Wednesday, 18 November 2020

Universal basic income is regressive: Tharman at Bloomberg New Economy Forum 2020

By Grace Ho, Senior Political Correspondent, The Straits Times, 18 Nov 2020

A universal basic income (UBI) is regressive and means that large numbers of people have to be taxed more heavily, said Senior Minister Tharman Shanmugaratnam at the Bloomberg New Economy Forum on Monday.

Responding to moderator and Bloomberg Quicktake chief correspondent Jason Kelly's question on whether governments should institute a UBI, Mr Tharman called it a "bad idea" on two counts.

Firstly, it is regressive.

"The idea of giving everyone (the same) quantum of money is very different from giving the poor and the lower-middle-income group the support they need."


He added that while many UBI proponents say it is a way of flattening the system of benefits, he thinks countries need to stack the benefits in favour of the poor and the lower-middle-income group, not give them less.

"Secondly, to give the poor what they need through UBI, you've got to give everyone that same higher amount. In other words, you don't just flatten the curve but you've got to raise the curve. That needs much more taxes.

"And if we do the arithmetic, it can't just be taxes on the rich. You need much more taxes on the middle-income group in order to give everyone the amount of benefits that the poor actually need."

Another argument for UBI is that new forms of automation and artificial intelligence (AI) will displace humans from a much wider range of jobs, and a way must be found to distribute productivity gains from automation and AI to a population that may not be fully employed. "We might get to that situation, but we have no idea whether we will," he said. More importantly, what happens depends on the actions taken now, he added, and the last thing countries should do is to "give up hope" and go for purely redistributive, or passive, strategies.

"We do need redistribution. But what we should be doing now is investing in public goods, investing in public school systems, and I'm quite optimistic about that potential," Mr Tharman said.

He stressed that by investing in things that everyone can see opportunity in, for themselves and their families, people can be brought together because they have a feeling that governments are doing something for everyone.

"Let's talk about how we can do things to develop capabilities, develop hope and aspirations," he said. "If we lose the game in 20 or 30 years' time, we can start talking about UBI, but we first have to get started. We haven't gotten started in many countries."








Vital to invest in lifelong education and public goods, says Tharman
He points to how Covid-19 has hit not just vulnerable workers but also the middle class
By Grace Ho, Senior Political Correspondent, The Straits Times, 18 Nov 2020

The economic fallout from Covid-19 has affected not just the most vulnerable workers, but also a broad swathe of the middle class around the world.

This means relying on traditional solutions to inequality, such as passive and redistributive measures, "is not going to change the game", said Senior Minister Tharman Shanmugaratnam.

Instead, it is important to invest in education and public goods that will create new jobs and opportunities, as well as a sense of optimism, he added when speaking on a panel on the topic, A New Deal For Workers, at the Bloomberg New Economy Forum on Monday.


The four-day forum, a virtual gathering of business and political leaders, covers finance, trade, climate, health and cities.

The other panellists were McDonald's president and chief executive Chris Kempczinski, IBM executive chairman Ginni Rometty, and Blackstone co-founder and chief executive Stephen Schwarzman. The session was moderated by Bloomberg Quicktake chief correspondent Jason Kelly.

Mr Tharman, who is also Coordinating Minister for Social Policies, said that in many advanced societies, there has been a loss of the sense that one can "move up in the old way".

"If you started off from the bottom, you actually had a chance of a middle-class life and there was a pathway," he said.

"That hope, that set of aspirations, is now diminished."

Covid-19 can be tackled in ways that address these longer-term problems, he said.

He cited two major interventions that are needed.

First, there must be investment in lifelong learning and education, which creates a positive and self-reinforcing spiral of learning, skills accumulation and job progression.

Second, there ought to be a new era of investments in public goods - from basic science and research and development, to training and investments in infrastructure.

This involves re-focusing budgets and fiscal policy in a way that will broaden opportunities and job growth, which in turn will create a sense of optimism that unites people, he said.


Agreeing with Mr Tharman's point on education, IBM's Ms Rometty said companies can open up new pathways for people that do not require a traditional university degree.

This requires a paradigm shift among employers, like hiring using a skills-first approach instead of over-emphasising qualifications, she added. "Today, 40 per cent of IBM's job requirements no longer require a four-year degree."

Blackstone's Mr Schwarzman said the business community must be deeply engaged in the school system, like providing apprenticeships: "If (people) are linked into the business community, they'll have a place to go to work and be taught increasing levels of skills."

Mr Kempczinski noted how McDonald's has had to work out multiple career and training pathways for its employees, from restaurant managers to franchisees.

Mr Tharman said there is a need to move away from a dichotomy that has defined labour markets for too long - one that distinguishes between traditional academically-oriented graduates, and those who went through a technical education.

"It's inefficient. It's not as if the market actually required this, it was largely a job signalling device," he said, adding that the practice of using algorithms in hiring has reinforced the preference for credentials. This is an area where the new generation of artificial intelligence tools can help, he said, as they can identify, based on a person's career history, the transferable skills that he or she has accumulated along the way.

The reality for most blue-collar workers worldwide is that they move from one job to another without accumulating skills or human capital the way highly-skilled professionals do, Mr Tharman added.

"We've got to use technologies, top management attitudes and new social norms to think differently about blue-collar workers and ordinary white-collar workers.

"Think of them as human capital... see them as people whose hopes and aspirations are achieved because they are invested in, and they themselves rise to the occasion," he said.


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