Basic Income in the Capitalist Economy: The Mirage of “Exit” from Employment

Unpacking “exit”

While the right to (and value of) exit is a constant refrain in the basic income literature, there is surprisingly little discussion about the different modalities of an exit option furnished by an unconditional basic income. Let us therefore start by unpacking three different ways in which a basic income recipient may end up exiting the labour market.

The weakest form of exit amounts to what we might call “incomplete exit”, referring to those cases where a basic income allows a worker to relax her dependence on an employer while nevertheless not fully severing the employment relation. The two primary examples of incomplete exit are a reduction in working hours and temporary exit in the form of a sabbatical for personal or professional reasons. The idea that basic income promotes the work-life balance by offering workers the opportunity to work part-time or take up a sabbatical is well-documented and needs little rehearsing here (Offe, 1992; Van Parijs, 2006). Since we are here focusing on the case where workers are discontent with their particular employer, the weakest exit option has limited relevance in the present discussion.

A stronger form of exit arises when basic income plays a role in allowing a worker to exit a poor job in favour of one that scores higher in terms of pay, working conditions, or whatever job dimension the worker values most. In republican terms, basic income may give workers the opportunity to leave a job where they were dominated by assisting them in taking up one where they are relatively better protected against domination by employers (Gonzalez-Ricoy, 2014; Gourevitch, 2013; Hsieh, 2005). The purported role of basic income in this form of exit is threefold: to bridge short-term income losses arising due to matching frictions and search costs in the period between jobs ^[4]; to facilitate taking the step in the first place by insuring against the possibility that a better job may not be available in the immediate future; and to subsidise low-paying jobs that constitute a more desirable work environment (e. g., moving from a high-stress financial job to work in the lower-paying community sector). This case is of interest when considering the perspective of workers who want to remain employed but merely seek to swap one job/employer for another.

The third and most radical form of exit involves workers leaving the labour market altogether. The value of this form of exit – comprising the “effective power to say no” – is strongly emphasized and defended by Karl Widerquist (2013) as part of a broader theory of status freedom. The central implication of Widerquist’s conception of freedom is that we ought to establish institutions for a “voluntary-participation economy” in which people are genuinely free to decide “when, how, whether, and under what conditions to join the labor market” (Widerquist, 2013, p. 54).

Radical exit need not be permanent, and in fact may involve repeated spells of moving in and out of the labour market at will. However, in contrast with previous cases, radical exit does involve the possibility of a clean break of sorts, with the worker being enabled to pursuing personal or social projects that are situated outside of the labour market. Basic income might assist former workers in starting up their own business (Nooteboom, 2013) but equally support former workers becoming engaged in projects that are deemed socially valuable but do not hold a market value in a strict sense. ^[5] Care work, community work, music and the arts, and all forms of volunteering are prime examples of the latter. In all these cases, basic income often becomes the main source of income and could even be regarded as a type of participation income for providing non-marketized essential services (Atkinson, 1996; Perez-Muñoz, 2016). What separates the radical form of exit from the previous two is the absence of an employment relation, though not necessarily a withdrawal of the economy in a broader sense.

Unpacking these three forms allows us to distinguish between several important dimensions of “exit”. First, we see a clear demarcation between each variant in terms of continuous involvement in the labour market, with important implications for individuals’ wellbeing and opportunities, including of course income. Second, there will be important motivational differences between workers wanting to pursue weak, strong or radical exit options. Third, the opportunities for exit in each variant are likely to be unequally distributed amongst different types of workers – a point that is largely ignored in the exit debate. ^[6] Paradoxically, whereas the exit option is primarily geared at offering a secure basic floor to the most vulnerable, it may be precisely this target population that is disproportionately disadvantaged in terms of having the real opportunity to exercise their exit option. Fourth, each of the options will also put important demands on the specific design of the basic income policy that is meant to facilitate exit. Chief amongst these will be the level of the basic income grant, with the radical variant in particular being quite demanding in terms of satisfying basic needs (Widerquist, 2013, p. 60 ff.) but equally whether basic income would be permanent or time-limited (White, 2003; Offe, 2000), and so on. While much more can and needs to be said about each case, it should be obvious that “exit” can mean very different things and will have different implications in terms of policy design.

