Non-labor Income: it only sounds fantastical

Recent sunny labor market reports have generated lots of buzz that the economy is coming back. Unemployment is down to 5.6%, the lowest it’s been since 2007, and Wall Street’s bull market is charging ahead. But even if stocks and the job market appear to be getting back on their feet, wages, a truer indicator of economic health, tell a different story. For 70 percent of the workforce, inflation-adjusted hourly wages are still lower than they were in 2007.

As we discussed in our new Future of Youth Employment report, the rise of the sharing economy and the proliferation of contract work are ready ways for workers to generate income. Roughly 50 million Americans, or one-third of the workforce qualify as freelancers now. But these new types of work also can create unfavorable conditions for wages. In other words, their paychecks only go one way, and it’s not up. So how will we cope with a future in which there aren’t enough good-paying jobs to go around?

One possible answer requires us to completely rethink what things income should come from. Just for a moment, suspend your disbelief and imagine an economy in which income flows from sources other than your labor (and not from government subsidies, either).

Actually, such a world is already here, in least in part. In the state of Alaska, for instance, every man, woman and child receives a check each year from something called the Alaska Permanent Fund. The Permanent Fund is a state-owned corporation that distributes profits generated from the sale of Alaska’s oil and gas reserves. All Alaskans benefit, regardless of income. In 2014 the Fund paid out more than $500 million, or about $1884 per person. In past years the payout has been as high as $2000 per person. Consumers spend that income, which causes businesses to produce more goods and services, which in turn drives the economy. Throughout the Great Recession, Alaska’s unemployment rate remained well below the U.S. average.

Not surprisingly, the Permanent Fund is enormously popular -- and politically bulletproof. But what’s most striking is a seldom discussed principle behind it: that certain assets – in this case fossil fuels drawn from the earth – belong not to private entities but to the commons, to the populi, and should be shared accordingly. Then governor Sarah Palin affirmed this in 2008 when she said; “Our constitution mandates that as you develop resources, it’s to be for the maximum benefit of the people, not the corporations, not the government, but the people of Alaska.”

Such an idea is not without political vulnerability, but even the critics of the Permanent Fund have had trouble casting it as “socialism” or “redistribution.” The fund has paid out $19 billion in dividends since 1982. But is what’s good for Alaska good for the rest of the nation? If you accept the notion that citizenship entitles us all not only to democratic rights and protections but also to a stake in certain common assets, then it becomes possible to imagine separating income from labor. And that raises a critical question: what other common assets are out there that we could all benefit from?

In his 2014 book ‘With Liberty and Dividends for All,’ Peter Barnes argues that non-labor income is in fact a market-based way to increase economic security for large numbers of Americans without resorting to taxation or welfare. Rather than a threat to capitalism, he argues, the sharing of co-owned assets would in fact sustain capitalism by relieving inequality.

Barnes defines co-owned wealth as “assets created not by individuals or corporations but by nature or society as a whole. This little-noticed cornucopia includes our atmosphere and ecosystems, our sciences and technologies, our legal and financial systems, and the value that arises from our economic system itself.”

So what common assets might be pooled to create streams of non-labor income? Two examples: the largely unregulated financial derivatives markets, with a global value of about $690 trillion, could generate billions in securities transaction fees. Also, fees attached to the licensing and use of the broadcast spectrum (the airwaves used by all radio, television and telecommunication companies) could produce billions if a portion were directed to a public fund. These funds, conservatively managed, could add up quickly. Alaska’s Permanent Fund, which launched in 1976 with $734,000, now has assets of $52 billion.

Non-labor income is actually well established in the tax code and is not stigmatized, but it almost exclusively benefits elites. While the middle class derives its income from labor, the upper class grows richer through income derived from capital gains, dividends, and ownership of property: all non-labor sources.

A steady stream of non-labor income works best as a supplement to work, not a replacement. But in an economy where good-paying jobs may be increasingly difficult to find, it could go a long way toward providing greater economic security for the middle and lower classes, whose economic health the nation’s economy depends on.



David E. Thigpen is an IFTF Research Affiliate and a Lecturer at the University of California at Berkeley. He was a member of our inaugural class of Future for Good Fellows in 2013.