Described by Martin Luther King Jr as the solution to poverty, universal basic income (UBI) may become an inevitability in this era of advanced technology. By 2040, technology will be ubiquitous: automation, AI and robots will be in operation in businesses across all industries, improving efficiencies and creating profit, while ultimately displacing many jobs, forecasted to impact as much as 20% of the global workforce by 2030. They will do far more than they do today.
Until now, technology replaced only the physical work of people. Once displaced, with some assistance and re-training a worker could move to a new employment vocation. Now, AI is rapidly taking on that other human ability — cognitive ability. This is a historical first. Whilst a worker could go from building car-doors to operating a machine that builds the doors, it is a massive leap of huge cognitive capability to move from that role to advance AI software programming as a vocation. Massive upheavals in a short time frame can create mass unemployment and under employment.
Weak employment growth has been a key feature of previous economic recoveries – a phenomenon economists call “jobless recovery”. In the US, following the 2008 GFC, it took 6+ years for employment to return to its pre-recession peak. The recessions of 1991 (post-Gulf War) and 2001 (the dot-com bubble), also saw long-lasting high levels of unemployment, with immense economic and social consequences.
UBI is also known simply as Basic Income. According to the advocacy group Basic Income Earth Network (BIEN), the essential principle behind basic income is the idea that all citizens are entitled to a liveable income, whether or not they contribute to production and despite the particular circumstances into which they are born.
In Europe, the effect on employment after 2008 was even more dramatic. It took the EU 11 years to return to its pre-crisis unemployment rate of 6.7%. In addition, real wages have stagnated and there hasn’t been a rise in income levels over the past decade. In fact numbers from PEW show that despite healthy employment numbers prior to Covid-19, when taking into account inflation, the average wage “has about the same purchasing power it did 40 years ago.” This has forced many consumers to become more value-savvy once home mortgages and credit cards become tapped out.
Regardless of the pros and cons of UBI, or whether it will in fact be introduced, Covid-19’s devastation upon the labour force, and continued downward pressure on wages, will all lead to a more frugal way of life and a secular shift towards value for money-based consumption.
Beneficiaries of this Megatrend are discount stores. Data from e-commerce analytics firm Edge by Ascential show that discount retail stores, such as Dollar Stores, have been growing at a much faster clip than other retailers. These value-based stores are experiencing acceleration in sales at a time when many businesses are struggling. Year-on-year traffic for one leading discounter increased by the mid-teens in both April and May, and crossed 20% in June.
As other retailers struggle to stay afloat due to Covid-19, dollar stores in the United States are continuing to increase their physical presence as well as their profits. Dollar stores cluster in either rural areas where access to traditional grocery and retail is limited or are in underserved urban communities. They are also more prevalent in lower income communities especially as Covid-19 unemployment numbers have skyrocketed. Many Americans are becoming more budget-conscious.
Insync’s stock investment benefitting from the UBI Megatrend generates a very high return on invested capital. It is expected to increase the number of stores by 50% over the next 8 years. In a period of ‘retail apocalypse’ how many bricks and mortar retailers can provide such a high level of visible profitable growth?
The UBI megatrend is one of the 16 global megatrends in the portfolio and exemplifies the diversity of investments that exist within the Insync funds.