Last weekend, I read about a robot developed in Japan that can assemble furniture from IKEA. Over the past couple of years, intermittent reports demonstrating the features of three-dimensional copiers have suggested we may not be that far off from the “replicators” on Star Trek’s Enterprise. And despite some setbacks, self-driving cars and trucks seem all-but-certain to displace drivers in the not very distant future.
Meanwhile, the “gig economy” continues to replace traditional employment arrangements.
While the American public is transfixed–and distracted–by the antics of the self-satirizing buffoon currently occupying the Oval Office, technology marches along, prompting major social challenges that very few people are addressing.
A recent paper from The Brookings Institution focuses upon the effect of these changes for social insurance–the government programs intended to provide a modicum of financial security to the elderly, disabled and/or unemployed.
The nature of work is being increasingly and suddenly altered by technological change, growing cross-border mobility, declining birth rates, and rising life expectancy. A growing share of work is done either under contracts that are shorter-term and less predictable, or without any contracts at all. Social insurance systems financed by payroll taxes created for times of stable employment with one formal employer and a substantial surplus of contributors over beneficiaries have become fiscally and socially unsustainable. Often, their rules leave the workers of the new economy without even a basic layer of social protection.
The authors suggest three major changes in the way the United States approaches social insurance: decoupling these programs from employment (payroll taxes provide the funding for these programs); for the elderly, establish a general-revenue financed basic pension for all; and set up a complementary pillar of privately-owned accounts for unemployment, health insurance, and old-age pensions, funded by tax-free private contributions.
I am insufficiently informed to weigh in on the latter two proposals, but it has been obvious for a long time that providing health insurance through employers–never optimal–has become increasingly unsustainable. It burdens larger employers, whose HR offices expend enormous time and resources navigating health insurance markets. It disadvantages small businesses and start-ups that cannot afford to offer competitive benefits and thus are less able to compete for quality employees. With the growth of the “gig” economy, increasing numbers of Americans are unable to access affordable plans (something Obamacare would ameliorate if the current Administration wasn’t determinedly sabotaging the program.)
These disadvantages aren’t limited to health insurance. As the Brookings report notes, providing social insurance through employers will only become more unsustainable, as automation displaces more workers and the number of independent contractors grows.
The solution is two-fold. The first is to eliminate the link between social insurance and employment status and provide a basic and affordable layer of social protection to all citizens, financed by general revenues…. The second is to supplement this insurance by a wider set of individually owned and financed insurance offerings.
Whatever the merits of these proposals or others, they are at least addressing important issues–issues with which a competent government would be dealing.
Unfortunately, we don’t have a competent government. We have deranged (and misspelled) tweet-storms from the White House and partisan game-playing from Congress.
Where are the adults when you need them?