How to solve unemployment and poverty? | Solving society's problems V
Policies
Keywords: unemployment, welfare, (Federal) job guarantee, government agencies, Universal Basic Income (UBI), funding, inflation, lowering of wages, debt-to-UBI ratio, total debt, greed, happiness, poverty, freelance, opportunity costs, misallocation of money and talent, right to live, debt forgiveness
This post will adress the three related concepts mentioned in the keywords, although I had only heard of UBI up until recently, because that had a lot more coverage in the media.
Society, the economy, the “free” market hasn’t solved unemployment or poverty. I have never seen a country that has zero unemployment or zero poverty. Besides the fact that the central banks of some countries use the Philips curve, USA for example, that theory means there has to be some unemployment for there to be low inflation.
Inflation isn’t only determined by one factor but by several, as a complex (adaptive) system would suggest. A concept I mentioned in two of my other blog posts: Change how we work or vote, change the world | Solving society's problems III and Being successful | Optimizing human potential I | Solving society's problems IV.
So instead just throwing more money at the problem, like unemployment benefits, welfare or spending money to set up governement unemployment agencies retraining workers or helping them look for other work. Let’s just use a (federal) job guarantee. They are voluntary, could be mainly for high demand jobs with a lot of vacancies and they could vary in supply to suit the need of society.
There are several other reasons better explained in the videos below.
Edit: after revisiting the concept about a jobs guarantee in my mind and thinking about how it would fit in the economy, I might’ve come up with some downsides to it.
There is such a thing as zombie companies, where the government and/or the central bank “subsidizes” bad companies, because of cheap credit. It could happen that by providing the funding to companies or organizations you create zombie companies in a different way. Or if the rest of the company is (financially) efficient in it’s operations otherwise, the company could provide what is known as “bullsh*t” or BS jobs in another way as well. Currently BS jobs exist, because of inefficient business operations and/or human biases/errors. Zombie companies and BS jobs might be reminiscent of Soviet style communism, where according to Janos Kornai the resource constraint economy leads to inefficient businesses and breakdown of society and a country as a whole, though not to that degree. On the other hand chinese state owned companies (SOE’s) perform remarkably well, circumventing the pitfalls mentioned by Janos Kornai. Furthermore non profit organizations exist where people find jobs not commonly found in the private sector. So if the implementation of a jobs guarantee is done poorly it could weaken the economy and stifle innovation by missallocating resources. However if it’s done right, it could be a win-win situation.
X thread about how china runs it country and how state owned companies work
A job guarantee done right could lead to a stable and less stressful labor market, which in turn leads to people having more children in certain countries, for those who want (more) children. Because they have more job security and they are able to afford children. More children also means more workers and consumers in a society which increases the GDP of a country. This is another way to solve the aging population problem, for the other one see my blog post: Work, problem or solution? | Solving society's problems I.
Parenthood more often postponed due to insecure future.(Dutch)
If for some reason the private sector doesn’t supply attractive jobs, the government with their job guarantee and with changing how we work (see my blog post: Change how we work or vote, change the world | Solving society's problems III) isn’t sufficient, then you can have government agencies coming to your aid. I think we can get to 99.999% employment with these aforementioned ways, I exaggerate, because obviously I don’t know the exact number, but these methods cover every possible way of “working” or contributing to society, that’s why I think it’s that high. If after all that, then you still don’t want some kind of work, you’re just a potato who doesn’t want to participate or contribute anything at all to society, then at least you won’t go steal if your basic needs are met with an Universal Basic Income. You probably would need to see a psychologist or psychiatrist to check if you’re mental health is ok. Though you can try to better yourself first of course, see my blog post: Being successful | Optimizing human potential I | Solving society's problems IV.
An Universal Basic Income (UBI) is like the name implies, everyone has access to an income. An UBI is not just throwing more money at the problem, but it’s “how” you throw or spend the money. I’d say we already have UBI in a lot of developed countries, mostly in social democracies and especially the Netherlands. Let me explain.
If you find any kind of work, by law you should at least receive the minimum wage. That is the wage you’re supposed to get by in society to meet your basic (physical) needs, to pay for your living expenses. Everything else on top of that is extra. If you’re out of a job and your country provides (social) policies like unemployment benefits or welfare. Those are also in the order of the minimum wage to meet those basic needs. Minimum wage, unemployment benefits or welfare therefore are just different words for UBI just applied to different situations.
