Don't go for basic income, go for new work and tax models instead
President Kersti Kaljulaid spoke at the St. Gallen Symposium in Switzerland on May 3, calling not for a basic income for everyone in the face of societal change, but instead for openness towards new models and solutions. Here is the president's speech in full.
As president of Estonia I represent the world's only digital society which actually has a State – the Estonian digital society of 1,3 million people, our whole population.
We have gone through a societal disruption to make sure our citizens and businesses have a totally digital environment to deal with both the State and also with their private partners. Important notice – at no point during this process has Estonia created any cutting-edge technology. Tech-wise, all we use is pretty well tried and tested by other actors, mostly private, in the world. It makes it cheaper, and more reliable. Part of it is even open data, namely our e-voting system, so all and sundry can try to hack it if they can – but they have not managed, in 7 years' time.
The disruptive innovation from Estonians is thus not technology itself, the innovation lies elsewhere – in the process of bringing businesses and government together to help all people, young and old, to benefit from digital services options available. Already for 17 years, Estonians have a digital ID and can use this to sign and time stamp documents, including private contracts, apply for different public services, pay fines and taxes, query the registries, change their services packages and simply send encrypted e-mails.
It took some special effort to get all people in all generations to use it, but through patient coaching plans called Tiger leap this was achieved also for older generation, who soon realised the advantages of taking to the PC instead of taking the bus in order to communicate with, say, pension's office. Even if the computer was at first more often in village library than at home, it was remarkably closer than the office.
Digital ID is an integral part of all ID cards, since 2001. Digital identity is created at birth, by the way, automatically and in the background when a doctor enters the details of a birth into medical records, without the doctor hitting one additional button to undertake this task. They are a civil registry manager, but they do not even notice! The parents can then later on, using their own IDs, add a name to the baby with an already created e-identity. They can then start applications for social services, kindergarten places etc., if they wish, from their maternity hospital room. A new digital citizen is born.
Both private and public entities use the same platform, called the X-road, for safe identification purposes, thus making the number of services available unlimited. Nowadays, some of the services are also open to citizens of other countries, called e-residents.
There is no enforcement to go digital. But as it is simple, cheap and available, everybody has done so by now. As it has to be simple, cheap and work every time, it cannot be too innovative, untried and tested. It is not. But it includes every one and works every time. It demonstrates that for a society as a whole high rates of technological penetration even when the technology itself is no cutting-edge, may pay off better than having something truly innovative in the hands of a few select people. You all have experienced this – the lives of millions have been transformed by cheap cars or washing machines, not by deployments to the moon. It is important to keep that in mind when digitalising societies.
We save 2% of our GDP by never visiting any public office and we have very few bank offices left in the country. Postal ones have been replaced by automatic delivery lockers, too. A delivery announcement is routinely an sms. You may notice – I am here not talking anymore of public service. The laziness of people to go and queue allows businesses to save huge costs by offering digital, automated solutions without facing the risk of losing their client base.
2% of GDP is a huge amount of savings and it is skewed towards simple people and SMEs, who cannot face high administrative burdens in order to verify the identities of their business partners or communicate with state and its databases. It also has its role in the fact Estonia already in 2006 graduated into the group of high income countries in IMF tables. Ourselves we still say middle-income, as we compare ourselves to Nordics, but overall, we have done pretty well, having graduated in 1991 from the soviet occupation as a poor nation.
I would now, having explained how digitally disrupted society works, come to the other questions I see on the horizon, which will disrupt our societies through technology implementation.
I will touch upon two. One is the future of the jobs.
The other one is what I like to call the Alice in Wonderland issue.
First, on the future of jobs. Industrial area jobs are indeed vanishing fast and I hear weird voices saying we need to therefore pay everybody a sustenance fee and get money for that from taxing robots. It sounds pretty absurd. I doubt that we would have reaped the full benefits to our societies from industrial revolution if we had decided to tax tractors and pay a sustenance fee to everyone who lost their job in agriculture. Of course, that transition was socially painful and costly for majority of people, but that was because of lack of education, medical treatment and other social services we offer to people nowadays. It is not so scary for lower middle class and poor, facing this time around the deterioration of industrial employment.
Instead of curbing people's ability to adapt by talking sustenance fees we should focus on the ability of modern technology to rise the earning capacity of the society as a whole. We must not take technological development simply as something limited to the better industrial processes and therefore to job losses. It is not, it is comprehensive change, it reaches out to every single person.
