Welfare systems need wholesale change to adapt to automation, the gig economy and changing global trade, says the Adam Smith Institute ahead of the World Economic Forum meeting in Davos.

Policymakers may need to consider a ‘Universal Basic Income’ (UBI), whereby citizens are paid a regular, liveable and unconditional sum of money from the government. Payments under the scheme would not require recipients to look for work, and would be paid regardless of other income.

There are currently trials for this type of scheme in countries such as Canada, Finland, Uganda and Kenya, although Switzerland overwhelmingly rejected the idea in a recent referendum.

The Institute said automation, the gig economy and global trade have the potential to deliver massive improvements in living standards, but also risk a populist backlash from those hit by creative destruction. Researchers at Oxford University found that jobs such as library technicians, telemarketers or accounts clerks had a 99% chance of being automated in future.

The group argued that protectionist policies were not the answer and implementing UBI could deliver popular consent for globalisation and technological change. It urged more governments to conduct experiments on UBI to ensure that ‘capitalism and efficient redistribution can be vindicated in equal measure’.

In Ontario, Canada, the local government is trialling payments to 2,500 people that ensure a minimum income level of at least C$1,320 a month, regardless of employment status. In Finland, 2,000 unemployed people across the country are being trialled with UBI of €560 a month for two years, with expansion to a further 1,000 for two to three years if initial results suggest success. In Silicon Valley, Y Combinator (early backers of AirBnb and Dropbox) are funding a long-term study of two to three years which will ultimately include up to 3,000 individuals.

Sam Dumitriu, head of research at the Adam Smith Institute, said: “New developments in machine learning, from driverless cars to AI medical diagnostics, will change the way we live, work, and play for the better. But they also risk disrupting traditional professions and career paths, from lorry drivers to lawyers. To avoid a populist backlash, we need to design policies for those left-behind by creative destruction. Attempts to protect jobs through luddite regulation will backfire and mass retraining schemes have a shaky track record. Cash transfers are our best bet at ensuring the benefits from coming technological change are felt by everyone.

“We now need to experiment with different ways of doing it – should we tweak the tax credits system, should we introduce a ‘Negative Income Tax’, or is a Universal Basic Income the best approach? And, if we’ve decided on the best way of doing things, what should things like the withdrawal rate be? This paper is a welcome contribution to the debate around welfare reform in the UK and puts evidence at the front and centre of improving policy, just as it should be.”