How social protection can foster and accelerate innovation
A couple of weeks ago while crossing the Atlantic, I read an article published on the Financial Times titled “Money for Nothing” written by John Thornhill and Ralph Atkins. Not only was the article interesting but it made me think how we at SAP are positioned not only to drive the digital transformation of governments but also, to witness and why not, to help transform, the future of welfare and the proper management and disbursement of the unconditional basic income for world citizens therefore accelerating innovation. Are you curious to find out how? Please read on.
The idea of an unconditional basic income (UBI) is not a new one, its origin dates to the 1800’s. Throughout the 20th century, the idea to receive an income regardless of work, health and social contribution has been debated not only academically but also in some parliamentary sessions, congressional hearings and election campaigns. France, the United Kingdom, Brazil, Canada, Finland and The Netherlands among others have toyed with this idea and some even have pilot focus groups.
Our social system is now 150 years old and we as a society have failed to adapt to the needs and values of our times. Technological change, together with wars, migration, free trade agreements and others, brings inherent social disruption and is convulsing labor markets worldwide. Machine learning and the rise of robots will only aggravate the labor issues. A good example are the self-driving trucks which in the United States alone, will impact the largest job category in a couple of states being equivalent to 3.5 million jobs. If not managed properly, the digital revolution can increase economic insecurity and inequality. And how could government agencies provide social benefits to address this important challenge?
I believe all rich societies should aim to provide a basic level of subsistence, enabling people to do more of what they want and less of what they do not want to do. Some authors claim that the UBI is about shifting power back to the citizen. If so, then I could theorize an accelerated innovation cycle as citizens focus on their real passions. A true digital revolution. And what does this have to do with SAP?
SAP shall provide the digital core for governments to manage and reimagine all social benefit programs. So we support initiatives like the UBI; at the same time SAP would help unleash citizen entrepreneurship by providing an environment that would foster innovation for all those citizens who would now focus on what they want to do and not what they have to do. This entrepreneurship spirit would create the new business models and companies of the future and SAP would be there to support them.
Sounds like a nice idea. Is the world ready for this? Only time will tell; in the meantime, at SAP, we are getting ready.
Thanks for your blog. Universal Basic Income was discussed on public radio in the US recently. In case you missed the stories, you can listen and/or read them at the links below.
This morning on Marketplace:
and last September - replayed recently on NPR
We should watch these experiments to see if they lead to wider adoption - or backlash against people getting something for "nothing."
Thank you for sharing the article and your thoughts on this topical subject. I say it is topical because just today there are articles in the press about a gathering momentum for pilots of a Universal Basic Income in Scotland. This is in contrast to Switzerland where a UBI initiative was voted down just recently - a Swiss referendum attracted only 23% support in June of last year.
Certainly there are many factors to be considered and a lot of details to be worked out around affordability in particular. But of greatest interest to me is the human factor... How would people react to being given a basic income? And most importantly, would people receiving a UBI be more or less motivated to work?
The primary argument of critics - that a UBI would discourage people from working - doesn't really hold water with me. After all, in some respects traditional welfare schemes can also create a disincentive to work, since benefits are reduced as income rises. At least with a UBI there is always a positive incentive to earn more money - even if only a small amount more.
Moving to a UBI would require people to put aside feelings of downwards envy and to have faith in their neighbour. But I think I would like to live in a society with such a spirit of community and mutual obligation. If we all share this common intent, perhaps we will be able to move past fear and mistrust, and turn our minds to how such a scheme could work and how to make it affordable. To me, this would be the ultimate in welfare transformation: Re-imagine!
A Universal Basic Income debate needs to include both tax (how it will be funded) and social protection (what it funds and why). Tax and welfare can be considered as the credit and debit side of a government’s bank account. Managing government finances is fundamentally no different to managing your home finances – to stay solvent you need the credits to be larger than the debits. In policy terms, governments use tax and welfare policy to redistribute national wealth which at its most basic level is about achieving some level of social harmony (remember all those revolutions in the 17th -19th centuries as the peasants rose up against the aristocracy and monarchies).
Of course what is a reasonable level of redistribution and how it is done to achieve social harmony is a function of many factors and will remain an on-going part of the political discourse in our societies. Rising inequality levels in many countries is a matter of concern that keeps many policy makers awake at night, especially those that subscribe to the theory that if you don’t learn from history you are destined to repeat it.
On the tax side of this type of debate, you will see calls for flat taxes – e.g. all income taxed at x% regardless of source – no tax free limits, no progressive tax rates, no concessions or deductions, so even the richest people have to pay the same x% of their income as the poorest. For a UBI scheme to work (which is a negative flat tax approach – i.e. the government pays everyone a standard or flat amount), you have to understand how it will be funded (remember the solvency issue and debits and credits). This will inevitably lead you to a tax debate, which is potentially more complex than the welfare debate because it starts to affect everyone. A UBI debate is a lot easier to sustain if it is kept within the welfare domain. I suspect the canny Swiss realised this was a going to become more than a welfare issue when they voted down the UBI proposal.
Rather than look for a panacea, you need to look at where and why people fall through the gaps. The holes in the social safety net need to be addressed – and more often than not this is a function of competency and demarcation between the different levels of government for funding and the distribution of taxes and welfare. For a start, if all countries committed (and implemented) to the ILO’s Social Protection Floor initiative, including countries at the top end of the wealth scale, then we might see some of these gaps addressed. But for many emerging countries, the Social Protection Floor initiative has funding questions that need to be addressed first.
From the technology side, the greatest contribution we can make is to give policy makers more options based on insight from digital data. One of the major arguments for UBI schemes and flat tax regimes is administrative simplicity. In a digital world, much of this argument falls away. In my own country Australia, while far from perfect, the government (of both left and right persuasions) have pursued a national wealth redistributive model based on progressive taxes, a universal social safety net and targeted means tested social benefits. This has been enabled through significant investment in IT and digitizing business processes. This is an on-going work in progress and is front and centre of the political debate. There are many who will argue the policy levers are not set right, and with inequality on the rise there is substance to these concerns. But at least the policy makers can make change relatively quickly and in absolute terms, inexpensively, as a result of the investment over many years they have made in IT. This doesn’t mean that what works for Australia will work elsewhere – it is just a simple example of the many factors at play.
A more interesting question is whether we are giving policy makers too much flexibility and as a result change is made because it can, without the necessary consultation and change management to accompany it. SAP is providing the digital core to enable governments to manage and reimagine all social benefit (and tax) programs.
But in reimagining, it is the large business and policy issues that need to be addressed first. Through technology, previously unimaginable propositions become possible. Somewhat paradoxically, perhaps digital technology can be considered a constant rather than a disruptor. Technology has always been disruptive through its change enabling features and the digital revolution is the current manifestation of an ongoing trend. Social, economic. political and the human factors seem more in a state of (irrational) flux and are therefore difficult to predict and manage – just like those Swiss with their 23% vote down of the UBI proposal.