There's a new class war brewing, that between employed and unemployed.

Sarah O’Connor, discussing the challenges of the Gig economy writes, “Offering employment benefits to drivers might well help to snap up the best workers and hang on to them. But if customers were not to shoulder the cost, investors would have to.”“Uber and Lyft’s valuations expose the gig economy to fresh scrutiny” January 2.

Sir, to that we must add that if the investors were neither willing to shoulder that cost, then the gig workers would have to do so, or risk losing their job opportunities.

That conundrum illustrates clearly the need for an unconditional universal basic income. Increasing minimum wages or offering other kind of benefits only raises the bar at which jobs can be created, while an UBI works like a step stool making it easier for anyone to reach up to whatever jobs are available.

Sarah O’Connor also mentions how a collective agreement was negotiated between a Danish gig economy company and a union. Great, but let us not forget that in the brewing class-war between employed and unemployed, the unions only represent the employed… and we do need decent and worthy unemployments too, before social order breaks down.

PS. There's another not yet sufficiently recognized neo-class-war too. That between those who have houses as investment assets and those who want houses as homes.

@PerKurowski

Loss aversion has bank regulators looking too much at the cost of the crisis, while ignoring the benefits of the whole boom-bust cycle.

Sir, Tim Harford writes: The concept of “loss aversion” developed by Daniel Kahneman and Amos Tversky…showed that we tend to find a modest loss roughly twice as painful as an equivalent gain… Those who were forced to evaluate and decide at a slow pace were… not intimidated by short-term fluctuations… less likely to witness losses.”, “The languid pleasures of slow investing” February 10.

That is precisely what happens when bank regulators go into action during a crisis; they just look at the losses, and completely ignore what good might have been achieved during the whole boom-bust credit cycle.

And that is why our regulators in the Basel Committee, panicking, imposed risk weighted capital requirements for banks, which pushes debt that relies more on existing servicing capacity, like financing “safe” houses, than debt that hopes to generate new revenue streams, like loans to “risky” entrepreneurs.

And we all know there’s little future in that!

Harford ends with: writes: “Perhaps we slow investors should adopt a mascot. I suggest the sloth” Indeed, and let us send a stuffed one to Basel.

An aide-mémoire on the major mistakes with the risk based capital requirements

@PerKurowski