On August 24, 2015, Robert Reich writes on AlterNet:
As Labor Day looms, more Americans than ever don’t know how much they’ll be earning next week or even tomorrow.
This varied group includes independent contractors, temporary workers, the self-employed, part-timers, freelancers, and free agents. Most file 1099s rather than W2s, for tax purposes.
On demand and on call – in the “share” economy, the “gig” economy, or, more prosaically, the “irregular” economy – the result is the same: no predictable earnings or hours.
It’s the biggest change in the American workforce in over a century, and it’s happening at lightening speed. It’s estimated that in five years over 40 percent of the American labor force will have uncertain work; in a decade, most of us.
Increasingly, businesses need only a relatively small pool of “talent” anchored in the enterprise – innovators and strategists responsible for the firm’s unique competitive strength.
Everyone else is becoming fungible, sought only for their reliability and low cost.
Complex algorithms can now determine who’s needed to do what and when, and then measure the quality of what’s produced. Reliability can be measured in experience ratings. Software can seamlessly handle all transactions – contracts, billing, payments, taxes.
All this allows businesses to be highly nimble – immediately responsive to changes in consumer preferences, overall demand, and technologies.
While shifting all the risks of such changes to workers.
Whether we’re software programmers, journalists, Uber drivers, stenographers, child care workers, TaskRabbits, beauticians, plumbers, Airbnb’rs, adjunct professors, or contract nurses – increasingly, we’re on our own.
And what we’re paid, here and now, depends on what we’re worth here and now – in a spot-auction market that’s rapidly substituting for the old labor market where people held jobs that paid regular salaries and wages.
Even giant corporations are devolving into spot-auction networks. Amazon’s algorithms evaluate and pay workers for exactly what they contribute.
Apple directly employs fewer than 10 percent of the 1 million workers who design, make and sell iMacs and iPhones.
This giant risk-shift doesn’t necessarily mean lower pay. Contract workers typically make around $18 an hour, comparable to what they earned as “employees.”
Uber and other ride-share drivers earn around $25 per hour, more than double what the typical taxi driver takes home.
The problem is workers don’t know when they’ll earn it. A downturn in demand, or sudden change in consumer needs, or a personal injury or sickness, can make it impossible to pay the bills.
So they have to take whatever they can get, now: ride-shares in mornings and evenings, temp jobs on weekdays, freelance projects on weekends, Mechanical Turk or TaskRabbit tasks in between.
Which partly explains why Americans are putting in such long work hours – longer than in any other advanced economy.
And why we’re so stressed. According to polls, almost a quarter of American workers worry they won’t be earning enough in the future. That’s up from 15 percent a decade ago.
Irregular hours can also take a mental toll. Studies show people who do irregular work for a decade suffer an average cognitive decline of 6.5 years relative people with regular hours.
Such uncertainty can be hard on families, too. Children of parents working unpredictable schedules or outside standard daytime working hours are likely to have lower cognitive skills and more behavioral problems, according to new research.
For all these reasons, the upsurge in uncertain work makes the old economic measures – unemployment and income – look far better than Americans actually feel.
It also renders irrelevant many labor protections such as the minimum wage, worker safety, family and medical leave, and overtime – because there’s no clear “employer.”
And for the same reason eliminates employer-financed insurance – Social Security, workers compensation, unemployment benefits, and employer-provided health insurance under the Affordable Care Act.
What to do? Courts are overflowing with lawsuits over whether companies have misclassified “employees” as “independent contractors,” resulting in a profusion of criteria and definitions.
We should aim instead for simplicity: Whatever party – contractor, client, customer, agent, or intermediary – pays more than half of someone’s income, or provides more than half their working hours, should be responsible for all the labor protections and insurance an employee is entitled to.
Presumably that party will share those costs and risks with its own clients, customers, owners, and investors. Which is the real point – to take these risks off the backs of individuals and spread them as widely as possible.
In addition, to restore some certainty to peoples’ lives, we’ll need to move away from unemployment insurance and toward income insurance.
Say, for example, your monthly income dips more than 50 percent below the average monthly income you’ve received from all the jobs you’ve taken over the preceding five years. Under one form of income insurance, you’d automatically receive half the difference for up to a year.
But that’s not all. Ultimately, we’ll need a guaranteed minimum basic income. But I’ll save this for another column.
Robert Reich continues to be stuck in one-factor thinking –– labor ONLY. Reich dabbles in the issue of the future of “work” but fails to come right out and state that without work there will be hordes of citizens of zero economic value. Of course this does not have to be the case except for Reich’s view of that when ONLY measured by work, a majority of people will cease to provide a means to earn an income. That is, unless the system can be reformed to empower EVERY citizen to acquire ownership in FUTURE wealth-creating, income-producing capital assets resulting from technological invention and innovation.
Reich states that “we’ll need to move away from unemployment insurance and toward income insurance”…and “Ultimately, we’ll need a guaranteed minimum basic income.
Reich ignores the further impact that legal and illegal immigration will have on the competitive labor market. Of the future he outlines there is one aspect of this future that is not addressed. It is legal and illegal immigration, which, according to government data, has since 2000 represented all of the net gain in the number of working-age (16 to 65) people holding a job.