In what follows we will restrict ourselves to examining the argument that basic income strengthens the bargaining position of workers. This means we will mostly focus on the potential of basic income to support strong exit; that is, to enable workers to retain some link with the formal labour market while attempting to use a basic income-induced exit option to improve their job prospects. ^[7]

Effective exit and its limits

Are workers individually better off with a basic income, all things being equal? Assuming basic income makes exit possible this would count as an improvement of the status quo ante by adding an option to workers’ menu of available choices. Exit-based empowerment, especially when institutionalised in a set of strong formal rights, is a powerful instrument for supporting individual wellbeing and freedom (Warren, 2011). However, put this way the argument skirts over important differences amongst individual workers in terms of their effective ability to use such a right. While a basic income will grant each worker the same right to an unconditional monthly income, this does not imply an equal opportunity to exit.

In the first instance, many jobs present real, and above all persistent, barriers to exit that remain even when a significant basic income is institutionalized. ^[8] Basic income advocates, for quite obvious reasons, tend to focus quite narrowly on the income component of a job; but many jobs offer benefits of both a pecuniary and non-pecuniary nature that a basic income cannot fully compensate for – from access to health insurance or pension contributions to latent benefits such as a vibrant social network or a source of social esteem. ^[9] In cases where non-income barriers represent a real cost, basic income may simply not amount to a realistic exit option. To this argument, basic income advocates would typically respond by saying that workers whose job offers them a whole range of benefits are not likely to be the cases for which an exit option is relevant or socially urgent. ^[10] This case must be contrasted, however, by the growing number of workers who fit the precariat label and who typically have no access to such job-related benefits. Instead, the precariat suffers from the very conditions that lead to domination and exploitation, and here basic income could give a real exit option to those who need it most (Standing, 2011).

However, when focused on the most vulnerable in the labour market, the exit argument faces a different objection. Basic income only offers a real exit option for those wanting to escape a bad job by moving to a better one when such better jobs are available. Recall that exit is supposed to compensate a worker while searching for a next job, subsidise taking on a job with a pay cut, or provide temporary insurance while finding more appropriate employment. This works provided a better job is to be found. Yet if we restrict the exit option argument to those most vulnerable in the labour market we are also talking about workers who tend to face structural restrictions everywhere they look for work. Even the argument that basic income may facilitate taking on a better job by allowing for part-time employment or otherwise moving to a low-pay/high-reward job is problematic for many of the precariat, because under current conditions such jobs themselves may be in short supply or the most vulnerable amongst the precarious workers may not have the required skills to compete for such jobs.

To put it differently, given realistic assumptions of how the contemporary labour market works, a worker exercising her right to exit provided by a basic income may be more likely to end up in a similar job to the one she escaped from. This concern is especially relevant in the absence of access to services that may help expand her opportunity set, such as free education or other support structures to facilitate job transitions (Haagh, 2011). Alternatively, against her will she may end up fully exiting from the labour market, rather than finding a better job. Some basic income advocates would still argue that this nevertheless constitutes an improvement of freedom – to wit, the freedom to say no (Widerquist, 2013). But that seems far from obvious when considering the case where exit from the labour market is not desired or actively chosen but rather structurally imposed upon the worker by the economic environment.

The potential of basic income to serve the objectives associated with strong exit for vulnerable workers are heavily constrained by the structural conditions of tight labour markets, and the fact that those who may need exit most are also those least able to exercise this right. ^[11] Basic income may help some workers to exit employment relationships in which they are dominated, but we should refrain from generalising this point across all workers. Similarly, for some individuals the radical option of leaving the labour market altogether may indeed be an acceptable alternative to being dominated at work, but again we should be careful to overextend this point and take for granted that radical exit is a desirable option for all those who belong to the precariat.

Exit as empowerment against employers?

But could a basic income nevertheless play a key role in strengthening the bargaining position of workers? If a worker’s exit option is restricted by virtue of facing important challenges to move from one job to another, this unfortunately also has major implications for the bargaining position of workers vis-a-vis employers. Employers who are faced with a vulnerable worker threatening to use her exit option in most cases have very little incentive to accede to any of her demands, for the simple reason that replacing that worker with another one may be the cheaper option. Of course, in some such cases employers may choose to grant a worker a raise or better working hours or whatnot, but this amounts to a privilege being granted by the employer out of the kindness of her heart. This is a far cry from the change in the power relations between employee and employer, or evidence of increased bargaining power of the former over the latter, as argued by many of those who stress the potential of basic income to empower workers in such a way that they are free not to live “at the mercy of another” (Pettit, 2007; Thomas, 2016; White, 2011).

