Saturday, November 29, 2014

Time Equity Versus Monetary Equity

What do I mean by time equity? Consider Investopedia's first definition of equity: "A stock or any other security representing an ownership interest." Individuals can generally utilize personal time as equity, insofar as they remain gainfully employed. Whereas once, individuals were also able to parlay time equity value within family, when families were more directly involved in economic production roles. Presently however, familial time equity options are most often limited either to the raising of children, or possibly assisting older family members.

In many respects, family arrangements in developed nations are primarily parallel (and yet somewhat separate) consumer roles, rather than producing relationships or other direct relation to resource use. (Indeed, this pattern was already in its early stages when I was young.) As a result, even when family members strongly desire to substitute time equity at home for monetary responsibility, doing so may not be a realistic option. All too often, the attempt to do so strains family relationships, which have become almost completely dependent on the money circumstance of all involved.

This has considerable bearing as to why low income family formation is so difficult, when time equity cannot substitute for monetary forms of equity. For instance, in the Great Depression, family formation was not as negatively affected as in the Great Recession, in that multiple means of time equity were still possible beyond employment. Time equity availability also played a role in the ability of the growth trajectory to return to normal after the Great Depression - something which remains in doubt in the present.

So long as economies are capable of sustained growth, financial equity often serves as a proxy for time equity, because it makes so many time coordination processes unnecessary. In these instances, insurance strategies and other forms of monetary pooling, work reasonably well. But when growth slows down and demographics begin to work against investment models, money alone cannot always cover for an overall lack of time equity options.

The twentieth century saw many earlier forms of time equity displaced, as production moved towards more centralized models. While these centralization processes worked relatively well for standard production, their application to services formations turns out to have been misguided. Once again, time equity needs to become a real component of wealth creation - particularly in the services marketplace -  in order for growth to continue.

During one's prime, it is often easy to coordinate primary time use decisions with others in the traditional workplace. Indeed, today's workplace can still proxy as time equity replacement, so long as one has full use of both physical and mental capacity. Just the same: in recent decades, individuals have needed to rely more and more on monetary equity outside of one's own personal circumstance. However, as an increasing portion of the population needs to do the same, Social Security and other investment alternatives start to appear as though Ponzi schemes, because everyone was relying on the same time use replacement strategies.

What's more, individual needs vary for retirement to such a degree that one size fits all measures don't work well, as Frances Woolley notes in a recent post regarding mandatory retirement. When investments exist in common pools which the beneficiaries aren't expected to personally manage, this is one of the more significant problems which can result.

Think of the interrelated areas of life, in which we are personally expected to contribute. How difficult this task can be! Unless - of course - one is able to make money "do the job" for what is often a lack of time equity - whether one's time is valued by others or not. While higher income levels can meet societal obligations through monetary equity, other individuals need a stronger ownership interest in the use of their time, to remedy otherwise impossible societal obligations. The fact that so much of the services marketplace developed without time equity, is what makes so many services feel inadequate and incomplete.

To be sure, time equity is often not needed for the kinds of production which provide more efficient means for resource use. However there is no substitute for time equity, when it comes to many of life's experiences and intellectual challenges. This is where the production reform which includes time equity, could do the most good.

No comments:

Post a Comment