Empower the Unemployed

 

Revised 16 Aug 2012

It is my belief that were the unemployed permitted to self-organize and allowed to operate within a free market unburdened of most taxes and all but essential regulations, they could in time prosper without ongoing governmental aid.  This might strike the reader as pure conjecture, but there is, under his very nose, an irrefutable working example of the kind of enterprise I envision.

Allow me then to call attention to a contingent made up mostly of young males, who might well be expected to conform to the 20% unemployment rate that is typical for their cohort, but instead have good steady incomes  that would be the envy of many professionals.  The reason behind this group’s favored circumstances is not that they enjoy some special advantages, educational or otherwise.  Indeed, most have only rudimentary education and virtually none have attended college.  Nor are they in possession of some particularly marketable skill, nor the beneficiaries of outside financial backing, nor driven by some sort of extraordinary work ethic or religious zeal.  (in fact, nothing could be further from the truth.)  Nor, for that matter, do they lack competition. Retrenchment, product redesign, constant retooling, relocation, and employee turnover are the norm in their bitterly contested world.

Can’t guess this group’s identify?  Hint one: its representatives are ubiquitous (perhaps this very moment dutifully manning your particular street corner)  Hint two: not only does this group get no government assistance they experiences nothing but relentless interference by the Feds in the practice of their daily jobs.  Yes, of course, I am speaking of the noble practitioners of the drug trade.

Mind you, I am not suggesting the government solve the problem of the unemployed by supplying them with free bags of crack cocaine and sending them onto the streets.  (although the idea would be well within Congress’s penchant of focusing on narrow, short-term gains at the expense of real-world consequences, not to say, common sense)  Nor am I endorsing commerce in illegal substances in general.   And, yes, I freely admit there are factors contributing to the success of the drug sector that I have not mentioned.  And admittedly, the careers it offers can suffer abrupt changes in lifestyle.  But, setting aside the distasteful nature of its business,  you have to give entrepreneurship its due wherever it is found.  The illegal-drug industry stands as living proof that a combination of the normal drive for material gain, a free market, and an absence of governmental regulation inevitably results in self-sufficient commerce.

Which brings me back to the army of unemployed.  Think of the injustice of their lives dribbling away in idleness most probably on account of the mismanagement of others.  And think also of the potential they represent.  If the drug industry can succeed (as indeed it has) with its ranks of ragamuffins, think what a  population of the unemployed could do with its vast resources of latent talent, business experience, technical expertise, and unbounded motivation.  Wouldn’t it be preferable for all concerned to release that potential rather than smothering it in checks from Washington’s paper mills?  Why not release that potential?  Why not endow the unemployed with the economic freedom we have managed to bestow on drug dealers?

Thus my original contention—i.e., given a decent opportunity under the right circumstances, there is no question but that  the unemployed would pull themselves up by their own bootstraps.  There is, I am confident, a true, bottom-up solution to the unemployment dilemma.

What might those “right circumstances” be?  I envision a new type of short-lived corporations called UCORPs that would give the unemployed a chance to get on their feet.  First, UCORPs would be relieved of all but the bare minimum of governmental restrictions necessary to protect public health and worker safety.  They would be exempt from minimum wage, workman compensation, corporate income tax and unemployment insurance requirements.  Second, these new entities would be furnished a set of software templates to help them get a start in the commercial world.  What UCORPs would not enjoy is government financial or advisory assistance.

THUMBNAIL SKETCH OF UCORPS MAKEUP

1. Term:  the maximum life of UCORPs to be five years at the end of which they would have a choice of liquidation or conversion into a regular corporate structure.  For its operations to be acquired by a regular corporation prior to its five-year termination date, a UCORP would first have to be dissolved.

2. Requisite officials: president, treasurer, secretary, and general manager.  No board of directors.  Company records to be kept in a professional manner and made fully available for inspection by any employee upon request.

3. Ownership: entirely employee owned.  Common stock not transferable.  Only one class of stock.  UCORPs could borrow money but could not pledge company stock as collateral.

4. Personel: must have been officially unemployed for at least six months before being eligible to join UCORP.  Screened at entry by computerized application form.  UCORP’s to be non-union.

5. Compensation:  Employees including the founding officers agree to work their first month without pay.  Compensation of executives to be no more than five times that of the average worker salary exclusive of executive pay.  Dividends, bonuses and commissions not permitted.  Every payday each employee to receive a number of shares equal to the dollar amount of his or her paycheck.

Upon any change in the status of the UCORP whether on account of its sale, dissolution or merger, the company’s accumulated profits to be divided in accordance with each employee’s share holdings.  Employees who leave  the company for any reason must surrender their shares at current book value.

6. UCORP required to contribute one-percent of its total compensation to the UCORP Association.  Association to provide services for the industry including acting as an ombudsman in governmental affairs, handling arbitration cases, furnishing consulting services, promoting the industry image, and refereeing complaints.

