The Floor and the Exit

The Citizen’s Dividend, Part 2

The last essay settled what the dividend is, a return on a commons you own rather than a charity you should feel grateful for. This one is about what it does. And the most important thing it does is not feed you. It frees you. The floor matters less as a source of food than as a source of power, the specific power that almost no working person has ever held in any quantity. The power to walk away.

There are only two things you can do about a bad situation. You can stay and complain, or you can leave. The economist Albert Hirschman gave them their names, voice and exit, and the distinction explains more about working life than any amount of talk about wages. Voice is raising your hand, filing the grievance, joining the union, voting for the man who promises to fix it. Exit is the door. And the reason the labor side of the economy has always leaned so hard on voice, on organizing and regulating and legislating, is that for most workers exit has never been real. You cannot walk away from a job you need in order to eat. The threat to quit is empty when quitting means the rent goes unpaid and the children go hungry, and an empty threat buys you nothing at the table. So workers were left with voice, because exit was a door painted on a wall.

The dividend turns the painting into a door.

Consider what the employment bargain actually is when one side cannot afford to refuse it. We call it a free exchange, an agreement between consenting parties, and the libertarian in me wants very much for that to be true, because voluntary exchange between free people is the most decent arrangement human beings have found for dealing with one another. But a deal you sign because the alternative is destitution is a deal signed with a gun to your head, and the gun is poverty. The man who takes a job because he will starve otherwise has submitted to that job, and a person who believes in choice should find that troubling. A market built on submission is something older and uglier wearing the market’s clothes.

A guaranteed floor takes the gun off the table. It does not make the work disappear or the bills vanish. What it does is more specific than that: every offer of employment now has to beat the worker’s other option, which is to decline, and live, at the bottom, on what he is already owed. The job that pays too little, or treats him like a tool, or grinds him into the dirt, now has a competitor it never had before, the option of saying no and not dying for it. To win the worker, the employer has to offer something worth more than refusal. That is what a market between equals looks like. It is the market the libertarian says he wants, and the dividend is the thing that finally makes the labor half of it real.

This is the part my own side tends to miss, and it is the part I most want them to see. The standard libertarian objection to the dividend is that it interferes with the free market in labor. The objection has the matter upside down. There is no free market in labor right now, not for the people at the bottom, because one party negotiates from abundance and the other from the edge of ruin, and a bargain struck across that gap is free in name only. The dividend does not distort that market. It creates one, by handing the weaker party the single thing a free agent must have, the ability to refuse. If you believe in freedom of contract, you should want both parties able to walk. At the moment only one of them can.

The left has seen the power imbalance for a century, and reached, every time, for voice. More unions, more mandates, more rules about what an employer must do. I understand the impulse and I think it picks the worse tool. Voice corrects the imbalance by binding the employer with law. Exit corrects it by freeing the worker. A freed worker needs no mandate, because an employer who must compete for people who can walk will raise wages and improve conditions on his own, to keep them. One approach grows the rulebook and the bureaucracy that enforces it. The other hands people their power back and lets the market do what a market is supposed to do. For anyone who would rather solve a problem with freedom than with a statute, exit should win the argument outright.

Here the careful critic raises the objection that has to be answered, because it has history behind it. Will the dividend not simply subsidize bad employers? If people draw income from another source, the worry goes, bosses will pay less, knowing the floor is there to cover the difference, and the dividend becomes a quiet handout to every cheap employer in the country. There is a real cautionary tale here, the Speenhamland system in England in the 1790s, where parishes topped up low wages from public funds and, the standard account holds, let employers drive wages toward nothing while the public made up the gap.

The objection is right about the wrong policy. A subsidy that tops up wages does suppress them, for the reason given, which is why the distinction matters so much. But look at what makes Speenhamland and its modern cousins push wages down. They are tied to work and to need. The money arrives only if you are employed, or only if you are poor enough, so the employer can capture it by paying less, and the worker cannot threaten to walk, because the top-up disappears the moment he does.

An unconditional dividend is the opposite animal in the one way that counts. You keep it whether you work or not. It is not a top-up to your wage but a floor under your feet that does not move when you stand up. Which means it does not lower the price an employer must pay to hire you. It raises it, because now you will take the job only if it beats doing nothing and keeping the floor, and that reservation, the wage below which you will simply not bother, is the lever workers at the bottom have never had. Conditional money tied to work subsidizes the employer. Unconditional money owed to the person gives the worker standing to refuse. They look alike on a pay stub and they run in opposite directions.

And this is the piece the Voluntary Settlement was missing, the question The Cap raised at its close and deliberately left open. That series made the case for the good employer who binds himself to a floor, a share, and a ceiling, not because the law compels him but because he has decided what kind of place his enterprise will be. The honest hole in it was the worker whose employer will never decide any such thing, the one stuck with a boss who treats the settlement as a sucker’s game. What protects him? Nothing, inside the firm.

The answer was always going to come from outside it, and this is where it comes from. Give every worker a floor and the power to walk, and the good employer stops being a martyr and becomes a competitor with an edge. The firms that offer the settlement win the people. The firms that grind their workers lose them, to better firms or to the floor itself, and have to change or wither. The settlement needs no law to spread, and it needs no owners to be saints. It needs workers who can leave, which is what the dividend gives them.

The left’s sharpest charge against the whole voluntary project, that voluntary protects no one, holds right up until the moment everyone can walk away. After that, voluntary protects everyone, because the power to refuse is doing the work the law would otherwise have to do, and doing it without a single new rule.

So the dividend’s real gift is not the money. It is the word the money lets you say. No. No to the job that is beneath you, or the boss who abuses you, or the town that has nothing left. Every one of those refusals is freedom in its most concrete form, and almost none of them are available to a person with no floor to stand on. We talk about liberty in grand abstractions, but for most people most of the time it comes down to something small and hard: whether you can afford to say no. The dividend is the price of that word, paid out of a commons you already own. What it costs, and whether the country can carry it, is the fight the next essays take up. That it would make free people of a great many who are currently only pretending to be is reason enough to have the fight.