Jump to content
House Price Crash Forum
Sign in to follow this  
wonderpup

Should Flexible Workers Have Flexible Debt?

Recommended Posts

Since there seems to be this consensus among the Elite and their 'economic advisors' that job insecurity is a good thing in that it creates a more flexible workforce who can be hired and fired more easily or employed on zero hours contracts or other such precarious arrangements then why not take this thing to the next level and introduce flexible debt?

So- imagine you are working for some outfit that sells mobile phones- they employ you on a zero hours type arrangement so you never know exactly what you will earn in a given month.

As luck would have it these generous people also run a scheme that allows employees such as yourself to purchase a phone contract-from them- at a small discount- which you have chosen to do.

Ok- so you are both an employee of this company and also a customer, with a contract to pay them a fixed amount every month.

But- suppose one month your hours are so low that you cannot afford to pay that fixed amount at the end of the month- is this likely to be problem?

Well it might, for this very interesting reason- while your employer is very keen on the idea of flexible wages, he is far less keen on the idea of flexible repayment from those wages.

But this is clearly irrational- since he himself has created a situation in which you cannot know in advance what your monthly income will be, it makes no sense at all for him to expect that you be able to guarantee to make a fixed monthly payment each and every month- but this is exactly what he does expect.

Ok- this is a slightly unusual case in that you both work for and are a customer of the same company, but I have used this case to illustrate the basic irrationality of wanting both flexible wages and regular monthly repayments- it seems to me you can have one or the other but cannot logically demand both.

If as a society we wish to argue that the only way that the country can compete internationally is to become ever more 'flexible' in terms of employment then we will sooner or later have to move to a system of flexible debt in which repayments are linked to monthly incomes, and if some months the income is too low then that demand for a debt repayment is non valid for that month and must be deferred.

Of course many companies will object to this arrangement- they might argue, for example, that such an arrangement would create too much uncertainty in their lives- but this need not be a problem since in many cases their own employees will have experience of dealing with this kind of uncertainty-being on zero hours contracts and the like- so they will be on hand to help their employers through this new world of flexible debt repayments by their customers.

Share this post


Link to post
Share on other sites

Student loans are essentially flexible debt. Payments are only collected when the debtor's income rises over a certain level.

Share this post


Link to post
Share on other sites

Since there seems to be this consensus among the Elite and their 'economic advisors' that job insecurity is a good thing in that it creates a more flexible workforce who can be hired and fired more easily or employed on zero hours contracts or other such precarious arrangements then why not take this thing to the next level and introduce flexible debt?

Will you lend me some money?

Share this post


Link to post
Share on other sites

Student loans are essentially flexible debt. Payments are only collected when the debtor's income rises over a certain level.

And IO mortgages that were created to rescue the over-indebted. Debts where there is an implicit acceptance of non-repayment but a lifetime of servitude. This does seem to be gaining traction. It offers a bleak future, unless you have parents who own a house and are in poor health.

Share this post


Link to post
Share on other sites

Get a PAYG sim.

Seriously, it is up to each individual if they want to enter into any contract to sell their labour for money, or promise money for goods or services.

If there is a problem with people feeling coerced into signing unfair contracts, remove the coercion, don't try and balance it by coercing the other party.

Share this post


Link to post
Share on other sites

Sounds great! Flexible work = no money, flexible debt so when you have money = no money.

Why not just kill yourself, or join the circus, have no money, no debt, but a life?

Share this post


Link to post
Share on other sites

An excellent and fascinating question. In essence you are asking who pays when income falls or debt otherwise becomes unrepayable - debtor &/or creditor and how should this be accounted for in the modern digital economy.

You could expand the question to encompass countries - Brady Bond type solutions/Varoufakis with his growth bonds; homeowners with mortgage contracts and households with unsecured debt and so on.

Personally I believe there is much to be said for replacing formal "nominal" debt contracts with some form of flexible nominal debt which adjusts automatically relating to income, economic growth and so on rather than the present system which tends to enforce the rights of creditors via a fixed nominal debt which can only be adjusted via some formal mechanism of default.

"Sticky debt" if you will.

