Self-employment and basic income

Universal self-employment and the abolition of wage labor should be the ultimate goal of the international labor movement. It is therefore unfortunate that in our time most trade unions and labor parties are ignoring self-employment and instead pursue policies that perpetuate wage labor.

Since the Lagrangian Republican Association is committed to the cause of self-employment, we favor polities that promote self-employment. We recognize that self-employments is possible in many forms, as sole proprietorship, partnerships or cooperatives.

Though self-employment is a formal option in modern capitalist economies, we have to conclude that only a very few people pursue self-employment. The question we need to ask is why? Our believe is that uncertainty is a key factor in why people do not seek self-employment.

As argued by John Maynard Keynes, uncertainty is fundamental is in shaping the (economic) choices people make. In general people seek to reduce the amount of uncertainty in life and this has important consequences how the economy operates.

A person who becomes self-employed also becomes an entrepreneur. And being an entrepreneur means accepting risk. The self-employed person has no fixed salary, as he cannot be sure that he will find costumers for his goods or services, nor does he have protection against dismissal.

Employees on the other hand enjoy the certainty of a regular wage. Trade unions and “labor” parties has reinforced this by pursuing policies such as minimum wages and protection against dismissal. Though such measures are sympathetic at first sight, they come at the price of strengthening the system of wage labor, as these rights do not apply to the self-employed.

It is not hard to see that these policies do reduce the amount of uncertainty for employees, but not for self-employed people. If presented with the choice between either being an employee with minimum wage and protection against dismissal, or self-employment with all its associated risks, it is no surprise that a large majority will go for the former option.

If we do take seriously our commitment to self-employment, we need to conceive a fair system to reduce uncertainty for the self-employed. A basic income guarantee seems in our opinion a good candidate.

The essence of a basic income program is that every (adult) citizen will receive a periodic payment, regardless of their employment status, income, wealth or ability or willingness to work. With a basic income every citizen are sure of a guaranteed minimum income and hence it will reduce uncertainty.

For those who believe that a basic income is “socialist” or even “communist”, I would recall that proposals for a basic income have been advocated by right-wing economists like Milton Friedman and Friedrich von Hayek.

If we accept the basic income guarantee as a method of promoting self-employment, it follows that we should oppose minimum wage laws. Not only is having both systems unnecessary, people will still prefer being an employee to self-employment.

A basic income will help self-employed people in several ways. First of all, they have the certainty of having enough income to live from. Secondly, with a basic income it will be easier for the self-employed to get loans to fund their business activities as the basic income will serve as a type of collateral for the loan.

Of course, we are aware that a basic income guarantee has its disadvantages. But considering the alternatives, we believe it will be crucial step toward universal self-employment.

Read here our response to Reddit comments to this article.

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2 thoughts on “Self-employment and basic income”

  1. Finally some sanity. I’ve thought along similar lines, but wonder if anyone has done the math to show it can work. I made a crude spreadsheet with guesswork and assumptions but would hardly call it worthy of peer review.

    1. Excellent point. Though it would be a hard job to work it out mathematically. Nevertheless, it has been advocated by serious economists from different schools of thoughts.

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