This is a whacky idea, but it illustrates that we need to do something about a disturbing trend.
More of the whacky idea anon. First to the disturbing trend. Labor and capital are getting out of balance again, but in a different way than in the past.
At various times in history capital has had the upper hand. At other times labour has done comparatively well. Typically, as the bust cycle goes through labour is in over-supply and people have to lower their wage and employment expectation. As the boom cycle goes through, labour is in short supply and wages and employment shoot up and unemployment goes down.
Two reports this week illustrate the new problem. We have a boom, but labour is not is short supply. Wages are not booming. Unemployment is staying static. This is new territory.
The Productivity Commission’s Dean Parham has produced an issues paper. It talks about inputs and outputs in the economy. Inputs mean capital and labour and outputs mean standard of living.
The trend is showing increases in average standard of living. More. Better etc. Outputs are higher. But inputs of capital have not moved up very much. And unlike previous booms inputs in the quantity of labour have not gone up. Rather the productivity of each worker has gone up hugely. For each unit of capital therefore, output has increased hugely because more productive labour is being applied to it. So total output goes up but it is created without a significant increase in the quantity of labour.
In short, smarter but constant amounts of labour plus roughly the same capital equals boom.
We now come to the other report issued this week by the St Vincent de Paul Society. Two million people are living in poverty, it says, and the number is growing. This is not typical in a boom. Poverty should go down. But as we have seen, because labour is getting smarter, there is no great demand for new labour. So many people who would otherwise have been employed in past booms stay unemployed in this boom.
It gets worse. In this boom the owners of capital are taking the lion’s share of the cake when it comes to dividing up the increased output. Labour is not getting the returns in higher wages. Instead the return is going to the owners of capital, particularly those who own shares. Shareholders are getting higher dividends and greater capital growth. Wage-earners are getting very modest increases. Moreover, there is a pool of unemployed and well-educated young people eager to work for lower wages than those in jobs. This makes the pressing of wage claims (whether by unions or individuals) more difficult.
There is some irony in the fact that a boom created by the greatly increased productivity of labour should result in the rewards mainly going to the owners of capital. We are seeing increasing disparity in wealth. It is best exemplified by the rewards for chief executive officers. These have been quantified because Australian corporations law demands it. The chief executives of three of the top four banks are now about $2.5 million each, ten times what it was 10 years ago. The difference can be put down solely to the fact that the CEOs are paid in share deals. In short they become owners of capital.
Trickle down is not working.
So what is to be done, as Lenin asked.
Lenin and Marx did not have the solution. Part of the solution is more mundane than that. If you cannot lick em, join em. Just as the CEOs have done.
Somehow we have to get more people owning shares. That may be hard for those relying solely on welfare, but it certainly is not for those in work.
We know there is some spare cash about. Gambling figures show that. But why buy losing lottery tickets when winning Telstra shares will soon become available. How do we get battling Australians to buy them, though, when they prefer the lure of the big prize.
Here comes the whacky idea. When the second tranche of Telstra is sold the Government should offer two $5 million prizes for lucky subscribers. The minimum subscription could be lowered to $500 or even $200. Computers can deal with this. And bureaucracy can be reduced by only sending annual reports and other bumph to those who request it.
The excitement in the lottery would cause extra subscriptions and boost the share price which inevitably will be undervalued anyway, given the history of these things. The $10 million would be trivial in a $1.6 billion float. But no institutions or corporations could be in the draw. And each person would get one ticket, not matter how many shares they bought. This would increase the chance of a battler winning.
Imagine it, people could buy their “”lottery tickets” and get to keep the value of the lottery ticket which would increase as the share price went up and pay dividends anyway.
It would be educational; the start of real mums and dads shareholdings. It would lure some people away from the dreaded gambling. Once the experience of the ease of shareholding is spread more it will take hold. Capital would be spread more, because every time a dividend was struck it would go to big and small shareholders, alike. Dividends to the big end of town would in fact trickle down, unlike in the sterile years of disputes between capital and organised labour.