The previous paragraph adopted an overly individualised perspective, but of course workers also organize themselves collectively. This suggests that we should perhaps understand the exit option not primarily from the individualistic perspective adopted by Karl Widerquist and others. Instead, in line with more sociologically informed accounts we could think of exit as a mechanism for the collective empowerment of workers (Casassas & De Wispelaere, 2016; Wright, 2004). Here again we need to critically examine how the collective exit option provided by basic income affects the bargaining position of workers when negotiating with employers.

One argument often put forward in this context is that basic income could operate as a strike fund, supporting those workers engaged in protracted industrial action. This seems a plausible enough argument and it can be expected that a basic income might go some way to extending the reach of a strike fund, though how much exactly very much depends on the particulars of the scheme. ^[12] But note that strike funds are not really part of the strong exit strategy; when workers go on strike they remain firmly wedded not only to the labour market but to the specific employer they are currently fighting. As Alex Gourevitch (2016) puts it, “strikers quit working but don’t quit the job”. We will return to this point in the last section.

Strike funds aside, the idea of basic income as a means to support the threat of collective exit faces several problems. First, as with the individual exit option, in many sectors the real value of a basic income-driven exit option is heavily restricted by the structural constraints of the labour market itself. To put it in simple terms: if it is difficult for individual workers to find a suitable alternative job under current labour market conditions, how much more difficult is it for a group of them, especially taking into account they presumably all will be competing for similar jobs, often in the same geographical region. Collective exit in this sense is simply no real option, and as such – under the plausible assumption that employers know the labour market as well as those threatening to exit – it is also no real credible threat for employers. As before, the very conditions under which a basic income is most relevant as an exit mechanism are also the conditions under which the alternatives, once exit is exercised, may be seriously restricted.

Second, taking this argument a step further, a collective exit option rather than empowering workers may perversely end up offering employers a pathway for mass layoffs and redundancies. In the last year the idea of automatisation and technological unemployment has again raised its robot head. The point is not so much that most human tasks could soon be undertaken by automated services or robots, but that they could do so at a greatly reduced cost (Brynjolfsson & McAfee, 2014; Rifkin, 2014). The profit motive thus dictates that firms prone to such automatisation shed their labour force as fast as possible. Under such a scenario a collective threat to exit rapidly becomes a dream come true for the technologically minded CEO. Where today some opponents fear that basic income will act as an employment subsidy and drive down wages, in the near future it could act as an unemployment subsidy making it possible for firms to lay off the bulk of their labour force. With such a scenario in mind, the idea that strengthening the opportunity for collective exit, on its own, provides an effective mechanism for exercising bargaining power seems rather far-fetched.

Third, insofar as a basic income is advanced as part of a strategy for improving labor market options by way of exit, instead of intensified efforts to support collective solidarity and coordinate bargaining between different categories of workers, it could actually worsen the bargaining power of the least advantaged workers. It could do so by driving a wedge in between different workers’ factions, thereby harming collective solidarity in ways that are particularly damaging to vulnerable workers. Let us return to the fact that workers are heterogenous in respect of their skills and employment positions. Consider the implications of introducing a basic income while assuming (realistically) that firms are under constant pressure to keep down labor costs in order to maintain global competitiveness. Workers can plausibly be placed on a continuum both in terms of their opportunities to find alternative employment and in terms of how valuable their retention is to the employer. At any given point in time these two factors often coincide and cluster in the same group of people. This implies that the same workers who are valued by management are also better equipped to find alternative employment. Their exit may thus constitute a real threat to the employer. In response to higher-value workers’ exit threats under a basic income regime, management may decide to improve the employment conditions of these workers as part of a retention strategy for high-value employees, but simultaneously decide to save on labour costs by further reducing pay and working conditions for the precariat. ^[13] Although universally given to all, in this scenario basic income may end up driving a wedge between groups of workers because the exit option at the higher end of the distribution results in worsened conditions for those at the bottom whose right to exit fails to translate into an improved bargaining position.

