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Concerns are growing over changes in industries and jobs due to the expansion of automation and artificial intelligence. In particular, there are calls for a complete overhaul of welfare and social policies in line with job cuts and changes in the nature of jobs themselves. Universal basic income is a representative example. The digital revolution is only the beginning. The immediate preparations are needed.
The keyword representing the current socioeconomic change is automation. Although periodic economic fluctuations and unemployment occurred in the 20th century, developed countries were able to enjoy a golden age of employment and income growth until the 1970s. However, fundamental changes began in the 1980s. The labour share of income in 35 advanced economies fell from around 54% in 1980 to 50.5% in 2014 (McKinsey Global Institute, 2019). On the other hand, the share of corporate profits in GDP has been increasing. The main cause was factory automation. Employment in manufacturing began to decline around in the 1980s, and the rate of wage increases began to fall.
The other cause was globalization. Especially after the opening of China and the end of the Cold War, developed countries’ capital moved to developing countries to avoid high wages and environmental regulations. This, along with automation, has led to the weakening of workers’ bargaining power in developed countries over the past few decades and lower employment and wages. The decoupling of labour productivity and the average wage in G20 countries began to emerge in 2000.
The Digital Era
The Internet has been widespread since the 2000s. The Internet, where some engineers originally exchanged e-mails, brought about a distribution revolution called e-commerce as the public became able to use a new technology called the Web. Online retailers such as Amazon and Alibaba removed the middle distribution stage and bankrupted offline stores. This has brought about the restructuring of companies that lost competitiveness and changed the map of major companies in the world. The communication technology of the Internet has also accelerated globalization. As work orders, business consultations, and production management became available online in real-time, the Internet eliminated the concept of geographical distance and space and helped integrate the global value chain beyond a country.
Computer technology is entering a new phase of intelligence. Like engines have been replacing human labour, artificial intelligence is replacing the human brain and opening a new phase of automation that moves on its own without human control. Artificial intelligence, equipped with technologies such as machine learning and deep learning, has made services such as face recognition, self-driving cars, drones, virtual reality, and digital secretaries possible, influencing business activities and decision-making, and certainly changing various aspects of the working population and daily life.
Declining Headcounts
As the share of manufacturing industries in the economy of developed countries is decreasing, the size of companies is also declining in terms of headcounts. In the 1980s, the U.S. giants had hundreds of thousands of employees. For example, General Motors employed more than 800,000 people worldwide in the 1980s (The Week, 2009). However, the U.S. IT firms such as Apple and Facebook, which are currently leading the global economy, have grown in productivity, but have the smaller number of employees—Apple with 137,000 and Facebook with 43,000 (Nikkei Asian Review, 2019).
The size of corporate employment continues to decline as much of a company is left outside the company. To reduce costs and increase efficiency, a company is entrusting production to agents or other companies. This is because instead of performing various functions within a company, it has become easier to handle things by forming a wide network with several external companies. Companies are cutting costs, reducing the number of in-company employees they have to pay, and increasing their dependence on non-regular workers extensively. European Labour Force Survey showed that 57% of those aged 15–24 in the EU who moved from education into employment between 2010 and 2011 took temporary jobs. More and more young people are turning into temporary workers and part-time workers with little or no medical insurance coverage.
The other trend in employment change is the increase in the labour of the sharing economy and the gig economy, which are mediated by platforms. Platform systems are useful for those who want flexible working periods and part-time jobs but as a result, the number of companies increases that do not provide existing benefits such as medical insurance and severance pay.
There is a proposal to impose a robot tax as a way to provide necessary welfare and job retraining for workers who have lost their jobs due to automation (Silkin, 2019). A number of people have different points of view on the idea. While some think that a robot tax could slow job destruction, others think that regulating or discouraging efforts to increase productivity and efficiency with taxes will ultimately undermine economic growth. It is also difficult to distinguish between automated machines and robots. The core problem is not the technology itself, but the problem of inequality due to the monopoly of performance by technology.
The Luddite movement, which was a campaign to destroy machines that took away workers’ jobs in the early days of the Industrial Revolution, has been reproduced repeatedly in every upheaval of the advent of new industries and jobs. Social and political consensus is needed on how the state will support the unemployed until they have a new job and how to raise the necessary capital. The measures should be discussed in terms of pain sharing and mutual assistance. It will be an era in which countries with the ability to address obstacles to innovation and with social safety nets, will grow faster.
