As humankind’s relationship to the earth has evolved from cave dwelling to the farm to the city, and from primitive tools to computers, our economy has changed with the times as well. 100,000 years ago people were trading, utilizing economy with methods such as bartering and using objects that would represent a thing of value, this would be the basis for what we would ultimately call money. Obsidian, feathers, and shells may have been money for our distant ancestors. The first coins known as the Lydian Lion are thought to have been minted around 650-600 B.C in what is present day Turkey. The Chinese printed the first banknotes during the Tang Dynasty in the 9th Century. In the late 20th century it became popular to present a piece of plastic that represented the monies an individual had access to. Over time our concept of money changes, likewise our basic workings of economy evolves.
Upon these layers of economic history our relationship to the terms of our financial reality are created and altered. Mistakes and great successes are strewn across the landscape as some methods of commerce and trade succeeded while others failed. In 1798, after 200 years of operation, the worlds biggest company, the Dutch East India Company went bankrupt. From 1299 right up to 1922 the Ottoman Empire controlled the vast majority of the Middle East, Western Asia, and southeastern Asia. Constantinople, capital of the Ottoman Empire was for an era a cultural and business center but would cease to be an empire in the flash of an eye and be relegated to a second world city called Istanbul situated in Turkey and is no longer a center of economic or political power. Trade and economic conditions greatly alter the balance of power for humanity, it is our reluctance to change with the times that allow for the disruption of trends catapulting other nation states to rise in importance.
11,000 years ago humans invented agriculture, 6,000 years ago the first writings appeared, 700 years later we entered the Bronze Age. 2,700 years ago the first Olympic games are held and 2,200 years ago trade from China with the west is established on the Silk Road. 1,500 years ago the Roman Empire falls. 570 years ago the printing press is invented. More than 300 years ago the Industrial Revolution gets underway marking a major turning point in human history. An age of scientific exploration thrusts humankind forward on a trajectory that brings us to the modern age.
Consider that it has only been 74 years since the first work on a programmable computer was begun by Konrad Zuse of Berlin, Germany and then in 1968 the first bits of data were sent over copper wires. Less than 45 years later we are sending data, photos, gardening tips, video, recipes, and purchasing stuff over wireless connections on devices that fit in our pocket and are able to communicate globally, while satellites 22,000 miles overhead coordinate our location on earth using GPS. Our lives are changing dramatically, but our economic system is not – it is time for a fundamental change.
But this change cannot happen in a vacuum and it won’t happen without humanity’s interaction and that cannot happen within the limits of how people are presently educated. It is time to consider that we may be at the edge of a sea change. While education and the masses’ ability to reason are an important factor to the acceptance of an economic paradigm shift it is not the aim of this writing to tackle that particular issue here and now.
The proposal put forward here is for a rethinking of the relationship between government, business, and labor and how to value a future where jobs are not as prolific, the necessity to work is diminished, but the need to trade time for income or create a value proposition is still relevant.
The World Income Stabilization Economic Theory proposed by Dr. Joseph Marcusia is designed as a method to secure economic stability for the individual during the years when career choices for young adults are still being decided and as a protection when the nature of the evolving working environment for those already employed (as during the 70’s with robotics and away from manufacturing as America has been doing for the previous more than 30 years) toward the paradigm shifting displacement of workers (as in automation and the development of information services) and possible long term unemployment. 150 years ago, 64% of America’s labor population worked on farms, today that total is just 1-2%. Labor markets change, but so does population and with the march forward of systems of efficiency, we are likely to have more laborforce going forward than we have work opportunities. How do we as a society afford these people the chance to be valuable contributors to the efforts of a society that rewards participation and hard work?