Exit, voice and another free-riding problem

The analysis thus far has focused only on the exit option in a strict sense: basic income is argued to add an important option to the opportunity set of dominated workers, who are now given a choice either to accept the status quo or (to threaten) to leave. Alfred Hirschman’s 1970 classic, however, opened up a different perspective by pitching “exit” against the alternative strategy of “voice”. For Hirschman, voice refers to “any attempt at all to change, rather than to escape from, an objectionable state of affairs, whether through individual or collective petition to the management directly in charge, through appeal to higher authority with the intention of forcing a change in management, or through various types of actions and protests, including those that are meant to mobilize public opinion” (Hirschman, 1970, p. 30). Hirschman’s scheme has been employed in a range of contexts and in our view has important implications for the basic income debate. ^[14]

Instead of thinking solely about basic income’s impact on workers’ effective right to exit, we should also carefully consider how introducing basic income might enhance or hinder the opportunity to exercise the voice option (Davala, Jhabvala, Mehta, & Standing, 2015). Voice, typically associated with collective action including work-to-rule or even strike, should be considered as a genuine alternative to the exit option; workers exercise voice when trying to change circumstances from the inside, while exit functions by taking steps to severe the employment relationship and take up a job elsewhere. How does basic income affect the choice of workers between exit and voice? One way was already mentioned: basic income could contribute to a strike fund and thus reinforce collective voice. However, basic income could also negatively affect voice and in fact introduce a type of free-riding that may be regarded as both morally problematic and difficult to defeat.

Imagine a case where workers are looking for ways to improve working conditions. There are two ways to do this: one is to exercise exit and seek a better job, the other is to engage in costly collective action. ^[15] Let us now assume not only that voice is costly to those who participate in collective action, but that such action has positive spill-over effects in that at least some of the gains from successful voice may benefit those who in fact did not participate. In some cases, the benefits may be universal, for instance where action results in worker legislation that applies across the board (e. g., minimum wage legislation). ^[16]

Mancur Olson (1965) has taught us that in such cases it is rational for each individual worker to opt for exit. Olson specifically used trade union membership as an example of a collective action problem, but let us move beyond membership to see how basic income that offers an exit option to (some) workers might affect voice. We have suggested in the previous section that workers not only differ in their ability to effectively pursue an exit option under a basic income regime, with high-value workers arguably having a more effective right to exit than precarious workers under current labour market conditions. But in addition we suggested that these types of workers may end up competing with each other: the exit option of high-value workers may even result in decreased exit for precarious workers.

Introducing voice in this context, it might be that rational high-level workers will prefer to use their real exit option over engaging in costly voice. For such workers, individually negotiating with an employer based on a credible threat to leave a job is simply the more cost-effective option compared to engaging in a coordinated voice action. For the precarious workers, insofar as exit does not constitute a real threat to the employer, voice is all there is left. But under this (arguably stylised) scenario we could detect two serious concerns about basic income’s impact on collective voice. First, by restricting voice to the most vulnerable workers there is every chance that basic income has now contributed to making this option less effective. ^[17] In other words, the real exit of high value workers reduces both exit and voice option for precarious workers. Second, insofar as the voice action nevertheless succeeds in bringing about some positive changes in workers’ circumstances, and insofar as these changes have spillover effects that also benefit those who opted for exit, the latter are effectively free-riding on the efforts of the former. And this type of free riding is especially perverse in that it is the high-value workers who are free riding on the efforts of the most vulnerable precarious workers.

Conclusion

One of the key arguments advanced in favour of basic income is that it may help improve the bargaining position of workers in relation to employers by granting the former an exit option. Yet, in view of the great significance that many basic income supporters ascribe to this claim, the meaning and mechanisms of exit have attracted surprisingly little attention in the basic income literature. In addressing this issue we have unpacked exit by distinguishing between weak, strong, and radical exit, capturing different degrees in which a basic income may support people’s independence in relation to employers and different values attached to exit.

Focusing on the argument for basic income in support of what we call “strong exit”, meant to enable workers to retain some link with the formal labour market while attempting to use a basic income-induced exit option to improve their job prospects, we have outlined several concerns. In the first place, those most in need of an exit option to escape domination at work may be the least able to effectively use a basic income-induced right to exit. In addition, those who may need exit most are also those least able to present a credible threat of exit and, thus, to improve their bargaining position against employers. Examining the interaction between exit and voice strategies under a basic income, we also identified a plausible scenario where the exit strategy may actually contribute to driving a wedge in between different workers’ factions in ways that would further worsen the bargaining power of the most precarious workers. While these considerations are sketchy, they clearly suggest that the exit-strategy for improving working conditions should not be embraced uncritically, and calls for more systematic attention to the role of exit in discussions of basic income. In this context, it is crucial not to dissociate the case for individual exit from the analysis of how best to support the wider structural empowerment of disadvantaged groups.