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Guaranteed Basic Income vs. Job-sharing Programmes

by John Brian Shannon | July 9, 2016

PART I – Guaranteed Basic Income

The Guaranteed Basic Income (GBI) or Unconditional Basic Income (UBI) plans that have been proposed in recent years that are designed to mitigate poverty — poverty that is mostly caused by higher unemployment due to economic downturn or from humans being replaced by robotics, or a combination of both — have been contrived as if they were made to fail the smell test for voters asked to vote on such initiatives.

For instance, the recent Swiss referendum asked Swiss citizens to vote on a Unconditional Basic Income equivalent to $30,300/yr for every citizen, working or not. How ludicrous! (Even I, a UBI supporter would’ve voted against that!)

Of course, all that extra income would be taxable and it would boost an individual’s income into a much higher tax bracket, and consequently, all Swiss taxpayers would pay more tax. However, in addition to automatically being bumped into a higher taxation bracket, the Swiss were looking at major percentage increases to their tax rate in order to afford that exorbitant UBI programme.

However, if such guaranteed income schemes are kept within a reasonable context it suddenly becomes much easier to afford.

Working people who earn any amount over the official poverty line in Canada (approx. $19,000/yr, depending if you live in a rural area or a city) might not require a Guaranteed Basic Income.

But for those senior citizens and disabled people who live under the poverty line, and for hundreds of thousands of Canadians whose jobs were shipped off to Asia (and we know those jobs are never coming back) whose unemployment insurance benefits have run out and are subsisting on various welfare programmes, all of these people now find themselves living far below the poverty line at $7320. per year in certain provinces.

And we wonder why we have homelessness, substance abuse, high property crime rates and higher policing, court, and incarceration costs.

Using the $19,000/yr poverty line threshold as it relates to guaranteed income schemes, we can see how GBI measures up with the real world. (Note: $19,000/year divided by 12 months = $1533/month)

It’s actually cheaper to pay a person $1533/month, than it is to incarcerate them at $6600/month. (The incarceration costs only average $80,000/yr in Canada — with federal prison inmates costing $113,880/yr. per inmate, and provincial prison inmates costing from $48,000/yr to $58,000/yr per inmate)

It’s also cheaper to pay a person $1533/month, than the common $1,000,000 per person (for example) property damage, policing costs, court costs, and incarceration costs, once all the disparate costs of one repeat offender are totalled up. (Some criminal investigations cost hundreds of thousands of dollars per month and may involve many officers and several government agencies)

It’s cheaper to pay a person $1533/month, than it is to hospitalize them in various Emergency Rooms each time they overdose on street drugs, or get hypothermia from sleeping outdoors.

ER costs are astronomical and range from $260. to $8120. per visit (and costs rise significantly if additional testing is required such as MRI, X-Rays, or if there are complications) and a substance abuser who lives on the street in a violent area might have many Hospital visits per month.

And particularly with vulnerable people like seniors or battered women with young children in tow, who subsist far below the poverty line, it is cheaper to pay a person $1533/month, than picking up the pieces afterward.

By rolling existing social programme spending from many different government departments into a GBI, much of the $1533/month GBI is already funded.

And by dramatically lowering property damage, policing costs, court costs, incarceration costs, and Emergency Room and other healthcare costs, a reasonable GBI can facilitate huge net savings for any jurisdiction.

Do dramatically lower homelessness rates, crime rates, lower substance abuse rates, lower policing costs, court costs, incarceration costs, safer cities, lower healthcare spending and shorter ER wait times, appeal to you?

Then, de facto, you’re a GBI supporter! Surprised?

Politics: Guaranteed Basic Income:

Guaranteed Basic Income: Dauphin, Manitoba was the site of the Mincome Project in the 1970s. Canada’s policy context concerning basic income may be surprising for some people. The famous Mincome experiment ended abruptly due to a newly-elected government and not due to any failings of the programme; it’s only recently that we’ve learned about the wide extent of its benefits. Photo Dauphin Economic Development on Facebook


PART II

That said; There is nothing that a national (and effective) job-sharing scheme can’t fix in regards to high unemployment levels, regardless of how high the unemployment rate soars.

I’m a firm proponent of GBI or UBI and I will strongly support it, in the absence of an effective job-sharing programme — which should be our highest priority.

In Sweden, they have mandatory job-sharing. Which means that by law, every worker must work for a minimum of 6 months per year.

That’s right, everyone who is not a student, not retired, not on maternity/paternity leave, or not disabled, is classed as a worker and must work a minimum of 6 months per year.

Sometimes, two people share the same job their entire career. Don’t forget that in Sweden, people are mostly employed. It’s the rare person who doesn’t work full time, at least 11 months of the year.

