The democratisation of wealth?

Did you know that just 1% of the global population own more wealth than the other 99% of us put together? That is a mind-blowing fact – even more so when you don’t belong to that top 1%.
Did you also know that to be in the top 1% of earners in the UK requires taxable income of £160K a year? £236K a year puts you in the top 0.5% and the top 0.01% is an annual income of £650K.
These numbers show just how concentrated wealth is. 43% of all adults in the UK pay no income tax because their earnings don’t meet the minimum threshold.
If you were to take a male, middle aged man in London UK earning 160K a year they would be in that top 1% nationally. However, if you just take male, 45 – 54 years old in London that same man would need a further £550K a year to be in the top 1% for his demographics. This just shows how polarised wealth is in a nation like the UK that would argue it has a democratic society and a healthy welfare system.
The reason I am sharing this information with you is because, during the Covid-19 crisis we have witnessed many governments, including the UK using government intervention to support salaries. This has led to an increased amount of focus on something called Universal Basic Income.
“Basic Income is a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement” (Basic Income Earth Network)
In effect this is where a state agrees to pay each and every adult a set amount of money so that they can cover all basic needs (i.e. places them above the poverty line) irrelevant of employment or status. To be considered a UBI scheme the payments must:

  • Be periodic
  • Cash payment – so people are free to choose how to spend it
  • Individual rather than household
  • Universal – everyone gets it without means testing
  • Unconditional – you do not have to earn it

The concept behind UBI is that by taking away the base need for food and shelter it creates greater liberty and equality, is more efficient and creates greater sense of community and fosters a more common ownership of the earth. It is also seen as a genuine option as even so-called advanced societies have been unable to eradicate unemployment and the growing division between the wealthiest and the poorest citizens.

Many opponents of UBI claim that it will leave many with no reason to go to work and will result in many people choosing to rely solely on the state. Some also argue that it would lead to business lowering wages to match this base level in a way to increase profitability and the gap would widen even further.

However, supporters would argue that if people had the freedom to choose where they wanted to work as they had their basic income covered there would be much less exploitation and business would be forced to elevate wages in order to attract people to want to do the work.

When I was working in a large national retail business we were faced with a dilemma something similar to this situation. With the increase in National Wage in the UK the gap between an entry level job and the next tier up became virtually nothing. You therefore had individuals who were able to earn virtually the same amount for much less responsibility. Many in the business took the attitude that people were inherently lazy, and they would take advantage of this. However, from my experience of direct involvement the issue really wasn’t with the teams. There, for me were two factors at play

  1. People were still willing to go for the more senior role our of a natural desire for progression, commitment to serve and self-pride
  2. The problem wasn’t that the base salary became too high it was the senior salary was too low! This business could have created a significant enough gap to attract the best to want to step up, but it would have costs them perhaps 15% of their operating profit to do so. In a business that was driven by shareholder demands (mainly from people in that top 1%) and with decisions made by a board that definitely didn’t have personal connection to those on these low salaries there was next to no chance this would happen.

UBI has many things going for it. By creating such a scheme, the likelihood of recession declines because every person is able to maintain a reasonable level of income and therefore spending to a base level is guaranteed. The potential for people to shift their attention from a need must attitude to a desire driven one that focusses on passion and purpose would potentially lead to an increase in entrepreneurship and new ideas. So many people feel they a tied to a job because of the financial handcuffs they have placed on them – remove this fear and what might happen?
However, the prospects for big business are frightening. Simply put there would need to become an even greater merit-based structure to the pay for many jobs – and the likelihood would be that many basic roles would have to increase salaries to attract people to do them – eroding profits which of course, would hit the top 1% more. However, it might also make larger organisations more efficient and much more productive as people are showing up because they want to rather than because they have to. You only need to look at Gallup’s global engagement data to see how many people are working because they simply have to, and many of those are actively disengaged with what they are doing but feel they have no other choice. When we look at the wealth stats we now know why the stats are as dramatic as they are (7 in every 10 people are disengaged at work!)
However, as our landscape is changing I can see more and more people wanting to be part of something that is fairer and has greater social conscience. There are already some places, Finland, Canada, Brazil to an extent, where UBI type schemes are being piloted and there is increasing calls for more investigation so it will be interesting to see where it goes. Some companies are already adopting it and many are finding very creative ways to democratise their wages – including one company I read about where everyone from CEO to cleaner is paid the same and every quarter there is a fund allocated by everyone at the business based on the value each person has added and this is all open and transparent. Such social enterprise style arrangements are becoming more and more common and in most cases they are highly successful and profitable.
If we take a moment to look at Maslow’s hierarchy of needs we see that UBI starts to cover the base 3 levels, physiological, safety, and a sense of belonging. Plus, for many it would go a long way to tick the box on esteem needs as my value as a member of society might be raised. 
Would this stop individual motivation? Would it hold back those who have drive and ambition? I guess, until you put it in place then you don’t know yet, throughout our history even before modern monetary systems there have always been those who would push beyond others to, in Maslow’s language self-actualise so I think the fear that it would disinterest people in working and would damage personal drive I think it unlikely to be seen.
I would love to hear your thoughts on the topic – please feel free to drop me a line on with your views and thoughts.
Thanks for taking the time to read this,
Kind regards,

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