As it should & ought to be...

There’s been a lot of chatter in the econblogoshere are the idea of a basic income, what we’ll call a Guaranteed Income.

Herewith, I’ll explain the way it works.  There’s only one way it works.  Deviations on the idea without the private sector auction ruin it immediately.

Milton Friedman walked away from a Negative Income Tax because it wasn’t a full replacement for social safety net.  This is that exact situation.  We either do it my way, or it won’t work, and isn’t worth doing.

The Basic Plan

Using the Paypal and Ebay platforms, the US govt. should establish a Guaranteed Income of $240 per week. Anyone who wants to work registers, receives a Paypal Debit Card, and each Friday at 5PM has their GI deposited.

All GI recipients have their labor weeks auctioned online. 

Bidding begins at $40 per week ($1 per hour). Bid increases by .50 cents per hour ($20 increments).

At $40 per week, there’s no able bodied / able minded person that some rational returns bidder won’t find use for.  The 70 yr old woman in a wheelchair who wants to work to keep busy?  Somebody has some work for her to do from home for $1 per hour.

Note: I solve for the criminally lazy.  Identifying and fixing them is one of my plan’s advantages. I’ll get to it a bit later in the What Abouts plan.

So minimum take home cash under GI is $7 per hour or $280.  $240 is the social commitment paid out of taxes and $40 is the winning bid.

To perfectly align incentives, for each $20 per week bid increase over $40, the govt. gets back $10 of our $240 social commitment, and the auctioned employed keeps $10.

So, on a bid of $100, the govt. is paying $190 and the auctioned receives $290.  A bid of $200, hits the govt. for $140 and auctioned receives $340.

The system ends at $7 per hour.  Just below current minimum wage.  So the maximum bid covered the GI Ebay system is $280 and the govt. is still kicking $100 netting the auctioned $380 per week.

Here is the actual schedule I’m suggesting:

Winning BID        GI paid by govt.              Payday: GI + BID
$40                      $240                               $280
$60                      $230                               $290
$80                      $220                               $300
$100                    $210                               $310
$120                    $200                               $320
$140                    $190                               $330
$160                    $180                               $340
$180                    $170                               $350
$200                    $160                               $360
$220                    $150                               $370
$240                    $140                               $380
$260                    $130                               $390
$280                    $120                               $400

At this point peoples minds tend to have lots of questions.  Since I’m writing this for let’s starts here. WALMART now has to pay more than $400 a week.

Here are the basic rules:

1. Recipients can choose to take lower paying jobs.
2. Recipients cannot be made to work outside a radius of 5 miles.  This is a guesstimate.
3. Bidders must also establish their real identity and deposit money into system before they bid.  No more craigslist roofing scams paying after the fact.
4. Bidders and auctioned cannot be related or cohabitating.
5. Bidders must accurately describe the job (check boxes) and cannot add to it after winning bid or require work not checked.
6. Feedback will be given both ways. If you are familiar with Ebay buyer / seller feedback, you understand what this accomplishes.  It makes it the whole thing work.   If you are not familiar with Ebay, get familiar with it before you state your opinion on this plan.
7. There are no taxes paid by employer or employee.  There are basic workplace protection requirements. Umbrella insurance is sold on Ebay for folks bringing labor into their home.
8. Upon meeting some fair criteria, the criminally lazy can be suspended from GI program. Perhaps 6 weeks as first suspension.
9. Only individuals and incorporated SMBs earning less than $3M per year can bid.   This is not subsidized labor for Fortune 1000.  Under this plan, their labor costs go up.  I am proposing Internet based #Distributism.

The costs

Expect 30M to register so approx $375B is our cost assuming 30M are auctioned at $1. This is of course higher than the market would bear.  At an avg. bid of $3 per hour the govt. is spending $312B per year.  At $5 per hour, the govt. is spending $250B per year.

There is no more unemployment insurance.  There is no more minimum wage.  That’s why there are 30M in program.

If you quit / lose your fulltime regular job, you stay out of the GI program for as long as you wish and can afford to.

The savings on ending UI alone, CBO places at $94B for 2012.

The savings from productivity gains in public sector that currently administers unemployment benefits at federal and state levels, I’m putting at $20B+ for 2012.

