According to LONDON – Saxo Bank, Universal Basic Income could become a permanent reality next year, triggering a “seismic realignment” of society as workers wave goodbye to big city life.
In a report titled “Outrageous Predictions”, the Danish bank outlined 10 “outlandish forecasts” for 2021 on Tuesday, despite insisting that these are not its “official” views.
Among the predictions, the bank said government actions to support lost wages in response to the coronavirus pandemic could become permanent and this new era of free money would destroy commercial real estate.
“The risk that societies will be completely torn apart leads to the realization that the Covid-19 measures were not a mere panic reaction, but the beginning of a permanent new reality of the universal basic income (UBI),” said Kay Van, global macro strategist by Saxo. Petersen said in the report.
“UBI leads to a seismic balance of the forces and structures within society and their geographical application.”
He said the Covid-19 pandemic “only accelerated the K-shaped recovery that led to inequality and social fabric disruption before the outbreak”.
A K-shaped recovery refers to a recovery where, as with the letter K, economic performance is widely divergent, with some parts of the economy benefiting from strong growth while others lag behind.
Van-Petersen also said the younger generation has realized that “even a solid education and attitude” are not enough to move up the socio-economic ladder, as was possible for much of the 20th century. And the growing wage deflationary forces of software, artificial intelligence and automation “have undermined growing numbers of jobs in various industries”.
Big city exodus
The universal basic income is not a new idea. But it has grown in importance in the wake of the pandemic. Proponents of the policy suggest that it could help provide financial support to those affected by the global health crisis and future proof against any further society-wide event.
The IMF describes the Universal Basic Income as an income support mechanism whereby regular cash payments should reach a large part of the population under minimal conditions.
In short, everyone, regardless of their employment status, would receive a lump sum on a regular basis.
A couple wearing face masks to protect themselves from the spread of the coronavirus (COVID-19) sit on a bench that maintains social distance in Retiro Park in Madrid, Spain.
Marcos del Mazo | LightRocket | Getty Images
In April, when many countries decided to put lockdown measures in place to curb the spread of Covid-19, Pope Francis advocated such a move, saying, “This could be the time to consider a universal basic wage.”
“Big cities have been the main drivers of employment growth for generations. In the new era of UBI, the layoffs normalized by Covid-19 and frequent work from home, real estate in city offices is suddenly facing 100% or worse overcapacity,” said Van -Petersen.
“Commercial office real estate values are being destroyed along with commercial real estate with restaurants and shops targeting drone maintenance for commuters.”
As a result, Saxo Bank said investors might consider taking a short position in real estate mutual funds in major cities. It quoted SL Realty Trust and said that it invests solely in New York office buildings or Vornado Realty Trust as it invests in Chicago, San Francisco, and New York.
A short position refers to a trading technique in which a market participant sells a security on the assumption that it will fall in the short term.
“The new UBI will also lead to changes in attitudes towards the work-life balance so that many young people can stay in the communities in which they grew up,” said Van-Petersen.
“In the meantime, skilled workers and marginalized workers in big cities are beginning to leave as job opportunities dry up and the quality of life in small, overpriced apartments in areas with higher crime rates becomes less attractive.”