This article first appeared in The Edge Malaysia Weekly on October 23, 2017 - October 29, 2017

DISPLACEMENT of jobs owing to technology and automation is here to stay, and Malaysians holding middle-skills jobs will be most affected, says a discussion paper published this month by Khazanah Research Institute (KRI).

KRI estimates that between 11% and 54% of current jobs in Malaysia will be displaced or their nature significantly changed by automation. Four out of five of the jobs are middle-skill and 90% of them are held by Malaysians.

Middle-skill jobholders include general clerks, machine and plant operators, cashiers and administrative workers. This group is in the M40 category, says Tunku Alizakri Alias, deputy CEO for strategy at the Employees Provident Fund (EPF). “So, how are we going to maintain this huge group of people — who are younger, smarter and better educated (than the lower-income group) — with no jobs? There are big issues coming our way,” he says.

The reshaping of the employment landscape by technology, among others, has two key implications for the future of the job market, according to KRI.

First, long-term employment with a single employer will increasingly be replaced by independent work, which gives greater autonomy and flexibility but less job security and stable income.

Second, the rapid progress in technology will see more rapid cycles of obsolescence and changes in available work. Workers will switch jobs more frequently and to do this, they will have to reskill.

These implications require a rethink of how a workers’ safety net is designed, says KRI. “In this regard, portable benefits may provide a promising answer to a redesigned safety net arrangement that does not compromise the flexibility and dynamism of modern jobs, particularly in alternative work arrangements, while retaining stability and security provided by more traditional safety nets.”

Globally, a 17th-century idea — universal basic income (UBI) — is gaining popularity. UBI, or a variation of it, may fit the mould of portable benefits — the security net is not tied to particular employers but is universal and portable as workers shift from job to job.

In simple terms, it entails regular and unconditional cash payments to all members of society without the need for a means test. This is a form of social security support to ensure everyone has access to basic needs such as shelter and food.

It is understood that the concept has been discussed in Transformasi Nasional 2050 (TN50) labs. There are various delivery systems to bridge inequality, such as progressive taxation.

That said, UBI was conceived as a social security to address problems — such as poverty and inequality — of society as a whole, not just labour participation issues.

Some variations of UBI have been tested, such as targeted basic income, which is not universal but requires recipients to meet certain criteria.

The idea of giving free money to everyone with no strings attached may sound like a recipe for a dystopia filled with idle, lazy bums. But a number of UBI experiments worldwide have shown the opposite.

“From what we’ve seen (through the experiments), generally, people do use it (basic income) wisely. From the pilots, they use it to improve themselves, to improve their condition, to improve their family’s lives,” says Nurhisham Hussein, the EPF’s general manager of economics and capital markets.

As an example, an experiment with guaranteed annual income in Manitoba, Canada, between 1974 and 1979 found that its impact on labour participation was relatively minor — working hours fell 1% for men, 3% for married women and 5% for single women.

While the small drops could be attributable to the short period of the experiment, proponents argued that a huge percentage of the people would continue working because it gives a sense of purpose, identity and meaning.

Crucially, a guaranteed UBI will protect recipients from poverty and stress, which comes with psychological effects such as excess fatigue, lack of energy and hampered cognitive functioning that may perpetuate the poverty cycle.

It will also introduce choice for workers — with a basic income system, they have freedom to upskill and learn, rearrange their working hours for a more balanced family life or even shift to lower-paying jobs to pursue their interests, freeing up their jobs for others.

Making it work, however, would be a mammoth undertaking not only from a cost perspective but also in terms of implementation, says Alizakri. With Malaysia’s working population of 21 million people, a targeted basic income scheme of RM1,000 monthly will mean a monthly bill of RM21 billion, or RM252 billion per annum, he adds.

To be fair, while any basic income scheme would be expensive, the actual cost to the country will be less at the end of the day as other social support systems will need less funding. For example, the basic income experiment in Manitoba resulted in an 8.5% drop in hospital visits, according to an analysis by economist Evelyn Forget published in 2011. She also found that the recipients had reduced contact with physicians, especially on mental health.

In any case, a basic income scheme will necessitate higher taxation. In an increasingly globalised world, work can be done in separate locations — for example, a person could be doing work for a London-based client while in Bali one week and in Yangon the next. Consumption tax (essentially being taxed where you spend) will gain more importance than income taxes (being taxed where you earn) going forward, says Nurhisham. Elsewhere, the idea of taxing productivity of robots has been raised.

But even if UBI’s funding question — a major hurdle and criticism — can be resolved, implementing such a system will not be easy for Malaysia.

Does the Malaysian public trust the government of the day to administer such a huge amount of funds properly to achieve its intended purpose? Do Malaysians have the right collective mentality to prioritise the welfare of all its members as opposed to putting themselves and their families first?

In June last year, Switzerland became the first country to vote on a basic income proposal that guaranteed all adults a monthly income of CHF2,500 and all children, CHF625. Nearly 77% of the population voted against it.

At the implementation level, another “big barrier, regardless of whichever way you want to do it, is that so few people actually fill up their tax returns that we have no idea what’s going on out there or what people actually need,” Nurhisham remarks.

For perspective, using the databases of the EPF and the civil service for a targeted basic income scheme will only encompass about 40% of the Malaysian workforce.

And even then, any variation of a basic income scheme is no silver bullet — it should be part of a wider strategy to provide a wholesome social security net for Malaysians that extends beyond employment concerns.

Introducing such a safety net is urgent, says Nurhisham. “Even though we are a young country, we’re also ageing faster than almost anybody else. And right now, the people who are young today are the ones who are going to feel (the impact) — they are the ones most at risk and facing low wage growth and low savings.”

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