Im afraid I shant be reading the responses cause they will almost certainly fall in the category of "bring back debtors prisons" to the "boo hoo debt victims" and all the rest of it which becomes tedious. But good on you for posing a fundamentally excellent question. Bravo!

Share this post


Link to post
Share on other sites

Sounds like a recipe for indefinite indentured servitude to me.

If creditors have a flexible claim on your income as long as you're alive then there's effectively no limit to the amount of debt they can assign a person - it just becomes a game of competing with other lenders for the highest percentage of a person's available income.

Would bankruptcy exist in this system? After all the debtor may recover and 'flexible' payments will eventually resume.

Mortgages would become enormous and the suicide rate would go through the roof.

Share this post


Link to post
Share on other sites

There are many of these fatuous neo-conservative terms. 'Flexible working', 'trickle down', 'Quantitative easing', 'derivatives', executive pay 'markets'.

You can tell they are criminal and phony because only ever work in the direction of funneling wealth, money and assets towards the 1%. They are basically all devices to drive the 99% towards feudal servitude.

This is why 'flexible workers' can't decide to decline a work shift or why householders can't stop their utility standing charges when they go on holiday.

Share this post


Link to post
Share on other sites

There are many of these fatuous neo-conservative terms. 'Flexible working', 'trickle down', 'Quantitative easing', 'derivatives', executive pay 'markets'.

You can tell they are criminal and phony because only ever work in the direction of funneling wealth, money and assets towards the 1%. They are basically all devices to drive the 99% towards feudal servitude.

This is why 'flexible workers' can't decide to decline a work shift or why householders can't stop their utility standing charges when they go on holiday.

Quantitative easing I agree is just a tax on the masses that benefits the elite. The other things you mentioned 'flexible working', 'trickle down', 'derivatives' and 'markets' not so much. I'll take them one at a time.

'flexible working' if flexible working is so bad, why don't all the 'flexible workers' quit? No one is holding a gun to their heads forcing to work under such terms. Any worker, flexible or not can decline a work shift. I've quit numerous jobs during my lifetime. Glad I did too, otherwise I'd still be breaking up fights at a bar for 30 quid a night.

'trickle down' is a strange one. The terminology used hides it's true nature. When economies grow and societies become wealthy, the rich tend to benefit just as the poor do. Can you name a case of a society in which the poor became middle class and the wealthiest stagnated?

'derivatives' in principle, derivatives are a good way to reduce the costs and risks within the world economy in such a way that everyone benefits. In practice they don't work as people expect (read Nassim Taleb). By the way, derivatives when they go wrong typically wipe out members of the very wealthiest in society. They are a great leveler. Read up about 'long term capital management'

'markets' or specifically labour markets as you mentioned. Unless you live in the wilderness as a hunter gatherer, you need markets to survive. In the sense that you would quickly die if you didn't have access to them. There is a market for highly paid executive labour yes, but so what? Are you well paid? What is the definition for well paid? Have you ever had a job? Have you ever earned more than someone else?

Share this post


Link to post
Share on other sites

Can you have 'flexible working' without working tax credits. I don't think so. That's why they don't quit.

Trickle down, you don't get rich by allowing your money to trickle down! 10,000 people spending £100,000 will spend it 'better' (in every way) than 1 person buying a car.

Derivatives, that buns in the oven... Ping! We can manage risk, by stuffing it in someone else's portfolio.

Labour markets to the rich are just sheep in a pen... move one over here.... another over there. They have never been in the pen. The pen is for sheep!

Baaaahhh!

Share this post


Link to post
Share on other sites

There is nothing wrong with the concept.

Unfortunately, the terms of the contract are likely to lead to high interest rates. Flexibility costs.

Share this post


Link to post
Share on other sites

Sounds like a recipe for indefinite indentured servitude to me.

If creditors have a flexible claim on your income as long as you're alive then there's effectively no limit to the amount of debt they can assign a person - it just becomes a game of competing with other lenders for the highest percentage of a person's available income.

Would bankruptcy exist in this system? After all the debtor may recover and 'flexible' payments will eventually resume.

Mortgages would become enormous and the suicide rate would go through the roof.

It wouldn't have to be "indefinite indentured servitude" if you put a time limit on it e.g. after 10 years the debt is wiped out.