Which means that the unemployment rate among workers would sit at virtually zero percent, EXCEPT for those people who’ve just graduated and are looking for work, or homemakers who’ve just re-entered the job market, or those who’ve relocated with a spouse to a different city in Sweden. (The historical unemployment rate in Sweden is 2.5% which neatly matches-up with my above statement)

In Sweden, there are two unemployment insurance (UI) schemes:

  1. One is the government scheme which pays unemployed workers 66% of their normal salary (most countries have this basic UI setup)
  2. The other is a public/private insurer that workers can voluntarily pay into that allows them to purchase additional unemployment insurance coverage.

Both the government unemployment insurance scheme and the public/private unemployment insurance scheme are money-makers! (And why not?)

For the equivalent of only one or two pennies per dollar earned, workers can purchase the additional unemployment insurance from the public/private insurer — so that during their layoff they receive the normal 66% of their salary from the government unemployment insurance scheme — but also receive up to 33% of their normal salary from the public/private unemployment insurance scheme.

When Swedes get a layoff notice, it’s not a traumatic event in their lives.

From the first day of layoff, they’re on a fully-funded unemployment insurance program that pays them up to 99% of their normal wages, and with no application process nor waiting period. It’s automatic.

It depends upon how much additional coverage they’ve purchased, most people only purchase an additional 24% coverage, giving them 66% + 24% = 90% of their normal salary.

Why don’t they buy 33% coverage?

Because they no longer have commuting expenses, work clothing expenses, and other work-related expenses. It’s actually a net benefit to purchase only 24% coverage. But it’s completely their call to purchase any amount of public/private insurance that they want.

In Sweden, workers don’t need GBI or UBI — as they’re either working, or receiving government unemployment insurance plus the public/private unemployment insurance they’ve purchased themselves.

Companies in Sweden like this arrangement as they always have a large pool of fully-trained workers from which to choose.

Also, in the case of an ill or injured worker, Swedish companies simply call-in one of their unemployeds to fill-in for the injured worker — at full pay.

Workers gladly accept this, as not only do they continue to receive their unemployment insurance benefits (both the government UI which is paid monthly and the public/private UI which is paid weekly) but they also get the daily wage from the employer for as many days as they’re required to fill-in for the injured worker.

Yes. As you might expect, there’s a waiting list! The most senior people are at the top of the ‘Do Call’ List, whenever another employee has time away from work for illness.

It’s a great thing for companies, for workers, and for those trying to raise young families in uncertain economic times.

In Sweden, if you’re a worker, you’re covered! No matter what.

Either you’re at work getting 100% of your normal salary — or you’re at home getting (typically) 90% of your salary. There is no ‘other’ category for workers in Sweden.

And throughout your entire career, you will be in one of those two categories.

If you think that workers and their families like that system, you should interview the companies. They like it even more.

In Sweden, Nobody Sleeps in Dumpsters. Now you know why!


Summary

Which approach do you favour?

Do you think that people should be saved from poverty via (1) a GBI system or (2) do you think that an efficient job-sharing programme with both government and public/private unemployment insurance is the answer?

Let us know in the comments!


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The Synergy of the Virtuous Economy

by John Brian Shannon | June 17, 2016

An economy that constantly grows and improves because it has enough virtuous circles (and cycles) is by design, a ‘good economy’.

It’s what every economy wants to be when it grows-up.

However, there are no generally accepted metrics to measure what constitutes a ‘good economy’ — but a definition by Edmund S. Phelps in his recent Project Syndicate essay is a definition that one can appreciate.

It is worth noting that the UN Happiness Index could be a way to grade the successful march towards a ‘good’ or ‘virtuous’ economy, as nations that rank highly on the UN Index also tend to have high productivity, high per capita income, low unemployment, a high degree of personal rights and freedoms, low crime rates (and related to that stat) generally high levels of education, and in other ways their citizens live fulfilling lives in a stable environment.

It’s easy to ‘work it back’ from the end-user point-of-view.

Another way to grade the march toward a ‘virtuous’ economy would be the Social Progress Imperative’s SPI Index.

If nations are ranking highly on SPI heuristics, it’s obvious that everything needed to support those high grades are *already in place* and working. Ergo, a high-scoring SPI nation is one with a ‘good’ or ‘virtuous’ economy.

Social Progress Index 2015

Social Progress Index 2015

Perhaps nations (and economists!) should put more emphasis on UN Happiness Index and SPI heuristics and less emphasis on GDP growth.

After all, You Can’t Feed a Family with GDP

The 1%’ers will always rate their country highly on the UN Happiness Index and on the SPI Index, as their incomes and security are guaranteed and their income growth meets or exceeds GDP growth. What matters in this case, is what 99% of the population thinks.

In developed countries, GDP growth has largely plateaued, and even in the United States of America the largest economy on the planet and the country with the strongest military, GDP growth is anemic at 2% annually.

There just isn’t room to grow the U.S. (and other) developed economies more than 2% per year under the existing paradigm.