The economic growth from this is of course ginormous.  Since we have no unemployment, the only task of the Federal Reserve will be to keep us from productivity driven deflation, at fisrt there will be some too. This means an end to QE and a much quicker end to the bad debt crisis.  


Policy goals

The goal here is to put the greed of private bidders to work to quickly identify which of the 30M are best at the jobs they are happily put too.   When a family hires a babysitter, and after 6 weeks they have consistently rebid, that is known, expect the market to quickly clear to find the correct price of babysitters – trust the ones who clean to earn more.

The goal is a fuzzy system with less rules, so a neighborhood with 30 dog owners can bid $3 an hour for someone to clean up their yards, and the guy taking the job knows he can do all 30 yards in 15 hours, netting him $21 per hour for picking up dog shit.

The goal is Internet transparency. Workers and Bidders are encouraged to take pictures and video, document before and after, week after week.  Consistent bidders with plenty of previous happy workers carry far more weight in judging employees than those with spotty records.  If you don’t understand this, go buy and sell some stuff on Ebay.

Note the steep increase in happiness and labor relations: plenty of bosses now are LIKED but they can’t afford to keep good workers – this is a big change.  Good yet marginal workers now have many, many choices, where their own happiness is given much greater weight without ANY technocrat’s big agenda.

The upside is ENORMOUS.

1. While the govt. can’t bid it can now hire low cost services organized by SMB that hire from this pool. Suddenly the cost of public goods (clean parks, subways, etc) drops dramatically – making the cost of LOCAL GOVT. cheaper. This alone likely covers the total expenditure.
2. This is about recovering lost American productivity.  This isn’t about just the 30M. This is about how you and I become more productive when we can use the 30M to accomplish more ourselves, and what those we work for can do with our new productivity.
3. Because GI recipients will disproportionately fall in certain areas, entrepreneurs in these markets suddenly have a labor advantage that is real.  Businesses that want to hire need to move into these areas.  That whip smart drug dealer in the towers?  He’s got a 30 story building full of low cost labor to organize and monetize.
4. The signalling to the unemployed is REAL economics. This is not the unemployed doing socially valuable shit that Technocrats in DC thinks matters, this is 30M seeing whats pays what in a sustainable way.  There’s a real difference between what’s worth $2, $5, and $8 per hour.
5. The cost of goods and services in poor areas drops dramatically. Suddenly ghettos are cleaned up, properties are improved. Daycare drops to $50 a week.   This is a super positive PPP in the most destroyed areas. Slums no longer are slums.
6. Overtime, this program allows us to move Housing and Energy Assistance and Foodstamps everything into it (even healthcare). If you are working for a boss who thinks you are worth the market rate, we’ll cover your nut. Otherwise, you are in trouble.
7. This program gives us a clear path to extending the age of retirement, first by choice, and slowly by law. It lets us ask even the disabled to work from home. I can all but guarantee 500K work from home customer service reps.
8. This plan SOLVES illegal immigration.  Many are forced to self-deport or seek citizenship (many don’t).  Since illegal immigrants are being priced out.  It is only truly the jobs that NO ONE will take, perhaps fieldwork, that illegal immigrants can afford to stay and do.  We’d ALL want them to stay.  No more “jerbs” bs.

The what abouts?

What about the criminally lazy guy who just wants to milk the system and never shows up for work?

Ok, for those that don’t understand Ebay or cred systems, I’ll game this out.

That guy right now hides amongst 30M good people who want to work.  The first step is to expose him.  The second step is ostracizing and singling him out.  The third step is firm but forgiving punishments until his behavior is altered.

On day one, he signs up with everybody else, and never shows up at job.  His feedback is bad, he gives an excuse, or he ignores it.  The bidder doesn’t lose anything but disappointment. 

After 4 weeks of taking the $240 GI, never being rehired, and given negative feedback, the criminal lazy is suspended, cut off for 6 weeks on first infraction.  Where does he go?  How does he eat?  Who’s couch does he sleep on?

Now all around him are 30M people waking up and going to work, getting their GI + Bid. They are happily employed, they are choosing between multiple jobs.  They are productive members of society.

He lives amongst them and they are shaming him.  They are getting angrier with him.  He’s no longer able to hide amongst them, complaining.  His support system crumbles.