In fact, remarkable amount of jobs created by technology development are surprisingly neutral to the occupations or educations in their nature. One might call them egalitarian opportunities even. They are not reserved to wise, well-educated and tech-savvy. Yes, those do best by creating tech infrastructure, but some of the quickest growing companies sell actually strikingly simple services or services we did not think existed at all.
Think chatting to each other, in long version facebook, in shorthand, twitter. Or Uber and AirBnb – allowing people to turn their spare resource into service to others. These are big examples, but SME versions exist, too. A bookkeeper can work for 10 companies from any end of the world. Their market is not global, I admit, as you need to know the laws, but it is bigger than their physical range is where they go to work by car, bus or train. In handicraft, a time-old available career option for people who do not wish to obtain degrees, previously it was limited in its earning capacity by the ability to drive around local markets, or later, in the 20th century, by the ability to sign distribution contracts with, say, souvenirs stands. Today, I know in Estonia a guy who is South African, he lives in a little county of 8 thousand people, he produces world class bows and his market is somewhere among the global billions of people, none of them living closer than probably 200 km from him.
These examples show how technology enhances earning capacity and lower provision costs in traditional tasks. In addition, tech use and more free time for bigger number of people stemming from efficiency gains creates permanently new jobs we do not know of yet. Travelling youtuber as a new job we know already, but the next one we do not.
To sum up, job creation will continue beyond industrial age as it did beyond agricultural period, the transition should be more tolerable to vulnerable classes of poor and uneducated due to existing social systems and the democratic nature of this transition, which creates opportunities for all social classes.
This brings me to the Alice in Wonderland issue I mentioned, my third topic of societal disruption I wanted to talk about. You remember, when the cat vanished, the grin just lingered on? If we talk about the disruption to current jobs and indeed, working habits of people, we need to test whether our governance models are sustainable through these disruptions? Or will our tax base, let's take a simple example, social tax base, simply vanish together with industrial jobs? If we do not believe that the grin stays on without the cat, we need to assume that social security model built on industrial model of work cannot survive if the industrial model itself is gone.
Indeed, new jobs and income methods – if you are not able to call youtubing a job yet – are free from physical location, therefore geographically not attributable to one state, and they are not easy to define as being employer, employee, benefits from assets etc. Worse, everybody is doing more than one thing to more than one customers, the economy is much more centred on each individual and his or her creation of added value than on enterprise as such. Add to this the fact that people do all these varied things intermittently and take long breaks if they can afford – and we see more and more can – to simply live their lives until money runs out. Working 12 months a year, 8 hours per day and 30 years, then retiring, is not an option for younger generation they want.
But we offer them societal support if they do. What is the result? Lots of people opt out at early years of their career of our social models, only to plan to opt back in once they need these services – medical ones, putting kids through school, etc. Pension systems are the only one which do not allow full benefits opt-in later in your career, as some of the potential to put money into your pension pillars – is lost. But medical, educational, all other systems are 100% vulnerable. Yes, we can tell people to work the old-fashioned way or go uninsured. It will not deter them, they will go uninsured. We lose the best part of the tax income from the life cycle value creation of each individual – the years between 20-35, maybe longer, if the need to have and school kids is not there. And they will then later opt in. It is not sustainable or tolerable for governments any more than it is sustainable for them to be the last ones forcing people to present themselves physically to apply for services.
Governments need to start thinking how they will replace the current models' tax river flowing in from lifetime of careers defined as employee, employer, enterprise, independent worker, renter – with new streams. They will not be a river, rather an intermittent trickle from varied streams. It may not be any more linkable with any geographical state at all. We are hunting down huge companies to make them pay their fair share of tax in every country. Imagine trying to come to terms with every digital job nomad on where they need to pay their taxes? Yet we want them to pay, and be somehow connected to our society's social security network. They want too, but the effort to stay in one place, one job, permanently or with certain allowed gaps in order not to lose benefits – simply does not fit their understanding of work and life. We force them out with inflexibility, unless we offer them easy flexible opt-ins. I have no answer to this disruptive development and on how to come to terms with it, but I see we need to tackle this as quickly as possible. The ones who go quicker will win, digital and other nomads will dock in only at places which offers them more flexibility in paying taxes and earning benefits.
That's the next societal disruption, changing the perceptions about jobs and social models built upon the old perceptions. The disruption is already happening, but the governments all around the world are still grappling with the previous one – the digital disruption to their services model. As an Estonian I am relieved we can already concentrate on the new challenge, as the old one for us is solved.
The speech is published here as it appeared on the website of the President of Estonia, in unedited and unabridged form except for the removal of the greeting at the beginning.
Editor: Dario Cavegn