2020-05-02
Before one can talk about a Universal Basic Income (UBI), one should first understand what is work and income.
One of the major criticisms against UBI is that it will create an incentive for people not to work. But what is work anyway? And what is income?
TL;DR - None of the research into UBI has ever found a detrimental effect on employment. But the longer explanation starting below will be more interesting. I promise.
Income
Economically speaking, income is earned from two broad sources - Capital(Wealth) and Labour. (And under labour I include entrepreneurship.)Capital is a vague idea, but one way to define it is that it is the accumulated product of excess labour. A very simple and direct example from many years ago, is the farmer that uses some of his time to build a water furrow to his crop field. Where before he had to carry buckets of water to water his crop, he now just needs to open and close the furrow as needed. (I will return to the topic of capital in much more detail in a later post.)
Labour is a much less vague notion, most of us eat "by the sweat of our brow". A special way of performing labour, is organising other labourers to labour on your behalf. Some people call that entrepreneurship, with its own reward of profit. However, since "profit" is just what is left after labour and capital has been rewarded, they are very closely related. And whether it is correct or not (certain elements of) society greatly values this kind of labour.
I include labour and entrepreneurship in one group, because labour, even if employed in a large company, involves a certain amount of entrepreneurship. This is very well illustrated by Toyota Motor Corporation and its concept of Kaizen. (Continuous improvement). Employees are encouraged to take ownership of their work, and the environment in which it is produced, to continuously improve efficiency and safety. (Obviously Toyota is not the only company that treats their employees as heads and not hands, but they are better at it than most.)
In theory, the wage reward for labour is determined by supply and demand, but in practice the supply and demand calculus is heavily influenced by the relative power positions of the two groups, employers and labourers. There are also completely different levels of supply for neurosurgeons than what there are for seasonal crop pickers.
And the pay for executives are of course not determined by supply and demand, but by their associates who sit on the board remuneration committee. These executives in turn also sit on the remuneration committees of the companies of these associates. (Executive compensation is a dirty can of worms, worthy of its own post.)
Work
Now, back to the original question. What is work exactly? And who decides?Most of us instinctively think of the effort that is put in, by an individual, between 9-5 on weekdays, and for which they receive a weekly or monthly reward. But what about stay at home mothers that look after the children? Or a sick relative? Surely that is also work?
In South Africa thousands of people are employed to fill your car with petrol, but none of that happens in the USA, and many other countries. Is a petrol attendant performing work or not? In South Africa therefor, filling your car increases Gross Domestic Product (GDP), in the USA it does not. Similarly, in Japan, people eat much more outside the home, due to the long hours that they work. Again, in Japan, much of people's daily eating is counted toward GDP, and in the rest of the world it is not. IKEA has outsourced a lot of the labour involved in creating furniture to the consumer, also excluding that effort from GDP.
Further, many people, especially women, stay at home to look after the house and kids, do additional work in and the around the house, or look after a sick family member, That effort is not counted, nor rewarded in monetary terms, and can be a surprisingly large amount of money.
In the modern economy, much of normal work no longer exists. People do part time, contract, zero-hour contracts and other forms of labour activity in the Gig economy. None of these work relationships are inherently bad, it depends on the way that they are implemented. If a worker prefers part time, it is good. But what if they would prefer a full time work, but the employer refuses to provide more than a certain number of hours? What if this parcelling out of work, makes it utterly impossible for them to negotiate a decent salary? Or get enough. stable hours.
Is it work to run around a field after a ball, whatever the shape of the ball? Whether it is work or not, society rewards (some) of those people immensely.
Is it work if you do it for free, like volunteers in all walks of life?
Is it work if you stand on the corner of the street to sell your body? Once again, society is willing to pay for this service.
Remuneration (Reward) for Work
In the good old days, in the agrarian economy, remuneration for work was easy to see: You planted a crop, you harvested it, and you ate it. Your husband, wife, child or parent fell ill, and you cared for them.In the modern economy the supply chains have become much longer. Assume you are a supplier of wood for pencils. First you need to harvest the wood and cut it, and provide it to the pencil maker. She glues it around graphite, and supply it to the wholesaler, who supplies it to the retailer, who sells it to the consumer. The money that the consumer has paid for the pencil, needs to travel back all along the chain, and every person in the chain, keeps as much as he can for himself, before handing over the absolute minimum to his predecessor.
Early in the division of labour, each step along the way was performed by an individual. Nowadays, each of these steps are executed by massive organisations. In turn, each of these organisations now need to divide the income for it's step in the chain, among it's employees - accountants, HR, C-level executives, and hopefully, something for the worker that actually does the work.
And let's not forget about taxation. Taxation takes a share from both labour and capital remuneration to use for the social good.
Is this reward fair?
Do we as humans regard it as fair that millions of people, even in developed economies, work 40 hours a week, but are still in poverty? Or that 3 or 4 people own as much as the poorest 50% of the population?In the time of the Corona Virus, is it fair that the people regarded as "essential workers", for a very large part, are the worst paid workers in society? The cashiers, the cleaners, the shelf stockers, the crop pickers, the meat packers. These people barely get subsistence wages, they are often seasonally employed, and they are now expected to risk their lives to keep us fed in a sanitised society. To the extend that the American government has compelled American meatpackers to go to work, even though there are incredibly high levels of infections in those meatpacking plants.
Is it fair that for numerous young girls, and boys, the only way to escape abusive parents, partners or hunger and homelessness, is to sell their bodies on street corners?
Is it fair that some people own unimaginable amounts of wealth, while others die of hunger? And yes, I mean unimaginable. Humphrey Yang provides a visual example here. Bear in mind that this example was filmed on 28 February. Bezos has been "rewarded" with another $26 billion in the meantime. (I wrote this on 2 May 2020). Which means his 58 pound pile of rice has grown to 70 pounds...
If you think that ANY of this is ok, don't bother reading further.
