Y Combinator made an announcement last Wednesday that it would pursue a short-term, exploratory study into the concept of a ‘basic income,’ a no-strings-attached form of welfare that would be allotted to every citizen of a given city or country. Residents of increasingly gentrified Oakland, California, across the bay from Silicon Valley, will receive monthly stipends.
Basic income (BI) has gotten a lot of attention in recent years, increasingly so as automated manufacturing and services threaten to make scores of millions unemployable. Yet the fact it is coming from a staple of the startup world riles me. It brings up two very different, but interconnected problems that I personally think reflect Y Combinator’s 1) ethnicity and 2) industry.
1) The notion of a no-strings-attached form of welfare is only gaining traction now that people who aren’t poor — and are largely white — are experiencing narrower life opportunities and failing to make ends meet. Blue-collar workers and college graduates with deep debt are entering a strained job market and the middle class is contracting as income inequality is rising.
2) Y Combinator is making the haughty assumption that there is no way to re-employ people who will be made industrially irrelevant by new methods of design and manufacturing, or by the automation of many services. They are testing the hypothesis that a free income is the only way to sustain them.
Both points tie into Y Combinator’s San Francisco base.
In spite of the fact that 52.2 million Americans live on conditional economic assistance, discussion of a basic income has not been explored so publicly before in the United States. According to the U.S. Census bureau, 78% of recipients were black or Hispanic in 2015, while only 13.1% were white. It feels racially biased that a “basic income” is suddenly becoming popular now that a group like Y Combinator is behind it whereas “welfare,” which is essentially the same thing except with a lot more government bureaucracy and a mandate to work in the U.S., still brings up class and racial stigma.
The first point also relates to the extreme inflation and cost of living in the San Francisco metropolitan region. In conjunction with it being a bastion of American progressive politics, Silicon Valley exemplifies so-called “white people problems.” Rent is high for working professionals, while more jobs are being offered that do not pay as much in real salary or in benefits, forcing many into freelancing by so-called “gig economy” startups like Uber.
The second point is that the venture capital and startup community is incidentally driving the cost of living up in the Bay Area by increasing demand over small areas for offices and living space, as well as deliberately by building scalable companies that employ far fewer people than middle class friendly sectors such as the auto industry of yore. Many tech firms also contract their workers, such as Uber, avoiding paying benefits such as healthcare and holidays, as well as withholding taxes. Y Combinator is essentially admitting that the gig economy is a harbinger of lesser employment, while advances in technology will permanently wipe out millions of jobs.
Why weren’t we more worried about this years ago?
In an October article for the New York Times, Katharine Seelye set off a firestorm with the aptly titled “In Heroin Crisis, White Families Seek Gentler War on Drugs.” Seelye points to the rise of drug use across all American demographics, and the resulting cry from mainly white victims and their families to shift from “zero tolerance and stiff prison sentences” to rehabilitation and treatment.
“They know how to call a legislator, they know how to get angry with their insurance company, they know how to advocate. They have been so instrumental in changing the conversation,” Michael Botticelli, director of the White House Office of National Drug Control Policy, told Seelye.
That same logic is what we are likely seeing now in discussing what is essentially easier access to welfare. Now that tech is potentially automating the work of not just poor people, but also working and middle class folks – i.e., more white people – startup organizations like Y Combinator are looking for “gentler” solutions to cash assistance beyond welfare.
You can’t avoid that there is a social stigma that exists with welfare. Ronald Reagan bemoaned widespread abuse of the system by “welfare queens,” which had a specific stereotype against black women on welfare. Bill Clinton later signed a law in 1996 requiring welfare recipients to have employment to qualify so that people who got welfare “deserved” to get it.
But now we’re considering skipping welfare altogether and offering free money. Why?
Y Combinator believes that Silicon Valley, which has encouraged the growth of the benefit-less gig economy and theoretically unprecedented levels of technological unemployment, will not be able to create enough jobs to support less affluent, low-skilled workers anymore. While none of this bears on the merits of arguments for or against basic income or requiring welfare recipients to work, we would be amiss not to connect the rise in interest in a basic income to developments in the economy that are impacting white workers as much as they are non-whites.
The threatened permanent loss of manufacturing jobs and threat to driving services affects white and non-white workers equally in unprecedented ways. But concluding those jobs as extinct is just another echo-chamber-induced assumption.
Technological unemployment: temporary or permanent?
Whether that cultural bias is understood by Y Combinator or other new supporters of basic income legislation, the main driver for implementing this income idea is technological unemployment — the continued penetration of more efficient machines to create products and provide services is scaring economists the world over. The possibility that changes in industry could drive unemployment is an old one, and it is in no way a foregone conclusion this new surge in technology and services is going to put blue-collar workers out of work permanently.
That assumption even has a name: the Luddite Fallacy. The issue here is that one of the most prominent innovation factories in the world is implying that the rise of robotics and manufacturing startups, as well as the shift of services like public transportation to self-driving cars, will certainly leave the bulk of humanity unemployable forever.
That is the tact Y Combinator is taking though. Sam Altman is hardly the first person to push the idea, nor is he the first to pilot a program. Economist Guy Standing, political thinker Robert Reich and entrepreneur/author Martin Ford are proponents. Altman’s impending study is an exploration of severance pay for the global, blue-collar work force.
In the words of Stanford futurist Vivek Wadhwa, “2016 will be the beginning of an even bigger revolution, one that will change the way we live, let us visit new worlds, and lead us into a jobless future.”
Reflecting Wadhwa’s thinking by green-lighting this study, there is a haughty implication from a center for creative thinking and new industries like Y Combinator. We have seen a number of advances in industrial technology before, including the proliferation of never-before-used services (buses and planes being recent examples), that should tell us we don’t yet know what kind of jobs will be available in the next few decades.
New technologies tend to free workers from mundane tasks, creating more sophisticated services. That is the argument of MIT economist David Autor. As he put it on a panel about the future of work in late 2015, “Tasks that cannot be substituted by automation are generally complemented by it.”
“[J]ournalists and even expert commentators tend to overstate the extent of machine substitution for human labor and ignore the strong complementarities between automation and labor that increase productivity, raise earnings, and augment demand for labor,” Autor noted.
ATMs are a good example of this, according to the afore-linked WSJ report. The number of bank tellers have increased in the U.S. since the introduction of ATMs, because employees are now free to focus on other tasks like personal investment management and loans. The banks saved so much money by introducing ATMs that they actually were able to hire more workers as they expanded their businesses.
A ‘cyborg’ economy shouldn’t be the only reason to consider looser welfare rules
I am anticipating conclusions from preliminary and secondary studies by Y Combinator that recommend the implementation of basic income to help replace paychecks of suddenly unemployable blue-collar and middle-skill white-collar workers. That will be built on an assumption that the technologies of Silicon Valley’s brightest startups will make mass employability a point of history. This line of thinking is riddled with inherent bias.
We are not about to be replaced by robots. We will be complemented by them. Employment will not be history. It will morph.
However, the idea of a basic income is a modified form of welfare that should first be experimented with in the current context of welfare as an alternative to the heavily bureaucratic and conditional form of payments we use today. If the economy improves and the discussion of basic income is totally dropped, millions of minority Americans would lose out on a potentially groundbreaking experiment in easier financial aid. If one opposes welfare ideologically, so be it, but let’s make sure we continue to look at basic income on its merits, not simply because one demographic is affected by a changing economy.