However I think what most people mean by UBI is probably on top of the income the private or public sector would provide.
Some of the problems mentioned with this view are the funding of such a policy, inflation and also the private sector would give you lower wages using UBI as an excuse. Some people suggest abolishing the welfare system to fund UBI, raise taxes, an Universal Basic Dividend or Universal Basic Asset. All of these could work, but also you could make UBI optional and possibly some rich people will decline. I’ll come back to Universal Basic Dividend or Asset in another blog post. As for a possible inflation, when everyone has more spending power and poor people will affect the economy unevenly, as mentioned in one of the videos, there is the following solution. When you want to give at least up to the poverty line say 1000 USD, you could distribute over several years. The first year 500, the second year 750 and the third 1000. At the same time you could have inflation measures already in place, like raise the interest rate and raise taxes on some things pre-emptively. Though there has already been two cases where UBI works, one in Alaska, USA, the oil companies share their profits with the population of Alaska and one in an Indian reservation in USA, where the casino’s share their profits with the reservation. It seems that in those places there are none of the downsides I mentioned, but that could be because the local economy has had time to adapt.
So if you take how I interpret the UBI, then the funding is nonexistant. Just rename minimum wage, unemployment benefits and welfare to UBI and distribute the money accordingly. For the working people the wage you get from the company would be less, because they would need to pay an UBI tax equivalent to the mininum wage, but the total money you receive would still be the same. No inflation, because there is no extra funding or currency flowing into the economy like you saw in many countries during the pandemic. Lastly no lowering of wages, because the minimum wages are already supposed to be given to people. This works for nearly all social democries, who have adequate social policies in place, if however your country lack adequate policies, looking at you USA, then yes you will need to adress the problems of funding and inflation. The funding problem is still solved if you removed the renaming of the minimum wage, because the other programs: welfare and unemployment benefits still would (almost) be enough.
This way of doing things means you just deliver funds unconditionally. Research showed that people do use their funds correctly, but there needs to be some check in place, just in case, for outliers and to have some sort of punishment for squandering funds. I suggest a debt-to-UBI ratio or just total debt of people, individually or per capita. Research should give a correct measure for these situations. If these situations would happen, then you could have government agencies step in to help.
For more rare circumstances, like having mental or physical disabilities, having kids, be a single parent, live in a more expensive area or you’re older, the UBI would increase proportionally and fairly.
A criticism against UBI is how can people afford things if everything else always get more expensive, in other words inflation. The answer to that is, just like with minimum wage or pensions, it should increase (decrease) with the same amount as inflation rises (or falls). However inflation doesn’t affect the rich as much as the poor, so there must be a new inflation measure that takes into account the inquality or the bottom 10%, 20%.
So now a problem with giving money unconditionally might be that people won’t work anymore. To that I say, some proponents of capitalism always say, people are greedy and always want more. Where did that argument go? Also there are enough rich people, for example popstars, star athletes, CEO of big companies, who have so much money that they don’t have to work anymore, I don’t see them not working, partially proving the previous argument. UBI becomes a floor to earn more, not a ceiling, like welfare, that leads to a poverty trap. An even better argument is that people become happer the more money they earn.
A case for UBI could be made through something called the multiplier effect from John Maynard Keynes, every “dollar” invested into a person multiplies in the economy and gives a high ROI: Thread about a video testing theories about Milton Friedman and John Maynard Keynes and the video itself
In such a rich and welfaring country as the Netherlands we have approximately 825000 people living in poverty, that’s 4.7% of the population.
Poverty important in the Hague (government), but there's no definition. (Dutch)
People in poverty cost the society in many other ways, through the criminal-justice system, because they need to resort to drastic methods, healthcare, because they are stressed out and also can’t afford healthcare, unhealthy people can’t work. Through opportunity costs, if the people would have the money for basic needs, they would spend that in the economy, they could finally contribute to society in so many ways, they could create jobs and that would increase GDP.
Poor people who have a right to welfare sometimes don’t apply, because they are scared of their privacy, scared to be judged of being lazy and of the fact that they can mess up the paperwork and as a result have to pay everything back or more. If we give everyone unconditionally UBI, then that’s not a problem. The people who judge get money as well.
