren’t more engaged with their union. IDEO was famous for using what they called “consumer empathy” to design objects like the first Apple mouse, the stand up toothpaste tube, and better shopping carts and elementary school desks. They embedded themselves in the daily lives of SEIU members and sought to understand their relationship to their union from the members’ point of view. These initiatives had their critics, but they also reflected and reinforced Stern’s reputation as a maverick thinker and leader in the labor movement.
My own encounter with Stern occurred as a result of his efforts to rethink the role and structure of locals. Stern hired an interdisciplinary group of change agents—myself among them—to help locals rethink their functioning, strengthen their leadership, reconnect in deeper ways with their members, consolidate their back office functions and make them more efficient. We also sought to help them develop visions and long-term planning processes which were unfamiliar in many local union cultures because they were used to being on the defensive and thinking short-term. He told us, “I know what we know, but I don’t know what we don’t know and I want you to help us figure that out.” He borrowed liberally from thinkers and practitioners in the private sector, academia, psychology, and the worlds of organizational development and community organizing to try, in his words, “to steer SEIU into the 21st Century.” He did so because he could see that the historical arc of labor unions was leading them to potential irrelevance. Whether he succeeded or not is a matter of opinion and debate. What isn’t in question is that Stern broke the mold of a traditional union leader and was willing to experiment, take risks, and anticipate future trends.
Since leaving SEIU in 2010, Stern has been studying the changing nature of work in America with the same spirit of innovation and future-thinking. In his new book, Raising the Floor: How a Universal Basic Income Can Renew Our Economy and Rebuild the American Dream, Stern argues that technology is replacing jobs at an accelerating rate, and that this trend is permanent and threatens our society with massive job losses over the next few decades in both blue and white-collar sectors of the economy. His premise is that this rate of change is historically without precedent and reflects an “inflection point”—a permanent paradigmatic shift in how work is and will be organized apart from anything to do with the business cycle. “We are heading off a cliff,” Stern says, and traditional liberal approaches can’t stop us. The only solution that makes sense is a radical one--one that is gaining increasing traction today—namely, a Universal Basic Income in which every person is given a fixed amount of money per year, a “floor” upon which individuals can build wealth by engaging in further work (there is no ceiling, just a floor) or which can be used as a security blanket for those who want the economic freedom to explore personal growth or leisure activity.
That automation threatens to displace workers is not a new observation. In fact, Stern liberally cites economists and political leaders who raised alarms about this trend decades ago. But the digital age, advances in artificial intelligence, and new and sophisticated computer software systems, have accelerated this process exponentially. Stern has travelled far and wide to interview technologists, corporate CEOs, academic researchers, and activists organizing at various points on the digital landscape. All of them underscore not only the increasing capacity of digital devices and software platforms to replace people directly, but the powerful incentives companies today have to either offshore their jobs or use sophisticated software to dissect job functions, and recruit freelancers to perform them, thereby replacing full-time workers who have counted on their jobs, including their employer-based benefits, to last a lifetime.
No more, argues Stern. That bond and implicit promise between employer and employee has been forever severed.
Stern builds his case for the appearance of this inflection point carefully over six chapters. For example, the McKinsey Consulting Group studied the issue of automation in a digital age and in its flagship business publication, the McKinsey Quarterly, concluded that up to 45% of today’s jobs could be automated within the next 20 years. Two scholars at Oxford University conducted an exhaustive study of 702 U.S. occupations and new techniques in automation and concluded that 47% of jobs in the U.S. are at risk of being eliminated due to advances in software, robotics, and artificial intelligence. Stern cites the fact that there are already self-driving trucks on the road and that with the progress being made in artificial intelligence and self-driving vehicles, it’s conceivable that 3.5 million truck drivers could be replaced in the next few decades and trucking is the largest occupation in 29 states. Morgan Stanley conservatively estimates that the freight industry could save as much as $168 billion annually by harnessing autonomous technology--$70 billion of which would come from reducing staff.
And, contrary to what we once thought, white-collar and professional jobs are not immune either. Budget analysts, legal secretaries, technical writers, loan officers, bookkeepers, accountants, paralegals, and librarians—any job, in Stern’s words, “that can be replaced with an algorithm or software”—is at risk.
Consider the example of diagnosing cancer. At Sloan Kettering Cancer Center in New York City, the IBM computer, “Watson”—famous for beating two chess grandmasters and the best player in the history of Jeopardy! at their respective games—has been able to correctly diagnose cancer with an extremely high rate of accuracy. This makes sense if you consider that Watson can quickly read through 600,000 pages of medical evidence, 1.5 million pages of patient records, and 2 million pages from medical journals. It can compare patients’ symptoms, history, and genetics to diagnose and develop a precise and successful treatment plan.
The ramifications of this trend are enormous. As white collar jobs shrink, the “dividend” that used to accrue to a college degree is no longer there or is shrinking, and families, for the first time, are having to calculate the return on their investment of their children’s higher education, all the while watching these kids accumulate huge amounts of debt.