“If you keep on doing what you’ve been doing, you’re going to keep on getting what you’ve been getting.” — Jackie B. Cooper

Einstein said something similar — “The definition of insanity is doing the same thing over and over again, but expecting different results.”

Therefore, to try to get more growth out of the U.S. economy by ‘doubling-down’ on everything that we’re already doing, does nothing except prove the truth of such quotes.

But what the U.S. hasn’t tried (enough) is to use heuristical analyses to plot a policy path towards high UN Happiness Index and high SPI scores. By doing so, I posit that the U.S. could unlock another 2% of GDP growth annually.

If that’s true for the U.S. economy, it works double for China’s economy.

Did anyone else notice the productivity increases in China during, and for a short time after, the Beijing Olympics?

Yes, a mini economic boom occurred as a result of hosting the Olympics — just as it does in any country that hosts the Olympics. But productivity isn’t known to spike upwards when a country hosts the Olympics.

I guess after not seeing the sky for decades due to a permanent and thick blanket of industrial smog, Beijing residents finally got to see the sky — due to some very foresighted Chinese air pollution abatement policies that were implemented for the duration of the Olympics.

“Look everyone, The Sky!”

Smog in China. Image by scmp

Constant smog is a normal state of affairs for residents of China’s major cities — except during the 2008 Olympics when special air quality policies went into effect (in Beijing only)

An improved quality of life picture for Beijing residents worked to improve overall productivity, improving the bottom line for Chinese companies.

Certain other perks were added — including never-before-seen-in-China freedoms to travel and to miss time from work in order to travel to the Olympics.

That’s what I call a virtuous circle!

Imagine if that could be made permanent. It’s an example of how improved lives for workers can positively affect productivity and the bottom line.

By employing end-user heuristical data, developing nations could double their GDP growth annually.

For the rest of us; Now that the standard economic tools to increase growth have largely ‘topped-out’ in developed nations, it’s now time to look at improving the lives of citizens by using heuristical analyses — to increase the happiness of citizens, which will increase productivity, improving the bottom line, leading to higher GDP growth.

The proof that this works well is easily found by investigating the Norwegian, Danish, Swiss, Swedish, Liechtenstein, and UAE economies.

Ultimately, the question is a regional one; How can we improve the lives of workers and their families so that productivity can be enhanced, and thereby improve annual GDP growth?

Some nations have asked, and the results have been astonishing.

Soon, people will be saying things like; “The synergy of the ‘Good Economy’ is that the pursuit of happiness by individuals is directly related to the pursuit of worker productivity by corporations, which is directly related to the bottom line and GDP growth.”

And when those words are commonly spoken by both the masses and the elites, for the first time in history, our civilization will be firing on all cylinders — courtesy of the ‘Good Economy’.

Free Market Economy, Monopolies, or Both?

by John Brian Shannon | May 13, 2016

Should developed nations favour a free market economy? Monopolies?
Or a
regulatory framework that strengthens the macro economy?

  1. The entrepreneur in me likes Perfect Competition in a free market economy.
  2. The businessman in me likes Monopoly because of the opportunities afforded by economies of scale.

Monopolistic economies of scale allow corporations to:
[a] provide more services or products for the same cost,
[b] provide the same services or products for less cost,
[c] provide decreasing services or products to improve the corporate bottom line.

Unfortunately, monopolies are becoming the norm in America these days and one of the reasons for this is due to the emergence of the activist shareholder who demands higher dividends — no matter the burden this places on the corporation.

Eventually it ruins the corporation as higher profits (gained by cost-cutting and lowering standards in the rush to keep shareholders happy) are directed up and out of the corporation, and sometimes out of the country.

In simple terms, today’s activist and powerful shareholders are taking huge corporate fortunes and creating small fortunes out of them — in exchange for higher personal returns.

When they bleed one corporation dry they simply migrate to the next corporation. That’s not the way to build a strong country.

How to Strengthen the Macro Economy via new Corporate Ownership Regulations

The regulation we need is that no more than 50% of any corporation’s total value should be available to shareholders.

By law, the other 50% would always remain founder-owned or corporation-owned shares.

This would prevent the most egregious profit-taking damage to corporations — and C-suite executives could then lead the corporation according to what works best to gain higher customer approval ratings and improved market share — instead of what works best to meet shareholder demands.

By keeping 50% of the value of the corporation within any combination of the corporation or its founder(s) it helps to prevent excessive profit-syphoning to shareholders and it allows for rock-solid collateral when (re)capitalizing the corporation during expansion, for example.

One immediate bonus would be a much larger investment pool available to corporations that are looking to offer up to 50% of their value to shareholders.

I’d expect a NASDAQ boom if such a regulation were passed. A small and mid-cap renaissance would finance a new bull market from one profound regulatory change.

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