Sunday’s Times of London featured a business article with the not-so-original title, Down and Out in Silicon Valley. The reporter, Danny Fortson, describes a few locations in West Oakland, CA where the homeless live. Most noticeable and perhaps surprising to him was the fact that tent cities have begun cropping up wherever there might be a vacant lot large enough to accommodate them. According to a community rights organizer interviewed, the settlements began appearing about six to nine months ago. Some of the residents make as much as $40,000 annually, but live there because they can’t afford local housing even at that income level. Oakland, it seems, is transforming into the spillover location for techies who cannot afford to live across the bay in San Francisco. Because of the influx of affluent professionals working there and Silicon Valley, rents in Oakland rose 16 percent last year and evictions have skyrocketed.
As a result, Oakland has been chosen as a pilot for the concept of UBI (universal basic income). Y Combinator, a Silicon Valley incubator and early-stage funder of Airbnb and Dropbox, announced a pilot in May to provide 100 individuals a monthly stipend for up to a year. The stipend amounts will be $1,000, $1,500, or $2,000 and recipients will be compared to a control group who receive nothing. Depending on the pilot results, Y Combinator may expand the project to other cities in California. The purpose is not just to test whether the UBI theory will succeed, but to also test the logistics of how to manage such a program. Matt Krisiloff, the manager of the pilot, noted that he was inspired to conduct the experiment based on his work with Artificial Intelligence. He maintains that AI will eliminate many jobs and Y Combinator wants to see if UBI is a potential solution for partially offsetting the turbulence of the resulting unemployment.
The author cites Warwick University Political Economy Professor Lord Skidelsky who writes, “it is possible that one-fourth to one-third of all jobs will be eliminated through technology over the next 20 years.” For 90% of the American workforce, their pay has been declining for the past 20 years. In Britain, wages have fallen by 10% since 2007. Other than the rich and entrepreneurial, people in America’s West are worse off than they were 20 years ago. According to Fortson, critics of UBI state that it’s a solution that only delays implementation of more widespread economic reform. Regardless of the outcome of Y Combinator’s pilot in Oakland, the breadth of income disparity continues to widen.
I applaud Y Combinator for funding this pilot to see if UBI payments work and am surprised that similar programs haven’t surfaced elsewhere. Mr. Krisiloff, the program manager, was clearly inspired to do this based on his knowledge of the impact of AI on the American work force. Some of the more recently published books about this impact that I’ve reviewed in this blog are: The Second Machine Age, Rise of the Robots and The Future of the Professions.
In The Second Machine Age, the authors determined that the “free” things that all of us receive directly or indirectly from the Internet total approximately $2,500 per person annually. While that sounds nice, if the beneficiaries lost their jobs because of technology (think travel agent, airline reservation clerks, etc.), knowing their situation is improved by $2,500 per year in free services and/or knowledge is little consolation. Technology and economics are inextricably linked. If an app, machine/gadget or software program can offer a service or perform a job at a lower cost than before, it’s likely to be implemented provided the cost is lower than the benefit.
The solution is not to ensure that everyone in America earns a college degree. It’s to provide opportunities for all to receive an education or training that maximizes their employment potential in the new economy. The proliferation of engineers, computer scientists and venture capitalists cooperating to build the next great application will further exacerbate the situation. There’s no evidence that our politicians are working to pilot solutions to the potential loss of many middle-class jobs and given their lack of progress on funding solutions for other issues, this looming economic change will likely be ignored until we’re in crisis mode.