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Money for everyone. But at what price?

UGLY TRUTH: Are states going to start handing out money to everyone? Formerly political extremism, soon reality…

David Budai
01.Jun 2020
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4 minutes to read
Kde si lidé vydělají peníze?

What sounded like an incredible idea out of a science fiction movie or a naive opinion of economic dreamers a few years ago is now being debated among experts and politicians as a serious proposal. We‘re talking about an unconditional basic income that would guarantee every resident a certain amount of money without having to go to work for a single day. Is such a thing possible at all and where would the money come from? Today's UGLY TRUTH deals with these questions.

Roboti připraví miliony lidí o práci.
Kde si lidé vydělají peníze?
Kde si lidé vydělají peníze?

The Spanish government is currently working on a new measure to help address the post-coronavirus crisis - the poorest households could receive an unconditional income. Each adult would receive 500 euros, which is a little under 13.5 thousand crowns. Regardless of whether they have a job or not. It sounds like the conventional social support, but it is, in fact, the first real step towards making an unconditional income available for everyone.

Where will people work?

The idea that each individual should automatically receive a minimum amount from the state isn‘t exactly new. Until recently, it was considered a bit of an economic "extremism". Society has been set up for centuries so that people receive money for working, and this revolutionary idea undermines the foundations of a market economy. But now, in the 21st century, with the extremely rapid development of technology and robotics, it is becoming an extremely topical issue.

Luxusní byt na pronájem - Praha 1 - Josefov
Luxusní byt na pronájem - Praha 1 - Josefov, Praha 1

There is a real danger that millions of people will lose their jobs in the coming years precisely because of robots. Scientist Michal Pěchouček talked about this issue in an interview for "Thanks to automation, a large number of jobs will disappear, people cite up to two billion jobs, so about a half of the entire job market on the planet," he said, adding that while previous technological revolutions were gradual, most nations were unprepared for the current and very fast one.

Interest in professionals and highly specialized workers will grow, but all the people with regular jobs - from drivers through officials and ordinary managers to accountants - will be left jobless. And who will feed them all? The answer is the aformentioned unconditional basic income - a certain amount of money available to everyone - from children through adults to seniors. This amount should be high enough to ensure a peaceful life and cover the necessary living costs.

Who will pay for it?

The fundamental problem is that it would cost a lot of money. And the word "a lot" really means a LOT. Let's take the Czech Republic as an example. Here, the amount under consideration is 15 to 16 thousand crowns, i.e. about half of the median income of Czech workers. That means a family of four would have some 60,000 crowns to live on, which would enable them to get by. It sounds really nice. But there are currently 10.6 million inhabitants in the Czech Republic, meaning it would cost 1.9 trillion crowns a year. Last year's budget alone was 1.5 trillion crowns.

Kancelář na pronájem Praha 1 - 67m
Kancelář na pronájem Praha 1 - 67m, Praha 1

Thanks to unconditional income, the Czech Republic would save, for example, on pensions and social benefits (about 690 billion crowns a year). It would also have lower costs due to the fact that there would be no need to pay thousands of officials responsible for social benefits. But hundreds of billions would still be missing. And most countries considering unconditional income would have the same problem.

But what other solution is there, when we‘re facing a real danger that people will start losing their jobs, which might come to pass even faster than politicians were ready to admit to themselves due to the coronavirus? Economists who are in favor if unconditional income claim that new sources of income would need to be sought. Taxation of robotic work, a digital tax or higher taxation of large and multinational corporations, of which there are more and more in the world, are some of the evident options. In addition, there could be a tax on luxury or non-ecological travel, such as air transport. If such taxes were introduced in the Czech Republic, the country could gain another hundred billion crowns and thus cover the costs of unconditional income as well as the running of the state.

Who will be cleaning the toilets?

The second question is how people would react to such a change. Would anyone want to work at all if we had a guaranteed income without moving a finger? And who would be doing "menial" work, such as cleaning toilets, collecting garbage, or picking fruit in orchards?

The theory is that robots and automated technology would take over the jobs no one is interested in. And for jobs where this would be impossible, wages would have to be increased to make them attractive. Proponents also claim that people wouldn‘t stop working, but rather switch to part time and spend more time with their families, traveling or pursuing their hobbies. It‘s not completely out of the question, after all, surveys show that most people wouldn‘t quit work with unconditional income. But how many of us only flatter ourselves, and what are the chances that laziness will get the best of us?

Luxusní byt na pronájem - Praha 1 - Nové Město
Luxusní byt na pronájem - Praha 1 - Nové Město, Praha 1

Has it already been tried?

Experiments that have already been conducted or are currently running should be able to answer these questions. So far, there have been very few, and those that have already been finished haven‘t provided conclusive results. For example, some time ago, one such experiment took place in Finland, where 2,000 people were drawn and received 560 euros a month for two years, i.e. 15,130 crowns. The result was a higher degree of happiness, but their approach to work remaind practically unaffected. So there‘s no clear conclusion.

In 2016, a referendum was held in Switzerland, in which people decided on the introduction of unconditional income, but the change was rejected by the majority. So far, there is not a single state where everything has been fully tested. Certain partial basic incomes have been implemented in several states - for example in Alaska, all citizens receive some kind of compensation for oil production in the amount of less than $ 1,900 a year. However, one naturally cannot live on that, so this example cannot be used to test the theory of unconditional income.

In recent weeks, the debate has intensified again, as the coronavirus has deprived millions of people of work and will continue to do so in the foreseeable future. In the USA, for instance, it is expected that up to a third of people could be out of work; in the Czech Republic it‘s one in ten. Needless to mention that not everyone will be able to find a new job over time, because companies will introduce robotics in the meantime and find out that it‘s cheaper. What will those people do then? That‘s what politicians should start discussing. And they can keep unconditional income in reserve as one of the options.

Hard number: 2000

That‘s how many people have already tested unconditional income in Finland as part of an experiment that run for two years.

The currencies were converted according to the current CNB exchange rates.

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