The sharing economy Reich refers to is a desperate economy, in which people are renting their homes or parts of their home or using their own automobiles in service others who are looking for a lower cost means to lodge when traveling or to get from place to place without incurring costlier taxi services. People are desperate to earn more income to support themselves and their families, even if that means a non-traditional, non-benefit job or service they provide.
Shifting to the larger picture, which Reich does not address, is globalization, which is enabling multi-national corporations (those that produce not only in the United States but in other countries as well to produce and sell products and services internationally using the cheapest labor rates, as well as non-human productive capital. Productive capital is increasingly the source of the world’s economic growth and will continue to be so at an exponential rate, resulting in far less need for people to work. Because globalization and tectonic shifts in the technologies of production will accelerate the end of work by destroying jobs and devaluing the worth of labor, it is imperative that productive capital assets become the source of added property ownership incomes for all. The reality is if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all.
The question that Reich should be raising that requires an answer is now timely before us. It was first posed by binary economist Louis Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital, with the result of denying the 99 percenters equal opportunity and access to become capital owners. The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”
Those seriously interested in exploring non-conventional solutions need to read the article A New Look at Prices and Money: The Kelsonian Model for Achieving Rapid Growth Without Inflation at http://www.cesj.org/wp-content/uploads/2013/11/pricesandmoney.pdf. In this paper, a case is made for a major transformation of any nation’s monetary system so that in the future new money would be created in ways that would unharness the full productive potential of society, while closing the growing wealth gap between the richest 10 percent and the rest of society — and to do so voluntarily without the need to redistribute existing wealth. Prices, wages and interest rates would be controlled under the proposed model of development completely by competitive market forces, not by the whim of central bankers, politicians or organized power blocs.
It is imperative that we address the structural problems of the system and reform the system to result in forward-looking growth.
Each year our national public debt has become harder to service because pretend-and-extend policy making has created a depression in real, capital asset investment and consumption (not the gambling casino stock market trading second-hand [owned] stock, because the extent of all productive capital asset OWNERSHIP is concentrated.
In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages (saving from denial of consumption) to purchase capital assets. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work by workers with capital work by the owners of productive capital assets. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Corporate decision makers know this, whether in the United States or China, or anywhere organized assemblies of people engage in production. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through make-work job creation, minimum wage requirements, and welfare programs. Such policies do not function effectively.
Even with historically low interest rates when the federal government borrows, say to repair obvious deficiencies in roads, rails, water systems and more and to upgrade such or finances the military-industrial complex, which perpetuates continuous war, only the people who already own productive capital are the beneficiaries of debt through contract work sold in the name of job creation, but in reality systematically concentrates more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming, and instead “re-invest” to further accumulate ever more capital wealth ownership. The result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.
The ever-growing trillions of dollar debt liability will come due on the heirs of today’s Americans.
Nor is the suggested solution by Reich and others to spread wealth by extracting a more heavy tax on the growing share of wealth accumulated by the owners of wealth-creating, income-producing capital to redistribute as a “universal basic income” viable and sustainable. Those who are productive, either through their labor or through the application of the productive capital assets they own will object to taxing their productive input to subsidize the idleness of millions of “takers.”
Under this proposed scheme, there would still be OWNERS of private property, and the productive, wealth-creating, income-producing private property OWNERS would be taxed to support a substantial REDISTRIBUTION of wealth in order to provide a “basic income” to EVERY citizen. This is the very essence of socialism.
The outcome is that the wealthy ownership class will still be the OWNERS of America’s productive capital assets and essentially, as OWNERSHIP LORDS, dominate the vast majority of citizens, who through a powerfully political government elite will be their “slaves”––”slaves” as in welfare and charity slaves, which the advocates of this proposal refuse to acknowledge.
The ONLY way out of the deepening economic inequality and the national debt hole is not to pursue austerity and cut spending (consumption), especially since there is a level below which you cannot go, but to increase income (production).
This is “Say’s Law of Markets.” It is based on Adam Smith’s first principle of economics, articulated in The Wealth of Nations: “Consumption is the sole end and purpose of all production.” The obvious corollary, of course, is that you can’t consume what hasn’t been produced — which is exactly the United States’ problem as well as other debt-ridden countries.
In short, you can mint, print, or borrow all the money you want, but if you’re not producing a marketable good or service for consumption, even if you have a mountain of gold, silver, or government debt paper backing your currency, you are trying to get out of a hole by digging it deeper.
If something doesn’t exist, you can’t consume it. the only thing that’s going to get the United States and other debt-ridden countries out of the hole they are in is to increase production dramatically, not cut consumption and pursue austerity.
Rather than focus on Job Creation that holds back technological invention and innovation, our economic policies should focus on wealth-creating, income-producing capital Ownership Creation, whose result will be REAL job creation where necessary to support rapid technological and societal development as we build a future economy that can support general affluence for EVERY citizen and provide inclusive prosperity, inclusive opportunity, and inclusive economic justice.