What is being suggested by Mr. Joseph Marcusia (photo above) is a melding and a modification of the popular economic models that are already familiar to the economic community. First is a contemporary reinterpretation of the Progressive Tax also known at the Negative Income Tax melded with the current workings of Ordoliberalism also known as Neoliberalism and Social Market Theory while still working with the best methods learned from Keynesian economic theory and Monetarism as written about by Milton Friedman. Second, an incentive structure that should motivate working age people to better their station in life. This incentive element of the plan is only now becoming possible through systems of data harvesting, analysis, and tagging of information to an individual.
Before moving on to this suggestion for an economic paradigm shift and reevaluation of its place in society, we must grapple with the idea of what defines work. Our future appears poised to shift our antiquarian industrial age thinking to reconsider what qualifies as work with a question arising from this situation that will ask us, what is the employment value of this task that may not be able to be done for income, or what if the value is intangible and thus difficult to create a monetary equation for? One thing is certain, systems of automation and greater efficiencies in mechanization are already hard at work displacing humans, if machines of labor, thinking machines, and machines not yet envisioned are the likely outcome from where we are today, it is easy to envisage a not too distant future where unemployment figures will continue to mount with no solution of how to reestablish these once productive hands to have meaningful purpose in the global economy.
What is work? Volunteering on a farm is work, but by its very definition, volunteering is just that, a trade without income exchange. Writing this paper is being done outside of payment, it is an exercise for the sake of noting one’s thoughts, there will be no remunerative satisfaction in accomplishing the completion of writing, but might value come from this as someone else reads it at some point forward? What value is assigned to one who tends to an elderly immobile relative whose retirement funds do not allow for in-home care by professionals or care in a facility? While this effort to support a loved one is admirable, it does not pay rent or buy food for the caregiver.
And even before we address the definition of work and the ideas of accountability regarding work habits, performance, and productivity, we as a society will have to overcome our perception that many people prefer a lazy existence of welfare support with no apparent return to the good of society. I posit that the vast majority of the worlds peoples prefer community involvement and have an inherent need to be productive and contributing members of society. If we find a correlation between education, poverty, and geographic accessibility to finding a place in an economy we can address issues of education. Poverty can be alleviated through the new economic model that is being suggested below, and with that adoption, geographic location stops being an issue, the work does not need to come to the people, the economy comes to them.
On our path to redefining work, to creating a global education structure, and valuing a person for the very act of simply being a part of our population and world, we humans will have a difficult journey towards enlightening ourselves and throwing off the shackles of hostility regarding cultural differences and accepting that this next phase in our economic and intellectual evolution will be a rocky transition that will make some people angry, some violent, and may bring out tendencies of racial intolerance; one race may desire to see themselves in a superior light where equality amongst populations would diminish their role. On the contrary, all those striving for betterment would elevate their role, reward would be in direct correlation with those achievements. But let’s push these concerns aside for the moment.
How does the World Income Stabilization Economic Theory work? We’ll begin with new workers, eighteen years old, fresh out of school, and ready to enter the workforce. At this moment, young persons are typically not trained in a method of knowledge or work skills that allows them to add real value beyond entry level manual labor or entry level service industry work. Many entry level jobs go nowhere, they are considered dead ends with no real career progression but they are essential to our society in any case. Turnover in these entry level jobs is high as the young person soon recognizes the limitations of the pay and the demands placed upon the least educated in our society and thus will strive to better their employment opportunities by moving jobs and ever so slightly incrementally nudging their income forward. It may not be that the job just quit is necessarily bad but the pay or inflexible hours may be an impairment to changing one’s path that would allow personal improvement regarding education or skill acquisition.
How do we encourage the reluctant acceptance of remaining in a dead end job to one that allows the unskilled worker to be afforded the latitude to improve their career potential or remain satisfied in a benign task? We do it with pay, increasing income, and financial stability. High service industry turnover is most likely due to unnaturally high expectations of earnings capability and little time for personal improvement that creates a situation of frustration where a worker never feels they are “getting ahead”. If we change this economic dead end, can we shift the burden of economic expectations from the type of unskilled work the person is doing to the idea that it is not the work itself that is not delivering economic stability but the person’s own intellectual inadequacies that are contributing to their low pay? Increase your skill set, your education, your community involvement and you put yourself on a path to better opportunity.
