THE BLOG
02/12/2014 09:43 am ET Updated Apr 13, 2014

Ownership -- The Minimum Wage Replacement

Whether or not raising the minimum wage is harmful and will cause less employment should be discussed within the larger scope of economic inequality. The proposed measures are at best a sedative to ease the pain of deteriorating livelihoods, but not the solution that is necessary to significantly address income disparities between the wealthy ownership class and the propertyless, non- and under-capitalized American majority.

While a $1 raise initially and another $1 in 2016 will be welcomed by low-income minimum-wage earners, this is certainly not the solution to the serious widening income gap between the "haves' and the "have-nots."

It doesn't make any difference what's going on in the scientific world or the business world or the industrial world, the nation still believes full employment with a minimum wage and other redistributive social insurance programs will solve our income distribution problems. This is what progressive political figures have always maintained.

Digital computerized operations, automation and other productive technological advances are destroying jobs and devaluing the worth of labor. This tectonic shift in the technologies of production and the greater employment of robotics and super-automation to save labor costs is not well understood and reported by the national media. Advances in software and production technology, abundant and relatively inexpensive energy, fast access to huge amounts of data, and growing global demand will continue to drive competitiveness of American manufacturing, and drive down labor costs, except for people with jobs in research and high-tech skilled work. Such innovation will increasingly impact the fast-food and services industries and as well result in fewer and fewer jobs as a result.

The global economy, as well as the national economy, will continue to bifurcate into a rich/tech track and a poor/non-tech track due to continual technological invention and innovation that will destroy and/or replace old non-tech jobs. For example, Foxconn (China's largest private employer and the manufacturer/assembler of Apple and other global manufacturers smartphones has plans to install over one million manufacturing robots within three years. Already, fast-food chains in Japan, China and Great Britain have begun piloting the use of robots to cook meals. These fast-food robots are capable of preparing full sushi rolls or noodle dishes for Asian food outlets. In many cases, customers complete their orders through a touch screen, which then alerts the robot how to prepare the meal. No humans needed.

Dan Fastenberg, a writer for BusinessInsider.com, stated the obvious: "It stands to reason that American fast-food companies will adopt the robots at some point." It is also logical to expect that demands for increased wages without corresponding labor productivity gains will intensify such efforts to adopt robotics and sophisticated automation.

The off-shoring of manufacturing will eventually be replaced by human-intelligent super-robotic automation. This too will put competitive pressures on American companies to ramp up technological productivity.

The impact of technological invention and innovation should surprise no one who is conscious and who has even causally observed the constant shift to non-human productive inputs in the manufacturing, distribution, and sales of products, as well as the delivery of services, that has been occurring during their lifetime. The first burst of this phenomena was the Industrial Revolution. But now we are in an age of technology sophistication that is permeating every sector of industry and our day-to-day lives.

There's nothing new about machines replacing people, but the rate of replacement is exponential and the result is that productivity gains lead to more wealth for the OWNERS of the non-human factor of production. For others who have always been dependent on jobs as their source of income, there has been a steady decline to poverty-level labor incomes or loss of employment.

Business investment in machine and robotic super-automation hardware and software is more than it's ever been. What's not back is the jobs.

The percentage of Americans with jobs is at a 20-year low due to tectonic shifts in the technologies of production. In every industry, we are witnessing fewer interactions with other human beings. Everyone should be aware of robotic kiosks -- providing bank teller services via ATMs, sales customer services via e-commerce, and switchboard support services via voice recognition technology. Super-automation is transforming commerce. There are heavily automated warehouses where there are either very few or no people around. Increasingly jobs, especially those that involve relatively structured tasks, are being replaced by human-intelligent robotic computerization and physical entities other than humans.

The pursuit for lower and lower cost production that relies on "slave wage" labor will eventually run out of places to chase. Eventually, "rich" countries, whose productive capital capability is owned privately by its citizens, will be forced to "re-shore" manufacturing capacity, and result in ever-cheaper robotic manufacturing.

"The era we're in is one in which the scope of tasks that can be automated is increasing rapidly, and in areas where we used to think those were our best skills, things that require thinking," says David Autor, a labor economist at Massachusetts Institute of Technology.

While I am not opposed to the concept of a "minimum wage," economic productivity is a bigger part of the story. Those arguing its support basically argue that labor is producing more value today, but working people aren't seeing any of the gains. Who has walked away with the proceeds from all that productivity? But contrary to general belief, when looked at through the lens of two factors of production -- human and non-human -- labor is not becoming more productive; the non-human means of production is driving the productivity gains.

A January 2013 report from Oxfam noted, "The richest one percent has increased its income by 60 percent in the last 20 years." It further argued that the 2012 net income of the world's top 100 billionaires -- a haul of $240 billion -- would be four times the amount needed to eliminate extreme poverty internationally.

These arguments fail to point out the income source for the richest one percent is not their labor but their dividend income derived from their ownership of productive capital assets--the non-human factor of production.

To maximize profit and thus dividend income -- the purposeful function of business -- companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by non-human physical productive capital's ever increasing role.

This is the reality of business in the global and national setting where lowest cost production is necessary to be competitive.

Yet, the government continues to discharge its responsibility for the health and prosperity of the economy through coerced trickle-down; in other words, through redistribution achieved by the rigging of labor prices, including the minimum wage; by taxation to support redistribution and job "creation;" or subsidization by inflation and by all kinds of welfare, open and concealed. From an employment perspective, employment should start at the time one enters the economic world as a labor worker, to become increasingly a capital owner, whose productive capital contributes to the work load, and at some point to retire as a labor worker and continue to participate in production and to earn income as a capital owner until the day you die.

While the problem is one that no one can no longer ignore, the solution also is one starring them in the face but they just can't see the simplicity of it.

The solution addresses the fact that productive capital is becoming more productive and increasingly responsible for the production of society's products and services, not labor, whose relative input is constantly being diminished by the substitution of the non-human factor of production.

The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today's wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through stock ownership and full-dividend payouts, so they can afford to purchase the products and services produced by the economy.

Binary economist Louis Kelso, whose books should be read by ALL conventional economists, the media and political figures, was quoted as saying, "Conventional wisdom says there is only one way to earn a living, and that's to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, 'Voila! The productivity of the labor has gone up 900 percent!' I say 'hogwash.' All you've done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don't have it."

The best way to protect American citizens from this spiraling disaster that will continue to undercut American workers, destroy jobs and devalue the worth of labor in the United States is to implement policies to create an OWNERSHIP SOCIETY, whereby EVERY American is extended the right and opportunity to acquire productive capital with the self-financing earnings of productive capital -- the physical wealth-creating assets of corporations (e.g., machines, super-automation, robotics, digital computerization operations, etc.). Currently non-property-owning Americans are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the "speculative stock market exchanges," purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners.

What historically empowered America's original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security -- those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need the dividend earnings it produces.

As Kelso asserted: "The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance."

A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production and global competitive pressures.

There is a solution, which will result in double-digit economic growth and significant job opportunities, and simultaneously broaden private, individual ownership so that EVERY American's income significantly grows over time, providing the means to support themselves and their families with an affluent lifestyle. The JUST Third Way Master Plan for America's future is published here.

See two references to the proposed Capital Homestead Act, the centerpiece of legislation of The JUST Third Way at here and here.

For more on how to accomplish necessary structural reform, see "Financing Economic Growth With 'FUTURE SAVINGS': Solutions To Protect America From Economic Decline" and "The Income Solution To Slow Private Sector Job Growth".