Much have been said about the need for economic growth of a country being translated into personal wealth and prosperity. For a small minority of the population, wealth is not an issue, as profits for enterprises are directly proportional to their personal wealth. This small minority are the conglomerate elites, heading large corporations and enjoying every bits of the wealth generated in business transactions. However, for the large majority of the population, the profits does not necessarily go to them. There need to be a mechanism of some sort how those profits can be shared with them, not as a form of direct transfers or gifts, but rather as a form of compensation for the work done. There need to be a mechanism to create employment, allowing more parties to contribute and adding value to the entire ecosystem. However, jobs are not supposed to be created just for the sake of creating jobs, or as a form of social responsibility. It has to be created because there is space for workers to contribute, adding value through highly productive efforts.

A simplified assumption will deduce that as a country grows its economy, with increasing aggregate demand and GDP, companies will be hiring more workers. As the labor input increases, output will increase to meet the higher consumer demand. Of course, this only hold with the assumption that the market is perfectly competitive, that if a firm does not increase its production, other firm will enter the market and grab the extra market share. What if the market is not competitive enough? increasing demand might not be met with increasing supply. Supply might remain scarce, only for price to burst even more. There is no absolute advantage for companies to increase their production, as the option to remain status quo and reaping more profits with the same effort is equally attractive. With no change in production, there is no need to increase employment, there is no need to share the wealth with others. Such could be said for large multinationals with specialized products and services, or those companies with absolute monopoly powers, or even for companies with very small competition, ie dominating the market. A sneak peak into the employment trends speaks volume:

The data suggest that for the period 2012 - 2016, the total employment from large firms remain roughly the same, at around 3.5m workers. Luckily enough, our Small Medium Enterprise (SME) are growing strongly, contributing to the overall increase in employment YoY. In Malaysia, SMEs are defined as below:


Comparing the employment numbers between large companies (LC) and SMEs, one might ponder, how much each group contributes to the national GDP? Despite having employed the majority of workers, SMEs contribution is only about a third of what LC is contributing. The figure below depicts the percentage of SME GDP contribution and the SME contribution to national employment.



Despite slowly growing in percentage, the total contribution is only about 36% of the overall GDP. This is despite the total employment is about 65%. In other words, about two-thirds of the workforce is sharing only one-third of the economy's wealth. Thus, no wonder the growth in GDP is not reflected in most of the workforce's paycheck.

However, all this are not something unusual. Most of the countries in the world will have a similar SMEs profile as such. According to a report by the Organisation for Economic Co-operation and Development (OECD) titled 'Enhancing the Contributions of SMEs in a Global and Digitalised Economy', SMEs assume a key role in national economies around the world, generating employment, value added and contributing to the innovation.

Such findings raises a few pivotal questions:

i) Why does the LCs keeping their employment number low, despite having increasing growth in profits? Are they operating as monopolist, or is there lack of competition in the businesses that they are doing?

ii) With the digitalisation and disruptive technologies, the entry / barrier cost is getting lower for new businesses to enter the market, will the behaviour of such LCs change with this development?

iii) To move further with inclusive growth, from a government's point of view, which is one better: LCs to hire more employees, or for more SMEs to enter the market? (Of course the latter is easier, but which one is better?)

Of course the findings are very high level and huge generalization was made by classifying businesses into only two (2) categories: SMEs and LCs. A clearer and better picture would probably surface if we were to divide the LCs into local LCs and Multinational Corporations (MNCs).

The other key assumption made here is the fact that we are only looking at the question of with higher profits, will firm decide to hire more people or will they remain status quo. There could also be another explanation: the productivity of employees in LCs are two (2) times higher than those of SMEs. LCs could be equipped with the right capital and technology equipments that their employees could perform two times better and produce two times higher output, contributing to the higher share of GDP. However, this can only be validated if we were to scrutinize the median income between the two groups according to job level classification by ILO. Only then a fair assessment can be said between the two groups' productivity.

Reference:
i) Economic Census 2016: Profile of SMEs, DOSM
ii) SME Annual Report 2016/17, SME Corp
iii) Guideline for new SME Definition, 2013, SME Corp

Is there suppose to be an amount of money that everyone deserves to receive, despite not doing anything?

Hey, who suggested the idea that only those who work, who got wonderful university degrees and great jobs, deserve to get their salaries?

What about those who can no longer work? Or those who are simply not productive enough to contribute to the economy?

Well, these people are normally categorized differently in the wide spectrum of a nation's citizen. They probably subscribed under some sort of scheme that will provide fund transfers to support their living.