My proposed solution: starting potential income for high school graduates is fixed at $100,000 per year, with a tax rate beginning at 96.5%. The future employee or unemployed young worker initially earns $3500 per year net, or enough nominal pay for transportation, clothing, and the means of helping this individual find work. Upon landing a job, this person’s tax rate decreases to 86% allowing for a yearly pay of $14,000 or about $7.00 per hour. Earnings increases would come in one of two ways, either every two years (or to be determined periods of time), an adjustment according to a percentage of inflation would be deducted from the tax rate, maybe taking the person to a tax rate of 85.7% after two years on the job. The other method for adding to earning potential and the preferred model is based upon improving themselves, either through formal education, continued training on-the-job, or a combination of both.
If the future worker prefers to begin a college education, upon acceptance from a post-secondary educational institution the student is placed in a tax bracket that gives the student a high enough income to pay for their various expenses (e.g. a 90% tax rate would result in an annual earning of $10,000). The parents of the child would see a 2% reduction in their tax rate while the student is enrolled and is performing to academic standards. Tuition would be paid out of the taxes from the student’s total potential income of $100,000. So, while the student might be earning $10,000 a year or 10% of their total potential income, the school would be given the amount of, say, 7.5% of the students potential income or $7,500, dependent upon which course of study was being followed. Certain courses of study might require 12% of the $100,000 per year income to compensate the university or college. This expenditure could be capped at some given percentage, maybe 15% of the $100,00 with the remainder of tuition charged by more expensive universities to be paid by the individual or family allowing the university to function much the way they are today while at the same time reducing the potential overall debt load of this future college grad.
Each year the college student remains enrolled and in good academic standing their tax burden lessens to offer incentive to complete their studies. This would also apply to the part time student, for the workers who have taken an entry level job. With each segment of college credits completed the formula for determining the tax rate for these workers improves, giving them a raise for continuing their formal education. The idea here is that an educated population will be less prone to violence, poverty, environmental ignorance, financial ignorance, substance abuse, and economic volatility. Upon each successful credit year of completed course work, the individual would see a 2% increase in wages so that over a four year degree by the senior year the student would already be earning $22,000 per year while studying. At graduation if the person goes to work they would instantly see a 10% pay increase taking their pay to $32,000 per annum, if they do not find work and are not participating in some program of self improvement they would see their income drop back to $6,000 per year until they become employed. If after sustained unemployment the worker joins a training program, their earnings will return the base worker wage of $14,000 per year plus half of the income increase they earned during college, bringing them to $18,000 per year until their vocational training is completed, at successful finding of employment they again would see their income return to $32,000 per annum.
If the high school grad becomes unemployed after working at least one year in a job, their income drops to 6% or $6,000 per year – unless they are enrolled in formal education or enroll to begin a college degree. Same goes for the person who went from high school directly to college. Utilizing a scale of sliding income based upon participation and general individual improvement we motivate the citizen to take an active roll in improving themselves and in great likelihood, their community and the general safety and health of our communities.
This economic theory is designed to be a tool to further the stability of the individual during the formative years when career choices are still being decided. It also rewards those who take the less glamorous jobs in society, recognizing their value and commitment, and allowing them a track to increase their income without having to sacrifice their enjoyment of the endeavor they have trained for.
Successive raises after graduating with a college degree would be earned at the rate of inflation for five years, after which it will be halved and can only increase based upon community involvement or further education, training, or career advancement within the place of employment. The individual would now be in direct control of the potential income they might earn and may be more motivated towards self improvement. Tax rates going forward would be calculated on the individuals accomplishments regarding community activism, education, volunteerism, job training, and cross training.
