Public Policies
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The Next Safety Net Social Policy
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The rise of the robots means we need progressive politics more than ever
The Next Safety Net Social Policy for a Digital Age
By Bruno Palier and Nicolas Colin
As new technologies are and will be disrupting the labour market, it is logical that states will have to adapt their laws, and more specifically their welfare systems, in order to face the new situations. This is at least the point of view of Bruno Palier and Nicolas Colin in their article “The Next Safety Net - Social Policy for a Digital Age”.
> An interesting concept
> The Social Safety Net
The social safety net is a fixture of welfare states, as well as a key concept in welfare policy. It came to existence after World War II and became a staple of welfare states. It is aimed at protecting people who are out of the labour market from falling below a certain level of poverty. It includes for example unemployment benefits, universal healthcare or minimum old age pension. This system lies on the logic of social insurance; people who work fund the system through taxes so that they will be able to benefit from it if they face illness or unemployment for instance.
> A model that is put under pressure by changes in the labour market
Unemployment as well as wage inequality between workers have been sharply increasing in the last few decades in most developed countries.
As we can see on the document, the distribution of earnings in West Germany was much more unbalanced in the 2000’s than it was in the 80’s. In the same timespan, the percentage of men without labor earnings, which includes the unemployed, had more than doubled from 5 to 12,5 %.
Those evolutions can be a challenge for welfare policy; lower wages mean that even people that work can fall into poverty, meaning that the Social Safety Net isn’t necessarily enough to protect people. More people outside the labor market means that there are more people that need assistance from welfare and less people to finance it.
> The thesis
Technological progress leads to a generalization of those challenges
There is a strong argument that the Social Safety Net will not work anymore due to technological changes. Palier and Colin support that idea.
New technologies mean that many low-skilled jobs can be routinized, handled with technology. Those jobs become “lousy jobs”, increasingly unstable jobs and wages that can’t provide any real career plan. In other words, the trends of increasing unemployment and lowering wages of low-skilled jobs will only continue with the technological progress.
The Social Safety Net will become less and less effective as technology progresses; the divide between working/unemployed people will become less relevant to prevent poverty, and there will be too many recipients with too many different situations for this system to keep up.
> Recommendations related to the following risks
> Increasing poverty
As traditional welfare systems become less effective at fighting poverty, it is natural that poverty rates increase. The same goes for unemployment rates, that have been sharply increasing in the later years and likely will keep on growing as less qualified jobs become less permanent.
> Increasing inequalities
As mentioned earlier, not all jobs will be affected negatively by those evolutions. This will only increase the unbalance between rich and poor workers. Moreover, welfare will be less effective at reducing those inequalities.
This is a dangerous situation for many people who are at risk of falling into poverty. Moreover, inequality and poverty can have negative effects on growth and economy as a whole (see for example In It Together: Why Less Inequality Benefits All, by the OECD).
For all those reasons, it is according to Palier and Colin necessary to reform welfare policies.
> Strenghts of this article
While this is a complicated question, Bruno Palier and Nicolas Colin make a good job at proposing solutions and reforms in their article.
> Interested enough to read the article?
How about checking it out? Here
> Other interesting resources
Do you want to further learn on this subject ?
The economists Maarten Goos and Alan Manning have been working on the polarization of jobs due to technological change.
They came up with the concept of “lovely jobs” and “lousy jobs”.
Take a look at their paper Job Polarization in Europe.
> The authors
Bruno Palier
● French researcher and professor
● Research director at the CNRS
● co-director of the LIEPP (Laboratoire interdisciplinaire d'évaluation des politiques publiques) at SciencesPo
● His works mainly focus on the reform of welfare systems, including reforms linked to new technologies
Nicolas Colin
● French senior civil servant and entrepreneur in the Ministry of Economy and Finance
● Graduated from SciencesPo and the ENA
● Created 1x1 Connect and The Family, two startups specialized in the numeric economy
● He is considered one of the foremost french experts on numeric economy
“ The rise of the robots means we need
progressive politics more than ever ”
by Alan Manning
> Thesis
Robots and job polarization
Computers’ performances improve at an incredible pace. Machines are now able of handling complex tasks like autonomous mobility, language and complex communications, etc. And these capacities can generate a great amount of wealth and new economic opportunities.
Yet, the trends observed in the past years reveal that returns to labour decrease when returns to capital increase. The median income decreased during the past 15 years in the United States of America, as Andrew McAfee observes.
Moreover, new technologies are progressively replacing jobs. According to the OECD, from 4 to 15% of the jobs in the OECD countries are automatable.
In the short-term, some economists expect a polarization of jobs: when abstract jobs are helped by new technologies, an important amount of the “routine jobs” handled by the middle class is threatened.
> Recommendations
> "Save capitalism from itself”
According to Alan Manning, there is a strong need to provide sustainable solutions to the social and economic challenges brought by the rise of robots.
He relates the polarization of jobs to that of inequalities, and insists on a core question: “who owns the machines?” If the elite designs and runs the machines that replace the middle class jobs, the model cannot thrive. It is a matter of survival for capitalism…!
Indeed, as the author warns: if there is no benefit of growth for the median voter, he or she will not vote for growth-friendly policies. So, if we are going to be collectively more successful thanks to new technologies, the author suggests that we better ensure an inclusive growth and a fair distribution of wealth. Otherwise, citizens in democracies will not choose capitalism.
> Progressive policies
Alan Manning argues that redistributive and inclusive policies are essential. Indeed, inequalities between those with abstract skills and those without, between those with robots and those without, are a threat to the society and to the capitalist model.
The author calls for progressive policies. For instance, he advocates for regulations of financial markets as well as redistributive taxation. Other policies like ensuring social benefits in case of retirement or unemployment, protecting independent jobs, controlling real estate to maintain the access to large metropolises, could contribute.
Facing the rise of robots, educational policies are key for technological change to be an opportunity for all. When machines constantly take over routine jobs, people need to have the skills to take advantage of these changes, to know how to learn and to re-learn, in order to adapt. They can, for instance, develop more social and abstract skills; learn how to cooperate, to deal with complexity, etc.
Eventually, Alan Manning ponders: “Technological change allows us to do everything we could in the past and more, so it should make us better-off”.
> Interested enough to read the article?
The article was initially published on the “Policy Network”.
Check it out here.
> The author
Alan Manning
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Professor of labour economics at the London School of Economics
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Research focused on labour markets in general, imperfect competition (monopsony), minimum wages, job polarization, immigration, gender in particular.