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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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NAFTA, TPP, or Tariff Me?

by John Brian Shannon | April 15, 2016

A long time ago when there were unicorns, there was a justifiable need for international trade agreements in order to spur trade, increase movement of capital flows and to promote movement of labour — but mainly to gain access to potentially larger markets in both developed and developing nations.

International trade agreements like NAFTA and even today’s TPP are throwbacks to a day when we didn’t have all of that. Many global economies then were practically closed markets, with few exceptions.

It’s almost the opposite these days — globalization has certainly prevailed — and it’s the rare country that isn’t buying or selling wares from around the world on a daily basis.

North Korea is a closed market, so is Japan (although it is a huge exporter) and only a handful of other nations could be considered ‘closed markets’ in any substantive sense.

In your home country you can probably buy a car, a music player, clothing, food, and almost anything else — and it likely wasn’t built, created, or grown, in your country.

Globalization has succeeded wildly and we now live in a globalized world.

How’s it working?

For the people in developed nations it has meant 25-years of inexpensive goods on store shelves — goods that were either built, created, or grown, in developing nations, which has been a real bonus for developed world consumers — and it has also benefited workers in the developing world.

Unfortunately, it also led to many high-paying jobs being sent overseas, resulting in higher unemployment and worse social ills than that in some developed nations.

Liberalized international trade has become all that it could be

Which is fine. It’s served it’s purpose and we now have open markets around the world with levelization of trade, capital, knowledge, labour, and general market equilibrium — if not market symbiosis.

But there isn’t much more room for globalization to grow. Other than tidying-up some intellectual and property rights regulations we’ve arrived at our free trade destination. We’re already living in the globalized economy.

Where do we go from here?

There are a number of things that can strengthen our domestic economies without turning back the clock to the (almost) closed economics of the 1960’s.

Ten Ways to Make Our Country Better and Stronger – While Helping Citizens to Succeed and Live Happier Lives

The Ten Ways: Increasing Intellectual Property Rights, Increasing Government Revenue Streams, Preventing Obscene Government Debt, and Enhanced Government Services Designed to Move the Bottom Economic Quintiles Towards Middle Income Status

  1. We and our trade partners should sign a simple trade agreement to protect intellectual property rights, one that includes universal patent, trademark and copyright protections. The point is to get it done now while it is still relevant. If we wait, there’s no point in bothering with it, as all the secrets (the patents, trademarks and copyrights) will be ‘out of the box’ and in the general marketplace. (The rule must be that we don’t trade with nations that won’t sign and abide by those laws)
  2. We and every country we trade with should pass legislation to allow a simple 5% tariff on every imported and exported good — from supertankers full of oil, to consumer electronics, to clothing, to food, — in short, everything. This simple tariff would replace all other import and export taxes/tariffs/levies and related charges. Billions of dollars of goods are imported and exported every month and the tariff revenue stream can be used by the federal government; To improve productivity by funding R&D, and to improve government services and infrastructure — or used to raise national GDP and quality of life for citizens, by reducing unemployment and to lower taxes on the poor and working poor.
  3. We and our trade partners that don’t already have a national Goods and Services Tax (of 7% for example) on all retail goods, should implement one immediately. This revenue can contribute to the overall economy to improve services and infrastructure, reduce unemployment, and lower taxes on the poor and working poor, and should be shared 50/50 with states or provinces — who after all, would be the parties responsible for collecting it.
  4. We, and every country we trade with should pass legislation making deficits of more than 4% of GDP illegal, at the federal, state, and municipal level. This prevents obscene government spending and prevents the trap of eternal debt servicing costs, once interest rates rise. Which they always do.
  5. Our own country and every country that we trade with should no longer charge income tax on those who earn less than the equivalent of $25,000. per year.
  6. We and our trade partners should pass legislation to the effect that every worker has the right to a minimum of 25 weeks of full-time employment, per year. Yes, it would require a job-sharing programme managed at the state level. Some workers may receive layoff notices in order to accommodate unemployed workers. On the positive side, long-term unemployed people could then contribute to the economy (and to their own personal income!) for a minimum of 25 weeks per year. In countries like Sweden, this is common in industries that can’t keep all of their workers employed, and it is normal for two workers to share the same job for many years (6 months ‘on’ and 6 months ‘off’) so that over the course of a year, every worker in the country will have worked a minimum of 6 months. Which keeps their skills sharp, makes them eligible for automatic unemployment insurance benefits during their layoff, and lowers the welfare rate to near-zero.
  7. Most government unemployment insurance programmes around the world pay 66% of a worker’s salary during periods of unemployment, often after a significant wait and a worker’s claim can be turned down for any number of strange reasons. It’s inhuman. Workers pay into unemployment insurance — it’s not their fault that there are millions more people looking for work than there are jobs available — because their jobs have been sent overseas since globalization began. In some countries, a brilliant solution exists whereby workers can opt to pay into a private unemployment insurance programme, one that can top-up their unemployment insurance payments to 99% of their normal salary for the equivalent of 1 or 2 cents per dollar earned. The employee merely indicates how much extra unemployment insurance coverage he or she wants to purchase, and the deductions are automatically made from their wages and directed to the private unemployment insurance company. The private insurer also begins paying unemployment benefits from the first day of a worker’s lay-off. Workers no longer need subsist on 66% of their normal income while unemployed. (Imagine working in the fast-food industry, living on subsistence wages, then getting laid off due to a slowing economy, and then having to exist on only 66% of your already subsistence-level wage!) NOTE: In Sweden, both the government-run unemployment insurance plan and the private unemployment insurance plan make a respectable profit, every year. That’s how easy it is to do, when it’s done properly.
  8. Every city, town, village or county in the country should have the option to receive a free website from the federal government for as long as certain information is continuously updated by the local jurisdiction. Simply by entering the name of a jurisdiction in Google Search, anyone should be able to find the local time, weather, federal, state, city, village or municipal phone numbers and addresses, emergency services and other essential services (like Hospitals and Veterinary Clinics) and employment information for that city, town, or region. Standardization is key so that workers looking for work, or visitors to a region can quickly navigate to and access important services without a frustrating search (or fruitless search, because not all jurisdictions have their own site or mobile-friendly site — but you don’t know that until you do an hour’s searching and discover that there isn’t one!) Quick access to important phone numbers and addresses can save lives and help to increase productivity.
  9. Streamlined government websites for self-employed people to set-up and begin working in one day with a minimum of confusion, stress and red-tape.
  10. Legislation to require internet service providers to provide basic internet plans of $10. per month with low entry barriers — enough to check emails, find a job, find rental accommodation, and perhaps practice the preferred local language in hopes of finding a job. The internet is an essential service in our era, and those entering the workforce or returning to work after illness, etc. need to be able to start somewhere.