Finally he breaks, after 6 weeks, maybe then 12, maybe then 26, he is put back to auction, and if he is rehired, he’s back in the game!  Take pictures of the work he did, prove he arrived early, stayed late by his own choice!  The system quickly exposes any positive effort and rewards it.

What about the scumbag slave laborer?

They are quickly exposed.  No one sells their labor to them.  Your real name. Your real reputation.  If you want to get “subsidized” labor, you better keep most of your hires happy.

What about criminal collusion between buyer and seller?

First, family can’t hire family. Cohabitants are out too.

But let’s say you and I are both criminally lazy and decide to collude.  I will give up my GI, so I’m out $280 every week to begin with.

I have to put in $40.  I bid, and you take the job.  You don’t show up.  You give me $40 back, plus some amount of the GI.

So instead of $240-400 you could earn doing lots of different kinds of jobs you might like, you have less than $200 for a no show job.  Meanwhile, I try to do this with 10 others as well.

We are both criminals, but the buyer  has committed a felony.   The punishment will hurt enough to deter the crime.  Hire more than one person, receive kick-backs,  and be found not requiring them to work in the eyes of society, you go to prison.

The criminal who didn’t show up, is suspended from GI for 6 months.

The machine can see the recurring pattern so it only takes a few criminals being made of in each local market.  Remember, the machine is already looking for rehires, since that is positive proof to future buyers.  Where are the time stamped before and after pictures?  Proof work was done?

And since you want to make more money, you are working and proving you do the work.  There is competition to PROVE you worked.

This gets to the idea of  “what is work” - the answer is easy, it’s what people will pay you with their own money to do and that you will do.  If someone will spend their money to pay you to dig holes and fill them up with their own money, that is work.

If however, I used govt. money to hire you to dig holes, that wouldn’t be work.  That’s why the govt. cannot bid.  It’s also why public sector jobs are always slightly suspect to the private sector.

Finally, since the preponderance of goods and  services in ghettos are suddenly far less expensive.  The truly lazy noble artists of the world, have the ability to coast without joining the GI plan.  

I don’t have an answer for I hired her to grow my pot in Colorado.  I hired him to sleep with me in Nevada.  Except that, states should really be the ones running this thing.  I’m just putting this out there as the only correct federal solution to a wide variety of seemingly intractable problems.  Except that you are buying their entire 40 hour week, so choosing to let them take time off, or be based on job completion, would need to be documented.

What about WalMart?

Since they cannot hire from the pool of GI workers, companies that currently pay minimum wage or near it, must now pay a premium to keep their workers from quitting and joining GI or fully automate.

Progressives should understand having a choice of jobs profoundly changes system dynamics without having to organize labor.


What about the politics?

Every American middle class family who wants to bid on cheap labor loves it.  Those surrounded by ghetto blight loves it.  SMB owners love it.  The GOP loves it.   The 30M who desperately want to work love it.   The workers at WalMart love it.  The anti-immigrant Mickey Kaus Dem crowd will love it.  Silicon Valley will love it.

Public employee unions do not like it.  Management at Fortune 1000 do not like it. 

My plan delivers the protestant work ethic, ensures there are no idle hands, and increases trust in a multicultural country.  It is a profoundly American way to extend the social safety net, without becoming France or pretending we’re all as chummy as the “you look like me” Nordics.


Some final discussion 

The basic problem with the American economy is that a covered nut is a social justice construct.  It is what we determine OWE one another for being American.

Meanwhile the value of a person’s labor can never be defined by fiat.  More so, our workers are being competed with by global forces. They aren’t worth what social justice crusaders are forced to pretend.

We cannot take what is a noble goal of a covered nut, call it a minimum wage and expect genius entrepreneurs to be able to make a return on every American.

My plan solves all of this.

We cover the nut with a GI.   Then to reduce the cost of the program, give entrepreneurs a honest competitive labor market, and provide lower cost services in poor areas, we auction the 30M.

If you struggle with grasping the likely market outcomes of this, just ask yourself, “what would I pay somebody $40, $60, $100 a week to do for me personally I don’t do now?”  

If you ask any questions please start with, ‘If I was bidding I could afford and would want to pay…”