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4 Ways Universal Basic Income Could Impact Innovation

The volume of the UBI conversation is growing, but what impact could it have?

25Aug

The debate around the merits of automation has been raging for months, but a previously far left political idea is beginning to take hold that some believe could solve the problem. This is the idea of Universal Basic Income (UBI), which essentially gives every person a specific amount of money regardless of whether they are in or out of work.

It is an idea that certainly would have had no traction at all until recently because of how closely it ties into the ideas spread by communism and the taboo around them that lasted until after the Berlin Wall came down in 1989. However, some of the richest and most influential people in the world now see it as a viable option to counter the issues that are soon going to arise from the mass automation of jobs across the world, which could potentially see millions of people losing their livelihoods and render skillsets useless.

Support for this comes from hugely influential business leaders like Mark Zuckerberg, Elon Musk, Andrew Ng, and Sam Altman. It is not some kind of fringe idea, but one that is being discussed by the most influential people in the world. This is not surprising, as despite the protestations of their purpose, these people primarily want to earn money and if their user base has no money, they can’t spend it on their products.

The idea has gained even more traction recently thanks to a Finnish experiment which selected 2000 people to receive UBI. This experiment saw people reportedly more willing to take work and had reduced stress levels, which has led the experiment to become a talking point for campaigners for the idea.

However, with this experiment being relatively limited in scope, we wanted to take a look at how UBI may impact innovation in the future, so we investigated 5 potential outcomes:

Increase Working Opportunities

The basis of modern socialism is the idea that the state should provide a safety net for people, so they can be guaranteed to not die from preventable disease, lose their house if they lose their job, and get a decent level of education regardless of their economic situation. However, the ‘welfare state’ system that normally takes up this mantle is frequently being shown to be inadequate. A prime example was reported in the Finnish experiment, with Marjukka Turunen, head of KELA, the legal unit at Finland's social insurance agency reporting a conversation she had with one of the participants who said ‘I was afraid every time the phone would ring, that unemployment services are calling to offer me a job’. The reason being that often the lower paying jobs or part time jobs paid less than welfare, but meant that welfare payments would cease if somebody took them.

UBI removes this because it doesn’t matter if you’re working or not, you will always receive a wage that will allow you to undertake additional work without risk.

This has the potential to be a huge boon for innovative risky startups as they can get hotshot employees without needing to worry about paying them full time salaries, and individuals can work in companies that they are genuinely passionate about without having to worry too much about salary. Both have a huge knock-on effect on innovation, with the ability to build ideas quicker than they otherwise would be able to for companies who would not be able to afford to hire these kind of passionate people full time.

Limit The Biggest Innovations To The Largest Companies

One thing that automation will do is put a huge amount of power in the hands of a few billionaire company owners, who will only become richer as automation becomes more and more prevalent in society. These companies will also save a huge amount on payroll and employee expenses like medical insurance, office space, and even basic utility bills as their own headcount can be reduced.

This leaves the potential for profits that are unfeasible today, allowing them to develop or simply buy the next big innovation, increasing their profitability and power. At present innovative startups have the potential to thoroughly disrupt larger incumbents, but in a world were automation is king and the incumbent’s profits are almost unfathomable, startups stand even less chance of making a genuine impact and even if they did, incumbent behemoths can easily just buy them off, take their innovation and strengthen their position or just shelve it to protect their interests.

Increased Dopamine Need

There are many scare stories about dopamine because of its association with addiction. As an addict, when you take a puff of a cigarette or a drink of alcohol dopamine is released. However, dopamine plays an essential role in being human because it is the chemical released when something is achieved.

It is why you feel good when you’ve finished a huge project and you even get a small dopamine burst from just finishing a small task that’s been bugging you. It is a basic human survival mechanism as it stems from a time when we needed to achieve something to survive, whether that’s hunting for food or creating shelter. Today it manifests itself in achieving something at work - clearing your inbox isn’t the same as building shelter so you don’t die, but the dopamine reward is the same.

With a wage that arrives regardless of whether you work, people will be seeking new ways to fill this void, which increases the chances of people seeking out new challenges.

Dopamine and the reward for achievement comes from working towards a goal and achieving it, which means that despite the general consensus that people will sit around in the sun, it will quickly become boring because it achieves nothing. Instead it will increase the need for people to actually work towards something they normally would not, whether that’s starting a new company, inventing something, or just working for a charitable project. All of these efforts help to build something new and innovative that could potentially change the world.

Increase Education

With an increasing number of people losing their jobs combined with skillsets being redundant and a wage that allows them support themselves regardless of circumstances, the need to retrain is going to be huge. With more time on their hands and financial means to support themselves without working, this has the potential to create a considerably more educated population than in any other time in history.

Rather than a time out of work being a desperate search for something that allows you to survive, it can instead be a time to retrain and improve your skills to adapt to a changing economy. This is something that is already happening to some extent with the National Center for Education Statistics predicting that 43% of students will be over 25 by 2020. With more time on their hands and an increasing need for education to perform new jobs, this number is only likely to grow as society changes.

This idea is backed by many large organizations, for instance the World Bank has said ‘Cash transfers have been demonstrated to improve education and health outcomes and alleviate poverty in various contexts’. It is not a logical leap to believe that people who don’t need to worry about living costs are more likely to spend time studying.

However, one of the challenges with this belief is the cost of higher level education at current rates. According to a report from Bloomberg, the cost of a college degree in the US has increased by 1,120% since 1970, with an average cost of $24,930 for public colleges and $33,480 at private institutions today. Universal basic income is unlikely to cover this and the idea of going into a huge debt to pay for skills in a job market with fewer jobs may be a risk that not many are willing to take. 

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