By Kevin D. Williamson
Thursday, February 28, 2019
Uber and Lyft, the two ride-hailing giants, both are
planning initial public offerings of their stock. And both of them are doing
something interesting: offering their most valuable drivers cash bonuses that
can be exchanged for equity at the IPO price — giving them the opportunity to
buy in on the same terms as the big Wall Street players. This is an excellent
idea, and one that should be encouraged. As the Wall Street Journal reports:
It is typically hard for an
ordinary investor to buy a company’s stock at its IPO price before it begins
trading on an exchange, so this move would give drivers access they likely
wouldn’t have had otherwise.
Uber is working out the details of
a program expected to be valued in the hundreds of millions of dollars that
would give a significant portion of its 3 million active drivers and couriers
globally either a cash bonus or the option to use that cash to purchase shares
at the IPO price, people familiar with the matter said. These awards will be
tiered based on a sliding scale related to the driver’s length of service and
number of trips or deliveries.
Democrats howled with derision at George W. Bush’s
program for an “ownership society,” a set of policies that would encourage
those with lower and middle incomes to invest in things like company shares and
other assets and encourage employers to include such assets in their
compensation packages. “Sweat equity” compensation for non-executive employees
once was, famously, a part of the high-tech startup model: Microsoft’s IPO
created three billionaires, but it also created about 12,000 millionaires, many
of them mid-level employees in less specialized positions who had worked for
the company for years while accepting equity in lieu of higher cash salaries.
(Question: Do we want to raise the capital-gains tax on
$50,000-a-year administrative assistants and customer-service representatives
who are cashing in 20 years’ investment, possibly making them millionaires?)
Much of our thinking about improving the real standard of
living of the poor and those in or near retirement has to do with consumption, for which income is a good
proxy when saving rates are low. That’s important and useful, especially when it
comes to things like basic nutrition for children, education, and health care.
(Consumption isn’t just flat-screen
televisions and lottery tickets.) Those things represent relatively
straightforward problems: We give poor people money to buy what they need or,
to the extent that we do not trust them to make their own decisions with cash,
give them vouchers (food stamps, etc.) or direct their consumption in other
ways.
Higher income changes things today; higher wealth can
change things for a lifetime, or even across generations.
The problem with schemes like Cory Booker’s “baby bonds”
is that they are basically vouchers with a long timeline. Booker’s program
would not create real wealth for poor families at all but instead would create
cash equivalents that could be used against a limited number of purchases: down
payments on houses, college tuition, etc. A better program might be one that
linked the ownership of real assets to work — maybe something in approximately
the shape of a negative income tax mated to an Australian-style private
retirement account, in which additional work would produce both cash income for
current consumption and long-term wealth.
Employers could be an important part of that, provided
that we move away from the employee stock-purchase model that encourages
worker-investors to put most of their savings into the stock of their employer,
which creates a compound risk for them — putting them at risk of losing both
their savings and their income simultaneously if the company fails.
If you want to spread the wealth, then spread the wealth–
which is not the same thing as spreading the income.
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