19 Oct 2014

Why every entrepreneur should be pushing for an Unconditional Basic Income for all

In my open letter to Jean Tirole yesterday, I argued that Central Banks should introduce a tiny financial transaction tax on all electronic transactions denominated in their currency, and inject the revenues directly at the level of citizens using an Unconditional Basic Income. I suspect that, globally, Euro denominated transactions are running at something like €2 quadrillion a year - that's also the volume of transactions in just 5 Eurozone countries in 2013.  If the ECB taxed those transactions at 0.1%, that should generate €2 trillion in revenue, which, spread between the Eurozone's 330 million citizens would mean around €6000 a year for every man woman and child - €24,000 a year for a family of four.

Similarly mechanisms could be introduced by every single Central Bank on the planet. The Bank of England could impose a tiny tax on transactions in sterling, the Federal Reserve (or the US Treasury?) could tax transactions in dollars, the Swedish Central Bank could tax transactions in Krone, and so forth. 

To some, this suggestion may appear like some insane left-wing plot designed to make businesses inoperable - why would anyone work if they were not forced to. But it's quite the opposite. In this post, I would like to argue that every entrepreneur, and every "Pro-business" government (like Manual Valls here in France) should be pushing hard to introduce such a scheme. Why?

Well, if you are running a business, be it in manufacturing or services, you have to keep costs down to a minimum if you want to be competitive. If you are the head of a car company like Renault, it will be very difficult for you to sell cars across the world, if your manufacturing costs are twice those in other countries. The result is that you may be tempted to delocalize your manufacturing plant to other places where conditions are better.

It also means that you will want to keep wage costs down, by paying people just enough to get them to work for you, but not too much, and only employing people when you need them to do the work. We often hear employers saying that they dream of having a "flexible" work force - one that can be called on to work when needed, but that can be laid off easily in the case of a downturn in demand.

Is that true at the present time? I don't think so - at least not in France, where the employment regulations are particularly difficult to deal with for companies and where the costs of employing people are notoriously high.

Now, let's think what would happen if citizens started receiving an Unconditional Basic Income, and let's  assume about €500 per person per month (€6000 a year). For a family of four, this would mean that they could count on  €24000 every year, even if noone was working. (For simplicity, I'm assuming that the rate is the same irrespective of age, although some would argue for smaller incomes for children). Depending on where you live in the Eurozone, this could be enough to live reasonably, although probably not if you wanted to live in a big city like Paris of course.

How much would you, as an employer, now need to offer to get someone to work for you? It would all depend on what sort of work they were required to do, and what sort of hours. You would obviously need to pay more to get people to do unpleasant jobs (like cleaning out sewers), or ones that are dangerous or with health risks.

But sppose that you only need someone to work for 10 hours a week. Currently, this would be very difficult to organise because you would almost certainly have to offer full-time work to make it possible for them to earn enough to survive. The only other option for them currently would be to have multiple jobs, but that would be a nightmare to organize - both for them and for you. And of course, what you would really like is to have staff who can come in at a moment's notice and do the 10 hours that you want them to do whenever you want.  That would not be possible if someone was combining multiple jobs because you would end up in competition with the other employers.

Ensuring that people already have an Unconditional Basic Income that is enough to cover their basic requirements means that they will be probably quite happy to come in to work for 10 hours, 20 hours, 40 hours or 60 hours a week, whenever you need them. They would be free to come in because they are not juggling with some other job at the same time. And earning some extra money to buy that new car, or pay for some holidays, or change the living room suite would be perfectly satisfactory as a way to motivate them. Believe it or not, you don't really need to starve workers to motivate them to take on employment.

And for those weeks when you don't have any work? No problem. You can just tell your staff that they don't need to come in at all... and they can go off and do something else instead, safe in the knowledge that their basic needs are covered by their guaranteed Unconditional Basic Income. It's literally the same thing as the so-called "zero-hours contracts" that have become so popular in the UK. But under the UK system, when the employer doesn't have any work, and their staff has no more income, its the social security that is forced to take over - and the UK taxpayer who ends up paying the bill. This inevitably fuels the idea that people forced to depend on benefits are "scroungers".

The net result of switching to a system with an Unconditional Basic Income is that you will have a happy and contented workforce, prepared to come in and help whenever you need it. And when then have done all the work that they have to do, you can tell them, like Richard Branson just did, that they are entitled to take unlimited vacation time.

But it doesn't stop with flexibility. You will almost certainly also end up with a situation where it will cost you far less to have staff working for you. Since they will already have a reasonable guaranteed income, you will probably be able to get them to work for less that you currently have to pay. It might even be possible to abolish any minimum wage rates. If people are OK to come in and work for a few hours on less than the minimum wage, then that's OK too. Difficult to be better for business than that.

Under the current system, you are really obliged to pay enough so that someone who is the breadwinner with a family can afford to live on the amount you pay. It's pretty stupid that you are legally required to pay the same amount to someone who is single, and living with their parents... but that's the way it is. You're not allowed to discriminate. The result is that your young single employee with no family responsabilities gets paid so much that they will be tempted to go out and blow half of it getting drunk at the weekend, or wasting their income partying in Ibiza. Is that sensible?

And, of course, since the amount that you pay the breadwinner with a family of four is not actually enough to live on (I think we can probably agree on that), the taxpayer then has to step in and top-up your inadequate pay with housing subsidies, free school meals for the children, etc etc. Is that sensible? 

Now, what about pensions, health care and unemployment costs? Currently, you know very well that when you take on staff, you are not only forced to pay them a salary. You also have to fork out large amounts of hard earned company profits to make contributions to pension schemes and to provide for unemployment protection and health care. But if your staff knew that they would be guanteed to get €6000 a year even if they become unemployed, or when they retire, they probably wouldn't insist of getting those sorts of payments in addition.

In other words, having a guaranteed Unconditional Basic Income for all would be fantastic news for all those people running businesses. You would get all the flexibility you could have dreamed of, plus a massive reduction in those additional charges that you currently have to pay, and which discourages you from taking on staff.

So, please, tell the politicians that you want everyone (including yourselves!) to have an Unconditional Basic Income. And tell them that you won't mind at all having to pay around 0.1% on all your financial transactions to pay for it!

One final point. Would you agree that, in any case, employers simply do not have enough jobs to keep everyone busy? If you own a supermarket, you are probably in the process of replacing cashiers at the check out with automatic machines. Even if you are running a hamburger chain, you can now get machines that will flip handburgers more efficiently that a human. If you are running a refuse collection agency, you probably know that you can now buy machines that can collect the trash cans? Google will soon be able to replace taxi drivers with automatic cars. Paid jobs are simply disappearing at a faster and faster rate every year.

So, isn't it about time that we woke up to the fact that you, the entrepreneurial class, are simply not going to be able to provide paid employment  for all our citizens? Isn't it about time to say that, no, it would be more sensible for people to do the things that they are personally motivated to do, without them having to fight for the few jobs that are left.  Giving people the liberty to choose to do other non-paid work would be great for everyone.  Don't you agree that people should be free to do all those other things - like looking after their children, their eldery relatives, the sick and disabled, running charities, looking after sports clubs, studying at university, setting up their own businesses, performing music, creating art, writing books, educating people, looking after the countryside etc etc even if there is no immediate way of justifying such activities as a way of making money?

Yes, there are a lot of things that only business can get done sensibly. And we need those businesses to be able to find well-trained highly motivated staff who are prepared to work flexibly. An Unconditional Basic Income is the way to get there.

No comments:

Post a Comment