7. UCORPs given immunity from civil prosecution.  Financial disputes resolved by compulsory arbitration or by a small claims court.

8. UCORPs would be prohibited from displacing existing operations.

GETTING STARTED

Establishing a UCORP would be no more difficult than completing an Internet-based questionnaire with a unique name for the new identity, its address, and the identification of its four officers: the president, treasurer, secretary, and general manager.  The purpose of the proposed corporation would not be questioned nor would any fees be assessed.

Upon application, the system would verify the eligibility of the proposed officers including their citizenship, requisite age, and the existence of a permanent address.  No more than two officers could be related to each other and none could have a criminal record or been recently bankrupt.  No particular qualification or experience would be required except for the treasurer who would be expected to have verifiable experience in bookkeeping or accounting.

If accepted, the new UCORP would be officially registered and be given without charge a commercial bank account at a nearby bank, and automatic membership in the UCORP Association.

In addition, the new UCORP would be provided a free, easily customizable website containing pages for its description, the marketing of its product and services, the posting of positions available, “FAQ’s,” and contacts.

HYPOTHETICAL SCENARIOS

CASE I:  An existing company, Acme Furniture, Inc. designs its products in the US but relies on China for their manufacture.  This arrangement normally works out well, but is judged impractical for Acme’s proposed new premium line that would require close supervision, short-runs, timely deliveries, and, frequent, last-minute changes.  To start, the company initiates a low-cost UCORP to handle the new activity.  Acme locates a qualified candidate to head the new facility then builds and equips a factory close to its main offices.  For the next five years, the employee-owned UCORP operates profitably under a labor contract with the company.  When the UCORP is forced to liquidate after this period, its personnel share the accumulated profits and, for the most part, elect to stay on the job as company employees.

CASE II: Several Hispanic ex-employees of Circle Design have, for months, been meeting regularly at a local coffee shop to share their grievances.  Intimately aware of Circle’s lost sales opportunities, they band together and present their former employer with a scheme to expand its operations into South American markets.  The company accepts their proposition and provides a start-up loan for the new UCORP—care being taken to ensure its  activities do not displace any of Circles’s current workers.  After three years the arrangement proves so successful that Circle offers a handsome buyout package that the UCORP’s employees share along with the accumulated profits in their dissolved outfit.

CASE III:  Elmer Hodgkins, a victim of the downturn in the construction industry, had neither business experience nor professional connections.  On the other hand, he grew tired of sitting around watching TV all day and was energized by the UCORP movement.  Enlisting his wife and two former associates—the bookkeeper and office manager of their defunct former employer—Elmer applied for and was awarded incorporation.  Without a dime to spare among them, the new UCORP’s officers first priority was generating income.  While Mrs. Hodgkins applied for micro loans and on-line lenders, the other three scoured the city’s businesses and governmental offices for temporary employment.  Given their willingness to work for low pay, jobs were found and each such assignment gained them references and a better understanding of the niche they could best fill.  By the end of their UCORP’s second year, they were earning more  than they did when originally employed.  After another year they were able to hire others and add company profits to the income they were earning directly.

CASE IV:  Georgiana Polankitz long believed many would relish the tasty  ethnic pastries handed down by her grandmother if they available.  When she lost her sales job with a department store, she briefly considered trying to earn a living selling these but a cursory review of  the city’s costly ordinances governing food service scotched her ambition.  However, when UCORPs came into being, she formed one of her own and quickly made a success of selling her wares to local bakeries.  From this modest start, she used the Internet to grow her bakery nationwide and employ fifteen people by the time she was forced to convert it into a normal subchapter S-corporation.

CASE V:  After being laid off as an auto mechanic, Don Axelsmidt tried turning his hobby of making radio-controlled model airplanes into a profitable business.  Enlisting three friends to serve as silent partners, he formed a UCORP and used his savings to get started.  Unfortunately, he was forced to close down after two years when he simply could not compete with foreign competition.  However, thanks to the proliferation of new UCORPs and the improved labor market they engendered, his handiwork skills enabled Don to find a good paying job in short order.

CONCLUSION

It is too much to hope, of course, that the powers that be would undertake anything like the above proposed solution to the unemployment problem for obvious reasons: it costs too little; does nothing to expand government; excludes unions; and if, God forbid, it were successful, it would provide yet one more demonstration of the superiority of the free market.

On the other hand, I cannot help speculating that were UCORPs introduced, they would reduce the jobless rate and the human misery that it exacts.  The increased economic activity they would bring about would not only help the unemployed but the economy as a whole.  Finally, UCORPs would measurably reduce the cost of federal and state unemployment insurance that, over the last four years (2008 through 2011) paid out $434 billion to 17.6 million Americans.  Makes one wonder if “safety net” is the appropriate term for entitlements that imperil the economy, but, I suppose calling them “danger nets” would make them a harder sell.

 

 

 

 

 

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