Sunday, January 6, 2013

An Exploitation Tax Is Past Due

© Charles D. Hayes

Many full-time employees of some of America's largest employers need government assistance, including food stamps. Guess who picks up the tab? Right: we do, the taxpayers. I say it’s long past time for the repatriation of work, and it’s time to impose an exploitation tax on those whose compensation strategy ensures that their employees will experience long-term poverty. Job creators should not be poverty enablers.
Young people find it hard to believe when I tell them about growing up in the 1940s and ’50s, when an entry-level job, even at a gas station, made it possible to earn a decent living. It was a time when working man was synonymous with virtue. Not so anymore. Working men and women today are considered chumps by those who preach the high-finance version of success. That people don't earn enough to support a family is considered a character flaw instead of what it is: contrived inequality. 

 Over a period of four decades, the essence of work has been systematically devalued, while the worth and legislative influence of capital in the financial sector has soared. Wall Street functions more and more like a casino.
This is an economic perversion, undermining the truth of what one of our Republican presidents once made clear in this statement: “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” So said Abraham Lincoln.
But today, instead of having a much higher consideration for labor, we give it little or none. Right-to-work laws are a euphemism for the right to lower wages and to stifle dissent.   

From the early 1900s until 1970, wages for working people kept rising. We were one of the most equal opportunity countries in the world (unless one was a minority, but that’s another article). When I was in grade school, corporate taxes amounted to about $1.50 for every dollar from individuals. Today corporations pay about 25 cents in taxes for every dollar paid by individuals. The tax burden has shifted dramatically because of lobbied influence. Wages for working people have suffered stagnation since the 1970s while CEO compensation has increased more than 725 percent. The result is that about a third of our citizens are now poor.

 There is nothing divine about wages or free markets. These numbers do not come from God. They are not shaped by virtue. Wages in many cases are not remotely in sync with the actual value of the work they represent. Wages express relationships of power, or a lack of it. Those with authority and control are insulted by hourly wages—they get salaries, bonuses, and stock options.

 In Antifragile: Things That Gain from Disorder, Nassim Nicholas Taleb makes a compelling argument that some aspects of our society thrive on disorder and some failures are necessary in order to compensate and thus grow stronger. He makes clear in clinical fashion that actions have consequences and that we learn more from failure than from theory. Fragile systems weaken with error. Anti-fragile systems gain strength from stressors in the same manner that our bodies protect themselves by building up immunity from exposure to germs. America's workforce should be anti-fragile too, but it's not. Let me explain why.

I grew up with a generation that paid great heed to the parable of the ant and the grasshopper. The ant worked hard storing up for the coming winter, while the grasshopper played. When winter came, the grasshopper asked the ant for food and shelter but was turned away. Lesson learned.

If one were to rewrite that fairy tale today, however, it would be wise to include buzzards appearing and raiding the ant’s storehouse. The financial sector operates under the guise of being a crucial component of the economy, but its increasing propensity to gamble recklessly with other people's money amounts to scavenging off of the labor of the men and women who keep our economy in gear.

 We human beings are viscerally wired to be wary of free riders. We are so sensitive about the issue that we are easily manipulated emotionally. This is why we overreact with penalties for failure that cost the public more than they cost the individuals we think we are punishing. It's why stinginess prevails when it comes to helping impoverished families.

This is why generations of children grow up lacking the resources that enable them to function economically and emotionally. This is why we spend more to keep people in prison than in school. And this is why we are so easily distracted by the disingenuous rhetoric of buzzards when they try to scare us with tales about ravenous grasshoppers. Taleb reminds us that never before in history have so many people with so little downside exposure exerted so much control over our economy. People with no skin in the game, as he puts it. I prefer to call them buzzards.

The real chumps today are those of us who have watched the greatest transfer of wealth in history, from the bottom up to the top two percent, and have remained silent. Taleb provides us with an aphorism that should become the primary functional app for navigating the twenty-first century: "If you see fraud and you do not say fraud, you are a fraud."

 Elsewhere I have ridiculed Newt Gingrich as being a hypocritical politician with bad ideas. But just as Taleb has provided us with a face-saving aphorism, Gingrich has given us the operative metaphor to redress raging inequality. During his run for president, he said we need to replace the social safety net with a trampoline. It was, and is, the most sensible and stupendous thing said about inequity in decades. We need to see to its creation before the buzzards strip us clean to the bone.

Taleb offers us another great word: optionality. Options, indeed, are what’s missing at the bottom rungs of society in order to make it anti-fragile. This subject warrants aggressive exploration. An option is what happens on a trampoline with each bounce.

 But for now, nothing is more important, in my view, than the repatriation of work. We begin by imposing an exploitation tax. Here is how it works:

Any company whose full-time workers qualify for food stamps or public assistance would pay an exploitation tax. And so would the companies who arrange their work schedules in a way that categorizes their employees as part-time to avoid paying additional benefits. The amount would be determined by that expression that grates on my nerves but is appropriate in this case: it is what it is. In other words, the tax would cover the cost of the taxpayer subsidy with enough additional penalty to inspire just compensation to begin with. 

We Americans are the chumps for ever having let inequality get so egregiously out of control, and we will be chumps as long as these people laugh all the way to the bank while letting taxpayers subsidize their employees. The executives who run businesses that can't pay a living wage and stay in business need to close shop. Fiefdoms demanding that workers be paid wages commensurate with indentured servitude belong in history books. Such work is better left undone.

Moreover, if executives and entrepreneurs can donate hundreds of millions of dollars to political candidates, then, as Alaska writer Shannyn Moore points out, they can easily pay higher taxes. Better yet, let them pay their workers a living wage directly, thus regaining their own self-respect and effecting the repatriation of work in the process.

In 1914 Henry Ford shocked the nation when he more than doubled worker wages to a record five dollars a day. But he didn't do it for benevolent reasons. Paying a living wage solved his high turnover problem, improved production quality, and inspired company loyalty. His workers gained the respect of their community, and they were able to purchase the products they produced, which increased demand. Treating workers with respect and paying them well was good business a century ago and it still is today.

The notion that raising wages costs jobs is a myth sustained by unrelenting mantras, but it's still a myth. If business owners want to avoid taxes, let them do right by their employees and avoid an exploitation tax. It's long past time for American citizens to rescind the right to exploit without penalty.    

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