Yeah, they're fine then. But what about those, who had to work 3-4 jobs to make a living? Is it fair for them? Is it healthy in terms of their physical body & mind? You would imagine such people who were forced to sacrifice every second of their life to work, would be stressful, desperate, and most of the time, being aggressive and harsh.

Does it really hard, just to allocate some money for these people, so that they can reduce their working hours and focus on other things in life? Can they simply go back early and play with their kids? Regardless of how you look at it, in terms of social well-being, and ultimately the overall happiness of a country, these people, those who struggle to make ends meet, need to be subsidized in terms of being provided additional income to top-up their earnings to meet the "minimum" basic income required.

But of course, the debate around this notion is not as simple.

Firstly, there will always be people who will take advantage on the system. Some lazy bumps will refuse to work hard simply because they assume that regardless of anything, at the end of the day, they will still have the minimum basic income. So what's the point of working hard? This is a classic moral-hazard issue. The way to overcome this is to build in a self-governed mechanism into the model to ensure such people will not be abusing the system.

Secondly, even if there is no one abusing the system, the question is, what is the minimum basic income? How do you calculate and determine it? Will it be dependent on your location? or your household size? or simply your spending patterns? A thorough study needs to be done to determine this "minimum" threshold that could vary between families.

Thirdly, of course, the mechanism to transfer the fund. Will it be weekly? Will it be monthly? Or annually? Again, all these can only be determined after several simulations to ensure the increase in spending power is permanent and does not lead to temporary boost in unnecessary expenditure.

Fourthly, where will the fund be coming from? Are you assuming it needs to come from the Government? If you are, probably your model will be very difficult to take off. Government worldwide are trying hard to maintain a balanced budget, and is adopting Austerity to cut off spending. What about private sectors? or NGOs? or even the riches in a country. Can't they simply fork out some of their never-ending richness to the rest. This is a form of distributive of wealth. The benefit is enormous, but whether it makes sense to them to do it, is another case.

In conclusion, even if we decide to proceed with UBI, the implementation is not easy. One thing for sure, initiatives and efforts towards that need to start now. We cannot wait too long. The economy is very volatile, industry are not behaving as what we would have expected.

After all, as we can see, the proliferation of internet & technology is rapidly displacing the labor market. Soon, more and more jobs will be irrelevant to the market. People will be out of job and need to be trained to do something else to earn money. Worse comes to worse, only a few segments of the population will be employed, while others are forced to go to entrepreneurship or simply rot unemployed. This is the point where discussion about UBI becomes more imminent & important. As it not only caters those who are not earning enough, but it may soon one day cater to the social issues of not enough jobs being created, as compared to being displaced by the technology.

Well.. you see, as the industrialization era started, more and more labor has been replaced by machines. At first they said machines will only replace hard-core labor, and the high value jobs, those involving brains and great minds, will still belong to human. They said, at that time, the introduction of machines, or as they call it "capital-intensive" production, will boost output, and enable labor to do other more difficult jobs that machine cannot perform, like thinking and reasoning.

But as the technology continues to mature, now we can see programmers on the street doing some coding to enable some small switches to behave based on temperature, or light, or humidity, or simply some voice instructions. And what more, this coding will let the switch to be 'clever' and make decision on its own. Isn't this exactly what we call "thinking"? We already see machines taking over from banks as they are deemed more "honest" and meticulous. Accountants too are now being displaced by this ever-increasing smart machines. Helpdesks and customer services are slowly going away.

Soon we will see machines taking over a cook's job as they develop their "taste", and finally taking over every single job there is. As technology continues to mature, engineers and scientist keep on finding ways to perfect it. How to make it smarter. Better. Etc. I am quite sure, one day, most of all, if not everything, will be done by robots.

Coming back to UBI, recently Mauritius launched its Negative Income Tax, another form of UBI. Population gets paid if their income is below a certain threshold. Read: http://www.govmu.org/English/News/Pages/Negative-Income-Tax-scheme-Beneficiaries-receive-first-payment-.aspx
Read: http://econsmalaysia.blogspot.my/2018/01/negative-income-tax-someones-finally.html

You can also read some additional researches done about how unearned income affects working hours: https://qz.com/1205591/a-universal-basic-income-experiment-in-alaska-shows-employment-didnt-drop/

Or how The Alaskan is the perfect example of UBI: They have been receiving UBI from The Alaska Permanent Fund for the past god knows years!: http://www.nber.org/papers/w24312

The time have come, for us to look at economics, to solve current problems, not to merely learning the past.