You are right that there would have to be some way of resolving competing lender claims if a person had more than one flexible loan outstanding.

Share this post


Link to post
Share on other sites

So- imagine you are working for some outfit that sells mobile phones- they employ you on a zero hours type arrangement so you never know exactly what you will earn in a given month.

As luck would have it these generous people also run a scheme that allows employees such as yourself to purchase a phone contract-from them- at a small discount- which you have chosen to do.

Ok- so you are both an employee of this company and also a customer, with a contract to pay them a fixed amount every month.

Get a PAYG sim.

Seriously, it is up to each individual if they want to enter into any contract to sell their labour for money, or promise money for goods or services.

If there is a problem with people feeling coerced into signing unfair contracts, remove the coercion, don't try and balance it by coercing the other party.

Exactly what we have + 1 on GiffGaff, and another the company not only paid for the smart phone, but covers the monthly bill, which comes when you study and work yourself up to a senior position where you skillset is in demand... and less reliant on zero-hours...in a competitive non-socialist market.

There's plenty of people who have large mortgages who may have a negative change in income circumstances. This flexible repayment softness, for those who've chosen to taken out mortgages, and in more recent decades, massively outbidding others,

You might as well be championing for house prices to double.

RK wants 100% mortgages + he's now favouring this softy approach for those who can't pay.

In a sane banking system, there would be 100% mortgages with no subsidy from the capital poor to the capital rich, and the risk would be borne by the lender rather than the borrower.

Deposits are an incredibly stupid idea. All they do is further encourage inequality and prevent the adequate supply of much needed new homes, while making them more expensive. Moreover it has led to the govt. subsidising builders, and increasing house prices due to the high LTV anomaly that the CB itself has created.

So long as a borrower is able to service his mortgage, any falls in house prices, during a recession for instance, should not need to be mitigated by the equity held by the bank. The bank (and the central bank) ought to find a much more equitable solution for reporting long term loans on their b/sheets.

Current pro-cyclical system is insane and clearly doesn't work.

You might as well just not be a saver because the HPIers and Excuse-Givers just want to take savers/lenders money, have a fun-spree spending on stuff that some savers don't allow themselves to have, outbid others for houses, then tell the saver/lender side to stuff it, "swallow the loss"... "here's 2pence a month"... "My house gone up another £30K last year woo".

Share this post


Link to post
Share on other sites

Sounds like a recipe for indefinite indentured servitude to me.

If creditors have a flexible claim on your income as long as you're alive then there's effectively no limit to the amount of debt they can assign a person - it just becomes a game of competing with other lenders for the highest percentage of a person's available income.

Would bankruptcy exist in this system? After all the debtor may recover and 'flexible' payments will eventually resume.

Mortgages would become enormous and the suicide rate would go through the roof.

Correct. Lets look to history - where people sold themselves and their children into fu cking slavery rather than remain free and poor/hungry. If you introduce anything like flexible debt, we will accelerate even faster down the road to serfdom.

Share this post


Link to post
Share on other sites

Flexible = variable.

These people should have very low debt otherwise they'll get overwhelmed with non-payment penalties and high IRs.

Share this post


Link to post
Share on other sites

.... why not take this thing to the next level and introduce flexible debt?

Because flexible debt has less value to the issuer. The debtor may deliberately put themselves into a position where they can avoid paying.

I think one issue to consider is risk. In your example, the employee is taking all the risk, the company is avoiding it as much as possible. The company has lawyers to back it up, the consumer is weak.

Personally, I don't think contracts (mobiles or otherwise) should be longer than a page unless you are legally trained. People really dont understand what they are signing up to.

I've heard financial lawyers say credit card contracts are impossible to understand.

Share this post


Link to post
Share on other sites

why should any person have any debt ?

It is becoming an increasingly false commitment, one that cannot be repaid, one that cannot be sustained without overt govt./central bank manipulation. Who gains from the increased levels of debt to spruce up the housing market - those that write it and create it, the banks in particular given an income stream out of nothing, for doing nothing constructive. The more debt they write the more commission and income stream they earn, to the point where they care not one jot of the consequences. If the loans they write become too toxic they attempt to slice and dice them and shove them under someone else's ****. The central bank encourange and perpetuate this by manipulating the yield curve of any investment they can either directly or indirectly - this has the effect for crowding out the market and making the dodgiest asset classes the only ones bearing a positive rate of real interest. Double jeopardy for the investor / saver - screwed either way.