These programs that allow an individual to progress up the income ladder would not be limited to 18 to 22 year olds but would be encouraged at particular periods in one’s life, such as at 35 for some refresher courses, 45 years old, 60 and maybe 75. Along the way people would be encouraged to participate in their communities and donate time to non-profits, hunger programs, community beautification, international aid programs, tutoring, mentoring, etc.
As an individual enters a professional occupation including acting, engineering, sports, medicine, law, politics, business ownership, finance, etc., they would be if they so choose to, be decoupled from the economic model and allowed to move into the free market, as it presently works with their taxes working similar to the current model.
Taxes and tax revenue. The government would calculate the $100,000 income across the number of people who are in the program. Say 135 million working age people were in this program, this would equate to $13.5 trillion of GDP plus the earning and economic activity of professional industries. As education increases tax collections would decline although there should be a relative decline in social services required for a better educated populace. If the base $100k income were to rise at the rate of inflation, that could potentially offset some of the decline in tax collections brought on by individuals pushing their way up the economic ladder.
The overhang in surplus taxes versus earned income in the early years of this program as people move towards this new incentive structure would afford the government a tax base that would offset our current deficits and obligations regarding social security and medicare.
Allow the citizen to escape the business cycle and to prosper during slow economic times when further education and community service will not only benefit the individual but the community and the businesses that employ and ever increasingly more knowledgeable population.
Interest rates, credit, inflation would all continue to function as they have. This theory is solely being suggested to act a safety net that affords a wide swath of the population to guarantee their own economic survival.
Milton Friedman theorized that using large-scale deficit spending by the government is needed to decrease mass unemployment, why not go one step further and totally eliminate unemployment? And John Maynard Keynes advocated using monetary policy actions by the Fed over fiscal policy to stabilize output over the business cycle, create a new function to be governed by legislative branch to take policy actions to stabilize employment in the private sector by utilizing this new paradigm.
The money supply would thus be removed as a factor effecting workers but could still be controlled by the Fed for effecting the business cycle allowing recessions and decreases in employment to control inflation and demand but at the same time would encourage workers on the fringes of industries that might be disappearing or downsizing to maintain an income over a period of time that encourages stability in the workers life and economic stability as long as the citizen moves actively into retraining and improvement courses designed to help them transition into a needed field.
Employers would initially pay at the minimum wage for entry level jobs and the 32% level for college grads, the remainder of gross income is a function of the tax base governed and paid for by the Fed. So incomes stay as they are now but the balance of the theoretical income can be counted by government coffers as tax revenue. These monies are a function of the statistic of how many working age adults are part of the population.
A portion of the $100,000 income would be locked into a new Social Security program for retirement, say $10,000 per year, guaranteeing the recipient at least $12,000 per year in retirement pay or more depending on how investments and returns performed over the years this money was accruing interest.
Retirement is based upon the highest level of income you achieved and calculated against how many years the person worked, for how long they worked at that income and how long it has been since they were able to earn that level of income. Social security might be calculated to be approximately 50% of net income at age 30 to set a base and to give incentive to young people to try to excel [inherent problem here as some may be kept back in order to curtail future financial expenditures].
This system is in part based on the Negative Income Tax or Progressive Income Tax as developed by politician Juliet Rhys-Williams of Britain in the 1940’s and then later in the 1960’s by Milton Friedman in his book Capitalism and Freedom. The idea was to establish a minimum level of income for all, thus eliminating the minimum wage, food stamps, welfare, and social security programs.
In studies during the late 60’s through the early 80’s in New Jersey, Pennsylvania, Iowa, North Carolina, Indiana, Seattle, and Denver it was learned that workers would decrease the hours worked eliminating two to four weeks of labor per year as their income was guaranteed. To offset this, it will be necessary to begin offering European style vacation plans, meaning twenty-six days of paid time off. Sick days would be booked against this. Beyond those days off and a percentage of pay would be deducted for a full fifty-two weeks to act as a disincentive, not only a one time one day pay exclusion.
