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Commerce · V.07 · MMXXVI · daylight

La Bourse  /  Volume V  /  Nº V.07  /  Workbook — the student

WORKBOOK — THE STUDENT

Chapter V.07 · Income, Floor, and Dignity

For the person studying this alone, or in a seminar, with no policy to set and no payroll to run. You have something better for this particular chapter: you are living inside the question. Almost every student in the world is operating with a floor they did not design, could not choose, and have never priced.

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WHY THIS WORKBOOK IS DIFFERENT

The chapter costs national instruments. You cannot legislate one. But the whole argument reduces to four quantities that exist in your life right now, this week, in numbers you can find in an afternoon:

  G  the guarantee     what arrives whatever happens
  t  the claw-back     what you lose from the next pound you earn
  B  break-even        where the two cross
  σ  the variance      how much your income moves month to month

Every student has all four. Most have never written them down. The grant that tapers against earned income, the bursary with a threshold, the parental support that quietly adjusts, the housing benefit that withdraws — these are claw-backs, and they compose in exactly the way the chapter describes: they do not add, they stack multiplicatively, and the resulting rate is routinely higher than anything the tax system imposes on anybody.

You are going to compute your own effective marginal rate. Very few people in any room can do this for themselves. It is the most transferable skill in the chapter and it takes one evening.

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PART ONE — DISCOVERY

Find the floor you already have

Exercise 1.1 — Name the counterparty (45 minutes)

Everybody has a floor. The question is who is standing under it.

Write down every source that would pay you something next month if all your current income stopped today: savings, a partner, a parent, a grant, a credit line, a landlord's patience, a friend's spare room. For each, write three things: the monthly amount, how many months it would last, and what it costs you to use it — in obligation, in relationship, in future options.

Then compute the one number that matters:

  months of floor  =  reserve held  /  essential monthly spending

Worked, with the chapter's illustration: a reserve of £4,200 against essential monthly spending of £1,400 is 3.00 months of floor. That is your personal version of the national question, and the arithmetic is identical — a guarantee divided by a burn rate. The only difference at national scale is that the counterparty is the state and the reserve does not run out.

Exercise 1.2 — The appreciative interview (45 minutes, with another person)

Find someone at least fifteen years older than you and ask exactly this:

"Tell me about a time you were able to take a real risk — change direction, turn something down, start something. What was underneath you that made it possible?"

Then stay quiet, and take notes on what was underneath, not on what they did.

You will hear, over and over: a partner's salary, a parent's spare room, a redundancy payment, a paid-off mortgage, a pension already vested. You are collecting a dataset on what a floor actually is, in the words of people who had one. Do this ten times and you will understand the chapter better than anyone who has only read it.

Exercise 1.3 — What is already working (30 minutes)

The chapter opens with six real floors that already exist: Alaska's dividend since 1982, Dauphin's saturation guarantee, GiveDirectly's 195 villages, Finland's 2,000 participants, Stockton's 125, and the four American negative income tax experiments. Pick the one you find least plausible and read the primary source rather than a summary of it.

Write one page on what it actually measured — not what it is usually said to have measured. The gap between those two is where most of the public argument lives.

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PART TWO — THE ARITHMETIC

Compute before you argue

Exercise 2.1 — Reproduce the chapter's figures (2 hours)

Do not take the numbers on trust. Open lib/verify/V_07.py, read it, then compute these independently, by hand or in a spreadsheet.

1. The gross cost of the floor. 54,200,000 adults × £5,200 and 14,100,000 children × £2,600. Confirm £318.5 bn, and confirm it is 12.4 percent of a GDP of £2,560,000,000,000.
2. The personal allowance offset. 31,000,000 basic-rate payers × £12,570 × 20 percent, plus 6,000,000 higher-rate payers × £12,570 × 40 percent. Confirm £108.1 bn.
3. The net cost, and the gross-to-net ratio of 2.24.
4. The Universal Credit stack: 1 − (1 − 0.20 − 0.08) × (1 − 0.55). Confirm 67.6 percent. Then compute what you get by adding the three rates instead, and satisfy yourself that the second method is wrong.
5. The break-even income: £5,200 ÷ 0.123. Confirm £42,227.

Then do the thing that matters most: find one figure in this chapter you can check against an outside source, and check it. Bring any discrepancy to your seminar. This edition wants to be checked.

Exercise 2.2 — Your own effective marginal rate (90 minutes)

This is the central exercise of the workbook.

List every source of income you receive that would change if you earned an extra £1,000 this year. Grant, bursary, benefit, parental support, tax, national insurance, student loan repayment. For each, write the withdrawal rate and whether it applies to gross income or to income after tax.

Then compose them correctly. Rates that apply to gross income add; a rate that applies to what is left after another rate multiplies. Work outward:

  keep  =  (1 − gross rates) × (1 − taper on the remainder)
  EMTR  =  1 − keep

Write your number. Then write the one sentence that follows from it: if I earn one more pound, I keep ___ pence.

Almost nobody you know can state this figure about their own life. Once you can, you will never again mistake a headline tax rate for what somebody actually faces.

Exercise 2.3 — Build the frontier (60 minutes)

Take a guarantee of £5,200 and compute break-even and band rate for claw-backs of 25, 35, 45, 50 and 65 percent. You should get break-evens of £20,800, £14,857, £11,556, £10,400 and £8,000, and band rates with National Insurance of 33.0, 43.0, 53.0, 58.0 and 73.0 percent.

Now plot cost against band rate using the chapter's payment-leg figures — £85.2, £71.3, £64.8, £62.8 and £59.5 billion — and look at the shape. Write one paragraph answering: where on this curve would I put a country, and what am I buying with the money I spend moving left?

