Wiped Out by the Automation Wave: a Case for Universal Basic Income

By Younseo Ryu / Winter 2020

My uncle Eric works in the logging industry. He specializes in logging in a steep mountainside. Recently, he told me, "the traditional logging we are used to is over. Nobody can compete with the latest technology, not if you are doing it in an old way." Logging has been profoundly impacted by the automation wave; however, steep mountainsides have remained unaffected since machines cannot function there, at least until a few years ago. Hence, not to be left behind from the industry, he invests most of his capital to build and send machines to mountains. I still remember when he said, "In the past, that machine you see like that never could come up this hill. Now it operates well here. It has replaced fifteen employees for the last year." He still misses his engineers, who worked with him mostly for more than a decade. They were highly trained engineers with bachelor's degrees and certificates. However, the machines made the skills earned by them worthless.

According to the survey conducted by the U.S. Bureau of Labor Statistics, there are approximately 152 million jobs in the U.S. as of January 2020 ("U.S. Employment," 2020). Among them, 25% percent are currently at high risk of automation. In twenty to thirty years, 44% of American jobs will be subjected to automation (Nova). Already, 4 million jobs have been automated in Michigan, Ohio, Pennsylvania, Wisconsin, Missouri, and Iowa. More jobs will be automated in those states. For example, the most common job in 29 states is truck driving - 3.5 million jobs in total (Dana). Moreover, a lot of businesses, such as gas stations, motels, restaurants, rely on truck drivers. However, it is projected that truck drivers will be replaced by self-driving trucks, which are now being tested on highways, and this will cause a significant impact on states and, most importantly, people. Moreover, jobs such as retail workers, fast food workers, call center workers, food services, food prep, manufacturing, insurance agents, bookkeepers, financial advisors, accountants, radiologists, will mostly be replaced with robots and artificial intelligence, and the jobs make half of the American jobs ("The Most Common Jobs", 2019). Yes, automation is real, and it's only a matter of time until its impact on us becomes clearly visible.

The irony of the automation wave is that it is beneficial to this country's economy. Self-driving trucks, artificial intelligence, and more will benefit corporations and increase the gross domestic product (GDP). For instance, Amazon, the biggest e-commerce company in the U.S., has taken over the retail industry in the United States. The company implemented automation on many steps, from storing products in warehouses to product delivery to customers, replacing humans with robots. As a result, Amazon destroyed over 2 million jobs at grocery stores, drugstores, warehouses, and delivery services (Nutting). Millions of people have lost and will lose jobs because of Amazon; however, it is benefiting the U.S. economy because of the large amount of revenue it generates, 87 billion dollars only in 2019 (Protalinski). When the automation wave actually becomes a thing in the U.S., the media will report the U.S. GDP to be a record high. However, we have to note that although the U.S. economy is doing well, Americans are losers in the game because those jobs that will be replaced by automation are simple and repetitive ones. The ones that will suffer from it are average Americans and the poor. I would not label the automation wave as wickedness because automation is a result derived from technological advancement. The underlying problem is that no one in the White House nor Congress discusses how we should face this change. Instead, the government places corporate rights and technological development above the wellbeing of citizens of the United States. The Gilded Age period seems to be repeating in this current moment. By looking deeply into the Gilded Age, we can cogitate the action needed at this moment.

In U.S. history, the Gilded Age was an era that occurred during the late 19th century. It was an era of rapid economic growth, which led to rapid industrial expansion, such as railroads, factory systems, mines, and constructions. Despite the era generating vast wealth, most Americans were left with nothing - politicians in the era were inefficient and corrupt. To them, corporate rights and technological development were much more significant than workers’ rights and security. Hence, farmers and industrial workers had to work long hours in dangerous conditions for low pay, and they were not a part of the new prosperity. As a matter of course, many of the most successful capitalists within the new economic order of the Gilded Age showed their uneasiness with the times. For instance, John D. Rockefeller, the wealthiest person in the era, realized he should protect his cause and his oil empire. Andrew Carnegie, the father of the American steel industry, recognized that he would need to create a new philosophy to defend the massive fortune he accumulated (“The Gilded Age”). Both tried to soften the repulsion from the public with philanthropy and philosophy, even though their own firms were thriving with selfishness and cruelty. An American historian Howard Zinn writes in his book that the banks and capitalists had substantial interests in monopolies as to create an interlocking network of powerful corporation directors, each of whom sat on the boards of many other corporations. According to a Senate report of the early twentieth century, Morgan, at his peak, sat on the board of forty-eight corporations; Rockefeller, thirty-seven corporations (Zinn). Yet, the flaws of the Gilded Age have not been fixed to the present. The history of the American economy, very few benefitting from prosperity, is repeating now with a new policy model called neoliberalism.

