Monday, October 01, 2012

Economy of Plenty, Part 2

Despite spending almost 2 months thinking about last week's post, "Economy of Plenty", I still rushed to get it published. I think I did not address the questions raised with possible answers. Instead, I just listed three things to make taxation in the US more equatable, which is a first step towards putting a birth-to-age-21 social safety net in place. So let's look more at, what an Economy of Plenty would look like.

So the goals are:

  1. More equitable distribution of wealth and a universal minimum standard of living.
  2. No child left behind, ever.
  3. 20 hour work week.
  4. Full employment if desired.
So, the 1st and 2nd goals are what the 3 points at the end of the last post addressed. Also, let's look at the minimum wage. How would you level wages? I saw a post somewhere that if income were distributed evenly, the average salary in the US would be around $196K per year. That's around $98/hour if you work 50 40 hour weeks. So that is probably an upper limit on the minimum wage. If we target $50K/year for a living wage (with usually two wage earners per family), that goes down to $50/hour for two 20 hour work weeks.

How would we get to a 20 hour workweek? We got to our current 5 day, 40 hour workweek with paid holidays pretty much solely based on the efforts of labor unions. Unfortunately, unions have been stripped of much of their power thanks to "right-to-work" states. Maybe the internet could lead to a resurgence? Somehow I don't think so.

So many of the new, information age jobs don't seem like they would be amenable to unionization. Say software development, where there is a well know factor of 10 difference in productivity between the best and worst developers. If I'm one of those high-end developers, am I going to agree to the same wages as a low-end developer?

Additionally, there is so much startup activity and entrepreneurship going on in technology companies, that often workers have equity in the company and put in far more then 40 hours, hoping to build the company to a level of success that they would have a liquidity event which would result in a huge windfall for them -- millions to billions of dollars.

But, there is a trend among startup companies who are in it for more than the money to organize as cooperatives, where, after 1 year of work, you become an equal shareholder in the company. So all employees share equally in the success of the company. 37signals is the poster child for this. Such a company might reach a point where it chooses quality of life over more money and created a shorter work week.

There is also very much a "reputation economy" in the software world, particularly where FOSS (Free Open Source Software) is concerned. Having dozens of heavily-used libraries on gitHub earns you the respect of your peers -- and is now also quite often the basis of getting paying jobs.

For big technology companies, offering a shorter workweek might be a recruiting advantage. Can they afford it? Look at Apple (probably a bad example): last year, $25B profit after taxes, 60,000 employees => $433K profit per employee. If they doubled those employees, at a $100K salary, that would be an additional $6B overhead, so say, $17B profit for 120,000 employees => $141K profit per employee. That's still pretty decent profit. And they could still afford to pay CEO Tim Cook his $378M, which I am sure he earned.

Currently there is negative unemployment for software developers. So if we can retrain people from older industries, there will be some jobs for them. But, as the robots do more and more, are the other options than everyone working for software companies?

What about employment in virtual worlds? I read recently that gold farming (grinding your way through lower levels of role-playing games to build up characters that you then sell) is now a $3B industry. I know many young people who would like to work in World of Warcraft, or Call of Duty. Can where be other types of jobs created there? Say maybe, that after a certain level, you go on salary to the game company as a guide or mentor?

But, come on you say, do you really believe that this can work? The long and the short of it is: money is software. We haven't been on the gold standard for 50 years. So getting this stuff to work is just a question of getting the parameters of the money machine tweaked. Inflation is not a problem of having too much money, it is a problem of having a scarcity of goods. And our premise is, in an Economy of Plenty, there is no scarcity of goods.

An immediate exception to that is land/property/housing. So everybody won't be living in a McMansion. But they should be living in an apartment or house with enough bedrooms for their family members. And they should have enough food to eat, universal health care, merit-based educational advancement through college, and, of course, a smartphone, to help make them smart.

Going back to the Bertrand Russell article, there was one quote I will take exception with. The quote is:

... a man should not receive wages in proportion to what he has produced, but in proportion to his virtue as exemplified by his industry.
I would say instead:
... a man should not receive wages in proportion to what he has produced, but in whatever amount is required to make the system work.
So I am convinced that the Economy of Plenty is totally doable. And I think that the alternative is a dystopic plutocracy, where all power and wealth is concentrated in the hands of an ever fewer number of people, particularly as life spans lengthen. But the question is, how do we get there?


Patrick Kehoe said...

Your apple comments on the number of employees excludes the workers in China and elsewhere assembling those devices. The average foxconn worker makes about $385 per month which is about $1.90 per hour for a 50 hour work week. Given that foxconn itself employees about 150,000 people building Apple products, it totally skews the math.

Certainly that production is outsourced and you wouldn't expect to include all the employees that indirectly part of Apple's revenue, but I think it is important to look at the system holistically.

Chris Heinz said...

Hmmm. I was just thinking, the Mondragon coop limits ratio of highest to lowest salary in the coop to 6.5. Tim Cook's $378M divided by, say, a $30K/yr clerk gives a ratio of 12,600. For the chinese worker at $385/month, the ratio is 81,818. Kind of a totally different model.