Given that there is no question that robotic technology will continue to expand the productivity and in large measure destroy jobs and devalue the value of human labor, the question that SHOULD be urgently addressed is WHO SHOULD OWN THE FUTURE TECHNOLOGY ECONOMY? Will ownership continue to concentrate among the 10 percent wealthy ownership class who now OWNS America, or will we reform the system to provide equal opportunity for EVERY child, woman, and man to acquire personal ownership in FUTURE productive capital assets paid for with the FUTURE earnings of the investments in our technological future?
The article asks that you ask yourself: “How is anyone going to make any money when there is ever less opportunity to work?” This is manifested in the myth that labor work is the ONLY way to participate in production and earn income, and that individual talent and effort are what distinguish the wealthy from the non-wealthy.
A sounder solution is to empower EVERY child, woman, and man to acquire personal OWNERSHIP stakes in America’s future productive capital assets by providing equal opportunity for EVERY citizen to OWN and to have access to acquiring wealth-creating, income-producing capital wealth (the whys and hows of becoming rich). And to ensure at death, using a transfer tax, that concentrated wealth estates are dispersed so that no “family” stays permanently wealthy and politically powerful.
The financial mechanism required must provide EVERY citizen an equal annual amount of newly issued money to be specifically used to form new productive assets determined by feasibility analysis using the logic of corporate finance––that the investments will produce earnings out of which to pay for the initial investment and provide the asset value for the new money issued for the extension of capital credit. The actual capital credit loans also must by interest-free as there is no conventional borrowing involved from people who have denied themselves consumption and saved in order to invest. This is all new money essentially issued by the Federal Reserve. The capital credit also must be insurable using private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). Thus, no citizen would ever be exposed to a reduction in their wages, if they are employed, or any other extraction of their personal equity wealth.
This solution, which upholds the principles of private property that our nation was founded upon and abates the further concentration of capital wealth ownership by providing equal opportunity to acquire and OWN future capital asset wealth, in which EVERY citizen becomes an OWNER and is thus a productive contributor to our societal development through “tools” they OWN, is the essence of the proposed Capital Homestead Act. See http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.
The whole discussion on reforming the money and credit system leads to defined policy actions, as does tax reform. Let’s take taxes first.
Four principles must guide the tax reform. 1) Efficiency: the tax system raises enough money to run the government without giving too much disincentive to produce. 2) Understandability: people should be able to pay their taxes without having to become an expert. 3) Equitability: people must be taxed in accordance with their ability to pay. 4) Benefit: people who receive the benefit should pay for it.
Thus, the fairest tax given these principles is a single rate imposed equally on all income above an exemption sufficient to enable people to live in reasonable comfort. In addition, the tax laws must permit a tax deferral on income used to purchase capital assets, up to an amount sufficient to generate an adequate and secure income.
Thus, every citizen should have a Capital Homestead Account (CHA) or Economic Democracy Account in which he or she can accumulate a reasonable ownership stake of income-generating assets on a tax-deferred basis. A CHA (a super-IRA or asset tax-shelter for citizens) would be available at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Now — how do they buy the assets in the first place on which to defer the taxes?
That’s where the necessary money and credit reforms kick in. Obviously, if a rich person or a corporation can finance new capital without using past savings, so can everyone else — and it’s better for the economy. The fact is, the more people who are productive, the more income there is, and the more income there is, the more demand there is, and the more demand there is, the more people can produce and sell ad infinitum.
Thus, every child, woman, and man can open up a Capital Homestead Account or Economic Democracy Account in which every individual can accumulate up to, let’s say, $1 million on a tax-deferred basis. And at a ROI (“Return On Investment”) of a conservative 20 percent (in direct new asset-based new stock issues), would generate taxable income of $200,000 every year.
Further, companies can be encouraged to pay out all earnings as dividends by making dividends tax-deductible by the corporation — and substantially raising the corporate tax rate to give more encouragement. That way a corporation has a choice: avoid all taxation of income by paying it out to the shareholders (who can pay taxes on their dividends the same as any other income), or pay even more taxes than they do now.
Besides, if they finance growth by selling new shares instead of retaining earnings, the new shareholders are going to need the full stream of profit attributable to their shares to pay for those shares. Issuing shares instead of retaining earnings to finance growth will create a lot of new shareholders, and create a lot of new demand to justify more growth and jobs.
Thus, if everybody has the right to borrow money to purchase new shares that pay for themselves out of future dividends — and all profits are paid out as dividends — ordinary people can become capital owners without risking anything they might have at present, which for most people in the United States is not a risk because they don’t have anything to lose at present as it is. If the money is created using interest-free capital credit, there will always be enough money for new capital formation — and for creating new owners without taking anything from anybody else.
What about security for the capital credit loans? What if the borrower defaults, i.e., doesn’t make the loan payments?
There’s an entire industry that already exists to help people handle risk. It’s called “insurance.” Using the risk premium on all loans as an actual insurance premium (ala the Federal Housing Administration concept), a borrower or lender can take out a capital credit insurance policy that pays off in the event of default.
Instead of tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent, these comprehensive policy and program reforms should become national policy as a necessary solution to correct the systemic injustices of monopoly capitalism. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.
The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.
The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to contribute productively to the economy as a capital owner as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.