Neoliberalism is a set of economic policies that tends toward free-market capitalism and away from regulation and public ownership. The neoliberal era began in the 1970s and continues to the present. During the last 50 years, its notions of common sense – an individualism, harsh competition, an attack on the welfare state, indifference on public goods, and its attack on everything that does not have market values – have become the hegemony of capitalist societies. During the last 50 years, those of wealth and power supported the importance of free market and competition so avidly to the point where a member of the United States Supreme Court, Lewis Powell, wrote a monumental memo for the United States Chamber of Commerce. In the memo, he advocated coordination of a long-term effort to spread conservative ideas on college campuses, in academic journals, and in the news media to spread a corporate blueprint that would dominate democracy (Cray). As a result, not only neoliberalism restored power to a narrowly defined capitalist class, but it also produced an extensive mass of corporate power in energy, the media, pharmaceuticals, transportation, and even retailing. The wealth inequality in the United States has been rising since the 1970s (Harvey). Middle-class incomes have grown at a slower rate than upper-tier incomes over the past five decades. The wealth gap between America’s richest and poorer families more than doubled from 1989 to 2016. Income inequality in the U.S. is the highest of all the G7 nations, according to data from the Organization for Economic Cooperation and Development (Schaeffer).  The freedom of the market that is proclaimed as the best ideology turns out to be nothing more than the useful means to spread corporate monopoly power over public goods without opposition. 

On top of this adverse socioeconomic status quo of the United States, the shift in the economic model is imminent; but again, nothing is being done for the public - there is no attempt to make any alteration to laws. The following is an example of outdated laws. Although Amazon has been destroying jobs and taking over the retail industry, it pays zero federal income tax. The company instead received a $129 million tax rebate from the government in 2019 (Tom). It is because the company continuously invested in its business by building new facilities, buying equipment, and expanding research. Not only Amazon but many tech companies also pay very little tax, apparently less than you do, including Netflix that paid 2.5% federal tax out of $899 million income in 2019 (Sullivan). If this continues, only average Americans will pay tax while all tech companies, which are the biggest and strongest as well, do not. We need a change at this moment.

As a solution to this issue, I strongly suggest Universal Basic Income, or UBI. For example, a democratic candidate Andrew Yang proposed Freedom Dividend, $1k a month to every American adult over 18. Yes, it sounds too good to be true. Nonetheless, historically, Thomas Paine supported UBI, Martin Luther King Jr. fought for it, and it even passed the House of Representatives twice in 1971 (Valverde). Also, Alaska has UBI funded by oil money, and everyone in the state receives between $1k and $2k every month, no question asked (Gupta). As the oil in the 21st century is data and technology, UBI has to be funded by technology money. Just like Alaska collects oil money from every gallon of oil, the federal government ought to collect a tiny slice of tech money from every Amazon sale, every Google search, every Facebook ads, and every self-driving truck mile. The collection of slices will give the American public a fair share. Hence, UBI is not an unreal thing to discuss. It is an actual thing that has been discussed since the foundation of this country and even implemented for many years in a state for decades. And I believe now is the right time for it to be implemented in the country.