It’s easy to look around the world to see what’s working well in other jurisdictions and write similar legislation.

Legislators in Sweden and Norway don’t have two brains nor any other super powers, that we know of. If they can manage to get these things done, so can we. And if we can’t, we’re not half as great as we imagine ourselves to be.

But we are! Therefore, all we lack is the will to act. So let us act, and help our country to leap forward by one order of magnitude.


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The Silver Bullet for the Economy

by John Brian Shannon | January 28, 2016

How balancing the economy can give us the best work/life balance.
Or is it the other way around?

U.S. work, life, balance

By legislating that every worker in the has the right to a job for a minimum of 6 months every year, we could solve inequality, poverty, and most social ills.

For those of us fortunate to be born in a Western nation, life is mostly about balance, and for our elected leaders it’s about how to achieve balance in the wider economy, and about the kinds of policies we’ll need for the future.

Thus far, our political and economic model has evolved. But let’s never forget that it wasn’t designed, it evolved. Big difference. (It might be the best Model T Ford ever built, but it’s still a Model T, if you catch my meaning)

And that’s exactly the conversation that we need to have

Here in North America, it requires only 1% of the workers (and presumably 1% of the total available investment pool) to produce enough food to feed everyone on the continent. Yet, we see major food distribution problems and it’s getting worse.

With regards to agricultural output and distribution, our North American model is the best devised but it’s far from perfect. And that is my point, instead of waging trillion dollar wars we should have continued to improve our economic model, especially in regards to the food distribution aspect.

I don’t think that we should be giving food away for free (except in emergency situations) but there are far too many Food Banks in operation for such an affluent society, and there is constant demand for more of them.

Q: And why do we have this particular symptom that I’ve singled-out for discussion?

A: There are far too many idle hands, and it’s because their jobs picked up and went to Asia — a process that began in 1973.

We could put an end to many social ills by employing every worker for a minimum of 6 months per year

By legislating mandatory job-sharing, every worker would be guaranteed a job appropriate to their particular skillset for a minimum of 25 weeks of full time employment, annually.

That means every worker has a full time job for a minimum of 6 months of every year and is then eligible to receive automatic unemployment insurance benefits during their (short) layoff period.

Mandatory job-sharing eliminates the need for ‘Welfare’

We know that long-term unemployed individuals eventually turn to welfare in order to be able to eat, have shelter, etc. once their unemployment insurance payments run out.

We also know that long-term unemployment eventually turns into substance abuse, crime, homelessness, and other social ills.

More crime = bigger policing budgets = bigger insurance claims/higher insurance rates = more citizens injured or terrorized by crime, etc… all of that are the symptoms of high and long-term unemployment, progression to welfare, and changes in the thinking of the individuals in such circumstances, including long term depression, withdrawing from society, anger, resentment, and more.

But with mandatory job-sharing the yearly unemployment rate would be 0% — that is, over the course of the year, every worker will have worked a minimum of 6 months. However, at any given point throughout the year the nominal unemployment rate would settle at 2.5%-3.0%.

With a job (and full unemployment benefits during layoff) long-term unemployment would become a thing of the past.

Keeping workers in a state of long-term unemployment brings on an OCEAN of troubles

Job-sharing is the answer.

By legislating that every healthy worker has a job for a minimum of 25 weeks annually, we could solve the worst inequality, poverty, other social ills, and dramatically and positively lower crime rates, insurance rates, policing and court costs, and enjoy a safer, more egalitarian society.

It’s so simple.

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