Rapid advances in artificial intelligence and automation are projected to disproportionately affect routine, low-wage jobs, potentially pushing the UK's Gini coefficient up from its current level of 0.34 to over 0.42 by 2035. As corporate profits increasingly accrue to technology owners, the share of national income going to labor is expected to decline further.
In response, some policy experts advocate for a fundamental overhaul of the welfare state. They suggest introducing a Universal Basic Income (UBI)—a flat, unconditional payment to all citizens—funded by a wealth tax on high-net-worth individuals and capital assets. Proponents argue this direct redistribution is the only way to prevent mass relative poverty in an automated economy. However, critics warn of severe fiscal drag, potential inflation, and a significant reduction in labor market participation.
Alternatively, many economists argue that the state should focus on 'active' supply-side interventions. Instead of hand-outs, they propose state-funded 'Lifelong Learning Accounts' and targeted regional infrastructure subsidies designed to transition displaced workers into high-skill, non-routine sectors (such as green tech and creative industries). While these pre-distribution policies aim to maintain high employment and productivity, they are often slow to implement, and retraining programs have historically suffered from low completion rates and mismatches with employer demands.
Using the data and your economic knowledge, evaluate the view that a Universal Basic Income funded by wealth taxation is a more effective method of reducing poverty and inequality in a highly automated economy than active, supply-side labor market policies.