The Change in the Concept of Work
As mentioned earlier, automation and artificial intelligence produce non-regular, temporary, and independent workers. This trend is due to the development of the digital economy and the digitalization of labour. Digitalization is increasing flexibility in working hours and places, enabling telecommuting and teleworking, and increasing temporary employment.
The problem is the deepening instability of labour. Part-time workers, temporary workers, and independent workers are in a precarious situation where they receive no or less social benefits such as health insurance and severance pay. The types of work, such as freelancers, volunteerism, mentoring and childcare, are diversifying, but social security is being provided only in the framework of full-time employment. It is time to expand the definition of work. The digital economy, which reduces working hours and increases leisure time, will expand non-business activities such as art, culture, music, and sports. The expansion of the labour concept calls for a social consensus for common interests in the future, that is to say an overall revision of social contracts.
Friedmann and Havighurst (1954) said that five main functions of work are 1) income, 2) regulating of life activity, 3) identification, 4) association, and 5) meaningful life experience. As society develops, the function of meaningful life experience will be strengthened. Work in the future will let people provide necessary activities and exchange values for society.
Universal Basic Income Against the Corporate-Oriented Welfare System
Entering the industrial era, states introduced social security systems such as medical insurance and pensions to help workers. The financial resources required for this were to be borne by businesses and workers. In other words, the corporate-oriented welfare system has been established. However, the welfare system of the industrial economy reveals a serious problem of not functioning properly as the shift to the digital economy increases the liquidity of employment and diversification of the forms of labour.
There is growing concern that if demand for labour decreases as technological development accelerates, workers, who are also consumers, will not be guaranteed income for basic living and will lose hope for jobs, deepening polarization. If this problem is not solved in the near future, the economy will go downhill, and social unrest will increase.
The new applications of the social contract are being proposed as a solution to the problem. They include 1) the introduction of a citizen account where a worker can receive various benefits even if he or she moves companies or industries, 2) the expansion of earned income tax credit (EITC) to help workers with low income, 3) the support for part-time work, and 4) the provision of universal basic income. Universal basic income is worth notice in particular. Universal basic income is a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement (Basic Income Earth Network, 2020). There have been various forms of experimentation about universal basic income in a number of countries, and many advantages and disadvantages have appeared. The problem is that the financial resources are bound to come out of taxes after all. In order to provide the basic income needed for substantial living security, the tax burden must increase sharply, which is not a thing to which the public easily consent. Some point out that introducing basic income on a nationwide basis will cause inflation and eventually reduce the value of cash, so there will be no income subsidy effect.
Financing
Several ways having been promoted to finance the new social security program. One is raising taxes on the top 1% of income level individuals (Cohen, 2015). Another way is to raise progressive taxes on high-priced consumer goods. The other is a solidarity tax. A solidarity tax is a government-imposed tax that is levied in an attempt to provide funding towards theoretically unifying (or solidifying) projects (Kagan, 2019). The tax acts in conjunction with income taxes and places an additional burden on taxpayers, including individuals, sole proprietors, and corporations (Kagan, 2019).
However, these tax increases face opposition that will daunt economic activities of economically successful people, thus reducing overall economic vitality, which in turn does not help the national economy. It would also be more difficult to reach the social consensus and introduce the system because it would create a political backlash from the rich people.
Conclusion
The current welfare system is corporate-oriented. Companies and workers share the costs of social security systems such as medical insurance and pensions for those employed by companies. However, the welfare system of such an industrial economy will inevitably expose functional limitations as the shift to a digital economy increases liquidity of employment and diversified forms of labour. Companies are changing their forms of employment from full-time employment to temporary, dispatched, and part-time employment to reduce the burden of social security costs. The platform economy, the sharing economy, and the gig economy are increasing the number of independent workers, who are excluded from welfare benefits. People in the fields of social service, childcare, and non-profit activities are not recognized as employees and thus are not subject to social security.
It is now necessary to change the social security system from a corporate- and employee-oriented social security system to a work- and social contribution-oriented one. It is required to ease the burden of social security costs from enterprises and to have society bear some of the costs. This will motivate businesses to hire additional workers and also help boost their competitiveness. Changes to the way businesses pay taxes in proportion to profits or sales and workers pay taxes in proportion to the wages they earn and save on their social security accounts will reduce the costs related to social security operations. This will promote liquidity of employment and help society to innovate. People will be able to move freely, from making money from businesses for economic reasons to seeking social contributions and engaging in non-profit activities. In the digital era, the basic concept of jobs and welfare themselves is called for a change. It is not about the distant future. The slower the response, the greater the burden.
References
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