Having established that there is an economic tsunami coming, Stern goes one layer deeper in his analysis by identifying what he calls two big “uncouplings, (1) the uncoupling of income from economic growth, and (2) the separation of work from jobs. In the first, he tells the story that progressives all know, namely, that while productivity is increasing and technological progress is extremely robust, the benefits are going to the top 1% or the 0.1% rather than to working and middle class people who are seeing their jobs go overseas and their incomes stagnate. More and more things can be produced using fewer and fewer people. In the so-called “race to the bottom,” American workers are losing out to automation and to cheaper competitors overseas. Time and again Stern reminds us that the postwar social contract in which children go to college, get a full time job, enjoy the benefits (won by unions), and look forward to a secure retirement and the prospect of watching their own children do better than they did, has been permanently broken.
The second decoupling, that of work from jobs, is more insidious and alarming. It’s not just that technology is directly replacing workers. Jobs, themselves, are being broken down into component parts or processes and each one can either be automated or else crowd sourced out to freelancers, temps, or consultants—the so-called “contingent” workers or members of the “gig economy. “
The theory is that people aren’t workers anymore, but independent entrepreneurs. For some, such a redefinition of work may seem to promise an increase in personal and creative freedom, but it has a dark side. Once work becomes separated from a job, it can more easily be outsourced. These new contingent or “crowd workers,” as they’re also sometimes called, have little or no safety net or power vis-a-vis their employers. While some people appreciate the freedom that the gig economy provides, the fact that the 9–to-5 job is a thing of the past leaves these workers in a harsh, uncertain place with lower wages and little bargaining power.
Increasingly, the marketplace for even high-end and sophisticated piecework is international in scope. When even well-educated Americans compete for such piecework against scientists, mathematicians, and coders around the world, cobbling together a living without job security, pensions and other benefits that used to come with full-time employment, the common sense notion that studying math and science in college insures economic stability and upward mobility no longer seems like a truism. And while Stern interviews several activists attempting to organize such workers, so far, it is an uphill battle.
Stern’s depiction of our current economic inflection point is depressing. With the erosion of the traditional employer-employee relationship, traditional union organizing and collective bargaining, while crucial to protect workers in the present, can’t be the long-term solution to the technology driven structural unemployment of the future. With the disappearance of the traditional employer-employee relationship, what becomes of collective bargaining?
Stern argues that progressives must have a short and long term strategy. In the short run, there are still absolutely crucial battles that must be fought on the traditional liberal playing field—for example, getting a new stimulus package that includes spending on infrastructure, raising the minimum wage, investing in education, tweaking and simplifying the earned income tax credit, and/or mandating a shorter work week to spread out available work and income, etc. These are vital efforts aimed at supporting and raising income for poor, working, and middle class people who are currently under siege.
But Stern believes strongly that the only long-term and radical solution that stands a chance of preventing our economic system from irreparably breaking down is the implementation of what is known as the Universal Basic Income, or UBI. Give people cash regardless of whether or not they’re working or want to work. People can choose to work and earn more or not. If the number is set correctly, it keeps people out of poverty. It allows people greater choices in life. It helps workers bargain with employers from a position of greater power. It increases demand in the economy and it provides a “floor” upon which people have the freedom to explore other, non-remunerative activities in their personal and public lives. Stern, for purposes of stimulating thought and discussion, proposes a $1000/person monthly stipend, with regional cost of living adjustments and an inflation rider. He says, “…with major technological advances eliminating more middle-class jobs, new systems of universal support are required. Lacking good jobs and satisfying work, the next generation will desire to build a life outside of poverty and low-wage work, and we should endeavor to give them that opportunity.”
The UBI isn’t new and Stern isn’t the first to argue its merits. In fact, it is a concept that has been promoted for a long time by both liberals and conservatives. Richard Nixon and conservative economists Friedrich Hayek and Milton Friedman supported a version of it (Friedman wanted to do it through the tax system with a “negative income tax,” i.e. everyone with incomes above a certain level pays something and everyone below that level receives something), as did Martin Luther King, and contemporary liberal economists like Robert Reich.
The UBI seems simple and, on its face, compelling, but it has many critics who argue that it would bankrupt the federal budget, put our social safety net too much at risk by having to cater too much to conservatives, and that it faces impossible political opposition. A recent national referendum in Switzerland on one version of a basic income proposal was soundly defeated. While increasingly debated by economists and policy wonks, there isn’t a single politician in the U.S. who is talking about it today.
In Raising the Floor, Stern wants to correct this—to provoke debate and bring the concept of the UBI into the mainstream of liberal thought. He attempts to delineate the ways the UBI could be financially affordable and even articulates a political strategy for building the kind of bipartisan coalition that would be necessary to make it work. Some of the ideas are, at first glance, shocking. For example, he believes that we would have to phase out almost all current welfare and transfer payments that the government currently deploys to keep people out of poverty (with the exception of Medicare and Social Security) in order to raise a significant percentage of the costs of the UBI. And he can, at times, trigger the reader’s cynicism about Washington gridlock when he suggests a value-added and wealth tax to raise more of the funds needed.
In principle, the UBI has something in it for everyone. Obviously, it is in its implementation that problems can and will arise. The issue, though, is this: If you buy Stern’s analysis of the magnitude of the catastrophe coming our way in the form of skyrocketing unemployment and underemployment driven by automation, artificial intelligence, robotics, and other new technologies, then you have to question whether traditional progressive solutions—stronger unions, a redistributive tax and regulatory system, a more activist government, and a broader and more effective social safety net are sufficient to meet the challenge. If the answer is no, then radical ideas like the UBI start to break through our cynicism. In that case, we owe Andy Stern a debt of gratitude.