A Business Case for Basic Income
CBC Radio One Canada “Information Mornings” show with hosts Don Connolly and Louise Renault recently interviewed me as a CEO explaining why Basic Income is pro-business, in an 8 minute segment. I based this article on the transcript with some additional ideas, research, and edited for readability.
I also produced this whiteboard animation which also illustrates the concepts:
Don Connolly asks:
Why is Basic Income a good idea for Business?
What could be more pro business, than having more customers?
Basic income is the most scaleable economic stimulus we could imagine — to put more money in the hands of people who will spend it. That eventually trickles up, creating more sustainability.
As a business owner I would rather have 10% higher revenues than 10% more profit; even if that means that tax rates will slightly go up. Businesses would be more sustainable.
Basic Income is pro-free market, demand-side economic stimulus, ensuring that everyone can participate in the economy; it is endorsed by Milton Friedman, F.A. Hayek, many modern nobel prizing winning economists, and even being endorsed and experimented with by famed startup incubator Y-Combinator — it is not socialism (this paragraph was added / not in the original interview).
Basic Income is Affordable
Don Connolly asks about the cost of a basic income, given the push back affordability of increasing the minimum wage to $15?
Floyd: A lot of people make a mistake in calculating the basic income as the gross cost. For example: 30 million Canadian times $15k, thinking it is unaffordable — that is not actually how you calculate basic income, it should be the net cost not the gross cost — so it really about the segment of society , probably the bottom third of society that will keep more of the basic income, above that will be paying out slightly more
It is important to note that here have been credible studies by institutions such as Ryerson University that have shown that we can Implement a basic income in Canada in a revenue-neutral manner, part of that will come from cost-saving from eliminating existing welfare programs that are no longer needed, eliminating tax loopholes, and other methods. It is not nearly as expensive as one would imagine.
Added (not in original interview): In the U.S., Presidential candidate for 2020, Andrew Yang is saying that adding a 10% value added tax (a tax that all major countries have) would pay for a basic income, so it isn’t necessary to look at income taxes for this. Other non-income tax methods I’ve seen proposed include a Carbon tax & dividend, intellectual property taxes, financial transaction taxes, and natural resource revenue sharing as is done in Alaska which dividends its citizens a portion of oil revenues.
Globalization and automation putting downwards pressure on wage earnings potential
Don Connolly: This also speaks significantly to some changing elements within the economy, I think you were suggesting to our researcher that you were at the [Marriott hotel*] recently and somebody was suggesting to how many people used to work there back then and how many people work there now.
Floyd: We need to understand that we are in the middle of a global transformation to a globalized economy where we are competing with billions of people around the world that can do not only manufacturing jobs, but also internet and information jobs, that are accustomed to being paid half to one fifth what we are being paid here. This is the new reality of the world we are in, it is the globalization and automation that we already experiencing.
I run large events in major cities of the world and the GM of the [Marriott Marquis in Time Square NY*] mentioned that in the 1980s the hotel needed 2500 employees to be staffed, and now he only needs 1500, due to software gains and other automation that we already have.
We are in the midst of a tidal wave of globalization and automation which is putting a downward pressure on the earning potential for most of [western] society.
It is simple physics — when you’re competing with people around the world who make a lot less. Eventually that will catch up.
From a business perspective it means less buying power for people who buy stuff from all levels of business in society in any Western Country.
I see a basic income as the most scalable solution to share the gains of globalization & automation, not just the wealthy owners of the machines or of the businesses that are that are globalizing or automating.
This is the current situation right now.
However, the reason that a lot of people have been talking about basic income in the last 5 years, is that Silicon Valley is warning that in 20–30 years half of all jobs could be lost to new forms of artificial intelligence and automation. Not just Silicon Valley, a lot of credible research institutions have made that prediction, including for Canada. What will happen when half of all jobs are gone, probably with self-driving trucks being among the first?
At that point we really need to rethink our social contract and how our society is structured and I think basic income will have to be a part of that.
Compassionate Capitalism and the opportunity for greater entrepreneurship
Don Connolly: When you as the president of C4Media Inc. go to the Chamber of Commerce and bring this idea to them do they think you are Chairman Mao Tse Tung (former leader of Communist China).
Floyd : I’ve never been to a Chamber of Commerce, but I do go to a lot of Entrepreneurship events where other CEOs of much larger businesses than C4Media. When I talk to them they are pretty receptive and supportive to UBI, and why wouldn’t they be?
Wouldn’t it be great to have a more compassionate capitalism where you can have innovation & entrepreneurship know that everyone else is okay too? With no poverty, and where the working poor do not need to be destitute.
From an entrepreneurship perspective, think about all the people who are not in the right jobs that fits their gifts and talents simply out of fear, they are stuck there because it is paying the bills and because they’re afraid of making a change. With a basic income, people could take a long-term perspective, they could take more time away from work to figure out what they want to do.
This is also a social justice issue. People in their twenties from working poor families have to get into the workforce right away, maybe they’re not taking the right jobs, as opposed to rich people who can take as much time as they want.
I think basic income is very good for entrepreneurship- people will be less afraid to fail, and that will create more upward mobility for everyone, and upward mobility is a very Canadian value.
Basic Income is an economic stimulus
Don Connolly: Do you think that people are open to the discussion that it is also good economics that if you have somebody who has a basic income guarantee basic income, they will not be wealthy and whatever the cheque is they will be spending it immediately and it would be circulated back into the economy.
Floyd: 100% — lot of research has been done in the context of minimum wage and social programs like that, that shows there is the multiplier effect to more money in the hands of the bottom 50% of society (by earnings potential). People spend it! Rich people can only spend so much. If you put money in the hands of people that need it they will spend it so that is why basic income is such an amazing economic stimulus.
It’s also really good for Canada, we do have consumption tax here, and every dollar getting spent means more revenue for the government which could be applied to other programs including paying for the basic income.
Don Connolly: thank you so much for taking our call this morning.
Floyd: excellent thank you
Added / not in the original interview:
Canada’s Central Bank Governor Stephen Poloz confirmed in 2017 that the Canada Child Credit, which is like a small basic income for children that pays up to $533/month to families with children, has been responsible for faster economic growth, saying it has:
“been highly stimulative. You can see that in the consumption figures. So we would not be where we are today if that had not occurred”
In late 2017 he confirmed that the Canada Child Benefit added 0.5% points to economic growth, this helped Canada lead the G7 in 2017:
Interestingly, it’s been my discovery that there seems to also have been a correlation between a fall in unemployment rate in Canada, and literally the month the CCB payments began:
Correlation doesn’t imply causation, however this evidence is quite compelling. Consumer spending drives economic growth. Jobs are created when employers hire to meet consumer demand. We can have a society where no one is poor, and we can all be better off because of it.
Programs like a basic income that help those who have the least, the most — are pro-growth, pro-business economic stimulus.
Check out the long list of celebrated business owners who are also endorsing the universal basic income, including Richard Branson, and others.
*In the interview I stated the I spoke to the general manager of the Hyatt, that was a mistake. We do run events at the Hyatt in SF, but in NY I was speaking with the GM of the Marriott Marquis in Time Square, NYC.