There are people who try to make ends meet, they freelance besides their regular day job, about 13.5% of all freelancers (6.4%) or 0.864% of the working population, 0.864% of 9.7 million is around 84.000 people. Also there are 11.8% of all freelancers who want income stability/security, that’s 7.55% of the working population, around 73.000 people. Combined, in total 157.000 people. That’s such a misallocation of money and talent, again a lot of opportunity costs.
Freelancing besides your regular job increasingly the norm. (Dutch)
Furthermore there’s a saying: “it costs less to educate a child than to hold them in prison”, we can extend this line of reasoning further: it costs less to provide for a person basic needs than to hold them in prison.
Also another reason why we should implement UBI is that a lot of companies get tax cuts and benefits, but without people those companies and the rest of society wouldn’t exist, so I think people deserve some “tax benefits” in the form of UBI.
An argument that promotes freedom or agency of a person would be. Do you want to give even more money to the government hoping that they and/or the labor market will do an adequate job for your basic needs or do you want to have a negative tax income, “tax benefit” or an UBI to provide for your own basic needs.
Lastly a moral argument for UBI would be, currently for you to have a right to live, you need to work, because you only have money for food, housing and (affordable) healthcare, if you work. UBI gives money unconditionally for your basic needs, the rest you need to earn, as you should.
More on UBI research here: Observed effects of Basic Income and Basic Income FAQ/Wiki.
I mentioned debt. There has been some mention of student debt forgiveness in the USA by the Biden administration the past year or so. Also a political party here in the Netherlands, Volt, mentioned, people above 600.000 euro of debt cost the society and economy a lot more than that, millions, so we should forgive the debts of those people. It happens that people through no fault of their own end up in such a situation, however to discourage people of abusing the system, if you monitor people’s debt, like I mention here above in this post, you can punish them with community service, a guarenteed job with no pay, something else or worse prison, because they are essentially stealing from society, only if government aid didn’t work initially. Though there should be a scale on which to forgive debt to make it fair. For example, people with 100.000 in debt, get 10% forgiven, people with 200.000, 20% and so on to 1 million, where 100% is forgiven. It doesn’t have to be a linear scale, I think a progressive scale would work better and it doesn’t have to be in this range, but whatever research would show being the best.
At this point you might think debt forgiveness or debt jubilee rewards bad behaviour. You just need to incur so much debt that the cost of the society is too large and your debt will be forgiven, gaming the system in the process. Just like when any law is broken, there needs to be a punishment associated with it, so does there need to be a mandatory option people have to take to compensate for this act of kindness. If one of the options has already been chosen before and it was not effective in preventing a relapse, one of the thougher options has to be chosen. If no option is chosen, one will be chosen for you. The options which the debtors are obliged to take are, in order of thoughness:
therapy;
education or training;
community service;
vacant, necessary, unpopular, low demand job;
military service
More on debt here: Thread on Killing the Host by Michael Hudson, about debt, rent and unearned income or just read the referred book, “Killing the Host” by Michael Hudson.
After we implemented the (federal) job guarantee and Universal Basic Income (UBI), with accompanying measures to facilitate proper use, we have two ways of preventing people to go into debt. That would go a long way to solving the problem. Before government agencies step in to help the remaining people you are repeat offenders, you can try to better yourself, see my blog post: Being successful | Optimizing human potential I | Solving society's problems IV. Applying both methods would be popular across all voters as well, as some voters only prefere predistribution: job guarantee and others prefer redistribution: UBI. See this thread about a paper: 2024 U.S. election, due to predistribution or the paper itself: “COMPENSATE THE LOSERS?” ECONOMIC POLICY AND PARTISAN REALIGNMENT IN THE US.
All of these measure would save tons and millions of money, which the country could put to better use. I wish I had a number to make my point more convincingly, but with a lot of these policies, there never has been a large scale test for a large duration, except Alaska and the Indian reservation in the US. By implementing these measures unemployment becomes a (policy) choice and thereby becoming not susceptible to the economic or business cycle. Also by employing these measures poverty will be gone.
Finally I suggest we apply the policies of a (federal) job guarantee, Universal Basic Income (UBI) and debt forgiveness to improve people lives, help society, the economy and your country.