Exercise 2.4 — Find the honest negative (30 minutes)

The chapter states one plainly: at a 50 percent claw-back the band rate is 58.0 percent, 13.0 points above the 45 percent top rate of income tax, and buying it down to the top rate costs £6.8 billion and widens the band to £14,054.

Practise the move yourself. Take a position you personally hold about how incomes should work, and write the strongest honest negative against it — the version that troubles you, not a straw one. If you cannot write it, you do not yet understand your own position well enough to defend it. That is not a criticism. It is the assignment.

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PART THREE — DREAM AND DESIGN

Days 46–70: build something

Exercise 3.1 — The present-tense description (60 minutes)

Write 500 words describing your working life eight years from now, in the present tense, as description rather than aspiration.

Constraints, and they are the whole exercise:

• Describe an ordinary Tuesday, not an achievement.
• Include one thing that is difficult and stays difficult.
• State what your floor is and who the counterparty is.
• State what you would do if your main income stopped on the Wednesday.

The last two constraints defeat most people. If you cannot answer them, you have not designed a life — you have designed a hope with an income attached.

Exercise 3.2 — Design a floor for one real group (2 hours)

Pick a population you actually know: the students in your department, a household, a society you belong to, people doing a particular kind of freelance work. Design a floor for them and specify all six parts.

1. The guarantee. A number, per person, per period.
2. The claw-back. A rate, and what income it applies to.
3. Break-even. Computed, not asserted.
4. The band rate. Composed correctly, and compared with something.
5. The funding. Where the money comes from, named.
6. The indexation. To what, and reviewed when.

Then write the honest negative in the same document, before anyone else finds it. A proposal that discloses its own band rate in the first paragraph has removed the only weapon that has ever worked against these schemes.

Exercise 3.3 — The one-page case (45 minutes)

One page, four parts: what is true now, what you propose, what it costs net, and what the effective marginal rate is in the band. Give it to one person who disagrees with you and ask a single question: what would you want to know that isn't here?

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PART FOUR — DESTINY AND DELIGHT

Make it hold, and notice what it feels like

Exercise 4.1 — The three defences (30 minutes)

The chapter names three things that keep a floor from eroding: indexation to median earnings, universality, and a ring-fenced source. Translate each into your own design from Exercise 3.2, and write what specifically would kill it without them.

Then apply the same three to your personal floor. Is your reserve indexed to anything? Is it defended by anyone other than you? Does it have a source, or does it compete each month with everything else you want?

Exercise 4.2 — The irreversible commitment (this week)

One thing that cannot be quietly undone. A standing order into a reserve account you have made awkward to reach. A stated monthly figure you will not go below. A person you have told.

Small and irreversible beats large and provisional, every time.

Exercise 4.3 — Delight, measured (ongoing)

The Finnish participants' life satisfaction moved from 6.76 to 7.32 — 0.56 of a point on a ten-point scale — and it was not the €560 that moved it. It was the end of proving: no form, no appointment, no explaining yourself to someone with the power to stop the money.

For four weeks, record two numbers each Sunday: your own satisfaction on a ten-point scale, and the number of hours that week you spent administering your own precarity — forms, applications, calculations, conversations about money you did not want to have. Then look at the correlation. Most people find the second number predicts the first better than income does.

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THE TERM PROJECT

One floor, costed properly

Choose one real population — a country, a city, a profession, a student body — and produce a complete floor costing.

Deliverables.

1. The evidence review (1,000 words). What trials exist for this population or a comparable one, what each actually measured, and what none of them can support. Name the duration of every trial you cite.
2. The costing (600 words plus workings). Gross, every offset computed separately, net, and the gross-to-net ratio. Show the arithmetic.
3. The band (300 words plus workings). The claw-back schedule, break-even, the effective marginal rate composed correctly, and a comparison with the top rate of tax in that jurisdiction.
4. The honest negative (300 words). At least one condition under which your design fails, stated before anyone else finds it.
5. The alternative (400 words). Cost a job guarantee for the same population on the same basis, and say what each instrument buys that the other does not.
6. The reflection (400 words). What you expected before you computed, what you found, and what the gap tells you.

How it is assessed. Not on which instrument you recommend. On whether a reader could reproduce every number, and whether you disclosed the band rate without being asked.

A costing that reached an inconvenient conclusion and was computed cleanly is a first-class piece of work. One that reached a comfortable conclusion and cannot be reproduced is not.

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SELF-ASSESSMENT

The two that matter most are the second and the sixth. The rest can be learned in a week. Those two are habits of honesty, and they take a term.

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CARRYING IT FORWARD

You will not be setting national policy soon. What you will have, if you do this properly, is:

• Your own effective marginal rate, computed, which almost nobody has.
• Ten interviews on what a floor actually is, in the words of people who had one.
• One complete costing with its band disclosed, in your hand, which you can describe in ninety seconds in an interview.
• The habit of asking for how long, and did they know? of every trial anybody cites at you.

That last one is worth more than it sounds. The person in the room who asks the duration of the trial changes what the room is able to conclude — and you can be that person long before you have any authority at all.

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APPRECIATIVE QUESTIONS FOR YOUR SEMINAR

1. Who in this room has had a floor under them at some point, and what did it let them attempt that they would not otherwise have tried?
2. Which of the six studies in this chapter is best designed, and what exactly makes it better than the others?
3. What is already working in how this institution supports people through a bad term — and what makes it work?
4. If every person here left with their own effective marginal rate computed and written down, what conversations would become possible that are not now?