If mundane work cannot be successfully managed by a worker, there must be an alternative for the person to offer value to the community so they are not parasitic. What type of volunteerism, community cleanup, walking around neighborhood security patrol, local garden work, or other endeavors could a citizen be employed by? What is elemental and imperative here is to create a system of incentives and strict controls that eliminate the ability to defraud and to not perform. This system would have to be tied to some type of strong identification combined with state and federal computer systems that track a workers education, community, volunteer, and work history.
Ultimately the WISE Theory will evolve to reward and give economic purpose to people who are not employed in what would be considered traditional jobs, while not encouraging citizens to simply take advantage of a welfare state and not make positive contributions to society. Through education, community involvement, volunteerism, global networking via health and education services, people will lend their knowledge and hands to help others and in return will be guaranteed a livable income that will allow for a respectable level of comfort.
While the word is not used in American contemporary society, what is at work to some extent and what might need greater recognition regarding economic theory in the United States going forward is Ordoliberalism also known as neoliberalism. This theory was developed by German economists and legal scholars beginning in the 1930’s and continuing through the 1950’s. It is the economic model attributed with dragging a destroyed German economy out of World War II and driving the Wirtschaftswunder (economic miracle) that brought about West German economic prosperity in Europe. Many will suggest that it was the Marshall Plan as designed by the United States soldiered in and created the conditions for the Wirtschaftswunder but the loans and regulations from the United States were only a part of the total program. Chancellor Konrad Adenauer brought Ludwig Wilhelm Erhard into his cabinet in September, 1949 as the Minister of Economics. The ruling party implemented a free market economy that has been referred to by many a name by now including Ordoliberalism, neoliberalism, and social market economy. The role of government in regulating conditions that effect a positive outcome in the business environment is a well known process. It is a central tenet of Ordoliberalism that a strong central bank be committed to monetary stability and low inflation. We have just that in the United States with our Federal Reserve and Mr. Bernanke.
As a matter of problem there are difficulties regarding language and media demonizing of particular words such as “liberalism” and “social” which have come to represent state sponsored welfare and communism. The fact is that the minds that fostered the theory of Ordoliberalism (neoliberalism) flatly rejected socialism, but they also rejected laissez-faire capitalism – which the current American Republican party seems to espouse.
It is the goal of the World Income Stabilization Economic Theory to bring together the best aspects of Neo / Ordoliberalism, Keynesian economics, Monetarism (Milton Friedman) and this new model of economic theory to develop an economic method that will work for a growing workforce facing a shrinking workplace.
For those who might read this and argue that this is income redistribution and or Marxist/Communistic or Socialistic economic theory, this is not a proposal for a single party dictatorship, nor is it a suggestion for a power grab by the state to acquire business and dictate economic rules upon business owners. It is a realization that people going forward are not going to find economically viable work they are trained for, educated for, or capable of doing but will still require economic stability if the cohesion of a population is to remain a unified and peaceful community.
Under the Real Business Cycle Theory fluctuations are accounted for by real shocks, the four shocks can be trend, business cycle, seasonal, and random. This theory sees recessions and periods of economic growth as efficient responses to the economic environment, I suggest that a stabilized economic model guaranteeing a minimum of wage with a maximum of incentive will raise the fortunes of a vast majority of society although we will still be burdened with those who look to game the system or who lack the skills, potential for education or may be inherently predisposed to not being able to function with responsibility.
This solution does not initially curtail consumption but it does work to guarantee a type of employment and incentivize a population to improve their education and respect for the world around them. Through this education will have to teach that consumption is not a means to happiness, without the need to work to produce something of value, it could be possible to break the cycle of production and consumption to one of respect, appreciation, and knowledge complimented by a service industry that caters to enhancing our education, entertainment, ability to travel, and experience the flavors, sights, and sounds of the world and our shared cultural heritage.