Share this post


Link to post
Share on other sites

Conflating some of the points above.......as long as you are a debtor you are at risk (of not being able to pay what you owe). On the other hand if you have some savings (even getting a very poor rate of return) then you are not the one taking the risks and can tell your employer where to go if you don't like his s***** job. Your savings will tide you over for a few weeks/months.

Who holds the risk is becoming more important because of the vast amounts of money involved especially when you start thinking about where you live and whether to buy/rent etc.

Share this post


Link to post
Share on other sites

Conflating some of the points above.......as long as you are a debtor you are at risk (of not being able to pay what you owe). On the other hand if you have some savings (even getting a very poor rate of return) then you are not the one taking the risks and can tell your employer where to go if you don't like his s***** job. Your savings will tide you over for a few weeks/months.

Who holds the risk is becoming more important because of the vast amounts of money involved especially when you start thinking about where you live and whether to buy/rent etc.

Not much of a fallback if you have never been able to out save those who are inflating your costs, or are born of an age where you are never likely to unless passed a big fortune to start with. Servitude starts early nowadays before you are even able to gain much above a min wage job by having to pay for a shiny new job certificate in the form of a degree - all funded of course by a state and bank backed loan. Not just any old loan but one that will hang around your neck no matter how dire your circirumstances, a specially formulated one for the benefit fo the loan arrangers.

Share this post


Link to post
Share on other sites

You take the debt, you pay the bill. Simples.

Lenders shouldn't be lending to people who cannot repay. I'm assuming these companies employ "experts" to asses the risk profile of customers? If not, then tough. If yes, they need to take the consequences of a loan going bad. ie. they don't get their money back.

Share this post


Link to post
Share on other sites

Not much of a fallback if you have never been able to out save those who are inflating your costs, or are born of an age where you are never likely to unless passed a big fortune to start with. Servitude starts early nowadays before you are even able to gain much above a min wage job by having to pay for a shiny new job certificate in the form of a degree - all funded of course by a state and bank backed loan. Not just any old loan but one that will hang around your neck no matter how dire your circirumstances, a specially formulated one for the benefit fo the loan arrangers.

Student Loan Debt.

A debt that costs more for the govt to manage over it's life than the previous system where tuition fees and grants were administered by govt. Crazy.

Next election, could we see a party promising to clear all student debts and return to the Grant system with tuition fees covered for most if not all - financed by heavier tax on BTL and rich boomers ?

That would be quite a debate on the hustings. I can dream . . . .

Share this post


Link to post
Share on other sites

Seriously, it is up to each individual if they want to enter into any contract to sell their labour for money, or promise money for goods or services.

If there is a problem with people feeling coerced into signing unfair contracts, remove the coercion, don't try and balance it by coercing the other party.

The problem is not the unfairness of the contracts but the logical absurdity of wanting flexible wages but non flexible debt contracts- given the fact that those debts must be paid from those wages.

The issue is that our debt contracts are predicated on an increasingly outdated world view in which the employee turns up from 9 to 5 monday to friday and in return is paid a predictable and regular amount each month. This is no longer the reality for an increasing number of people.

The truth is that our entire economy is based on the idea that incomes are in general fairly predictable- this is what makes renting, mortgages, car credit and the entire 'consumer society' a viable proposition- the core foundation of our economy is the concept that debt can be repaid and obligations met in a predictable and reliable fashion.

So the concept of the 'zero hours' contract is at heart a deeply radical thing- it strikes at the very foundation of our credit based system- why? because you cannot have a system based on credit driven consumption if you don't have reliable debt slaves capable of servicing that debt.

So this vision of the future in which we are all operating as atomized agents flitting from job to job with little or no security of either employment or income might seem a neo liberals wet dream- but should that situation ever come to pass it would represent a serious threat to the stability of the system- after all you can't really have debt and credit in a world where the majority of the population would fail the most basic test of creditworthiness- access to a reliable stream of income.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   44 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.