If UBI is as good as it seems, then are there people against it? What obstacles prevent us, as a society, from having UBI to solve problems derived from the automation wave? I believe the most prominent hindrance is the socialism-capitalism dichotomy in the country. Supporters of capitalism have very negative views on socialism. For example, approximately 63% of Republicans and Republican-leaning independents had a very negative view of socialism, and 45% of them had a very positive view of capitalism. They viewed socialism and capitalism as zero-sum terms, meaning they believe socialism and capitalism are mutually exclusive. Capitalism supporters believed socialism would destroy the country's economy, as it happened in China, Venezuela, and the Soviet Union, by undermining work ethic and increasing reliance on government. Socialism supporters believed capitalism is benefiting only a few and exploitative in nature, and they mentioned Sweden, Norway, Finland, and Denmark as success cases of the implementation of socialistic factors in their market economy ("In Their Own Words," 2019). Apparently, people with positive views on capitalism would not consider UBI as a beneficial policy. Nevertheless, they should not consider UBI as the beginning of the spread of socialism and communism. Supporting UBI, Franklin D Roosevelt once remarked, “The test of our progress is not whether we add more abundance to those who have much; it is whether we provide enough for those who have too little.” When Martin Luther King Jr. was making a speech about UBI at Stanford in 1967, he said, “The dignity of the individual will flourish when the decisions concerning his life are in his own hands, when he has the assurance that his income is stable and certain, and when he knows that he has the means to seek self-improvement (Arnold).” We need to have an ethical principle that UBI is needed in this status quo to create a true democracy that finds a balance between corporate rights and the common good.

Still, there are two big arguments from people against UBI. To start with, it is expensive. For instance, to fund $10k a year to every adult in the United States, the government would have to invest $2.5 trillion every year in it when the U.S. federal government collects $3.5 trillion in revenue each year (Amadeo). Second, UBI might disincentivize people from working. To elaborate, during the Clinton era, the welfare state decreased drastically, but the employment rate increased as it motivated people to get jobs ("The Lowest Unemployment," 2020). Yet, the arguments against UBI can be easily debunked. Let's talk about the taxation system in this country. The United States is one of the lowest taxed countries in the world, 24% of GDP was collected as tax in the United States in 2019 while the OECD average tax-to-GDP ratio was approximately 35% ("How Do U.S. Taxes"). Along with that, Warren Buffett made a famous statement that he paid less tax-rate than his secretary, thanks to many loopholes and deductions that benefit the rich. To elaborate, in the 1950s, when the country was at its economic boom, the highest earners had a marginal tax rate higher than 75%. But now, as of 2019, the highest earners have a marginal tax rate lower than 40% (Hutchison). Also, corporations are paying zero or almost zero taxes, as mentioned in previous paragraphs. With significant reforms in the taxation system, I believe this country would not have to worry much about the financial deficit coming from UBI. More importantly, regarding disincentivizing people from UBI, I would have to insist the motivation in people does not matter anymore; instead, it is about the inevitability of people losing their jobs.

The ratio of producers to consumers has been declining significantly. For instance, in 1979, general motors employed more than 800,000 workers and made about $11 billion. In 2012, Google made about $14 billion with 58,000 employees (Kurzgesagt). Kodak, the iconic American photography company, had 145,000 employees in 1988. But in 2012, when they went under Instagram, they had 13 employees serving 30 million customers. When Facebook purchased WhatsApp for $19 billion in 2014, the application was serving 450 million customers with 55 employees (Reich). As more technologies and automation take over many industries, the ratio will decrease faster, and, inevitably, average Americans and the poor will not have any choice but to lose their jobs. The automation wave will displace jobs, disrupt local economies, and raise inequality. We should face the impending reality and ask ourselves how we, as a society, can win the automation wave.

Although today is not a suitable stage for Americans to collide against each other, different frames of reference over the automation wave and socioeconomic ideologies will constitute a colossal obstacle. Socialism-capitalism dichotomy will close many people’s ears. Capitalists and corporations will reinforce the neoliberal ideology in public to diminish the regulation and taxation of corporations. UBI will be cogitated too costly and treated as a disincentive to workers. As such, going forward with policies for UBI will require a great deal of time and energy. Still, we need to be consistent and courageous when we encounter aversions. We need to persuade the public that Americans are the indispensable shareholders of the country who deserve better. We need to examine further about the history of this country and the structure of the economy so that we can be self-assured to discourse the fallacy over it and the urgency for reform. We need to be aware of the significant impact of the automation wave. Martin Luther King Jr. once emphasized, “Our lives begin to end the day we become silent about things that matter."  If we speak for ourselves, the citizens of the United States will not fall victim to the wave of the automation revolution.

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