I think a good case can be made that a UBI [universal basic income] would be more helpful to the disadvantaged than the patchwork of frequently intrusive, infantilizing, bureaucratic, and wasteful means-tested programs that presently constitutes the American social safety net. So if I could wave a magic wand and replace the policy status quo with a UBI, I would do so. That said, my reading of the available evidence convinces me that a social policy that channels benefits through work and thereby encourages paid employment has important advantages over a UBI in helping the disadvantaged to live full, happy, productive, and rewarding lives.
…a UBI cannot be recommended as sound social policy. The great challenge at present is to arrest and reverse the slide of less skilled Americans into a permanent underclass – even as automation and globalization continue to marginalize the role and value of low-skill work. But as the celebrated negative income tax experiments of the late 1960s and early 1970s made clear, unconditional income support reduces labor supply. Perhaps not dramatically, but still the impact is going in the wrong direction. By contrast, wage subsidies in the form of graduated payments to employers of low-skill workers can increase the attractiveness of work and boost labor force participation.
My remarks:
1. I think it is important to distinguish adding a universal benefit to the existing means-tested programs from using it to replace existing means-tested programs. I doubt that the negative income tax experiments give us any idea of how the latter would work, particularly today. (a) I don’t think that the experiments replaced existing programs and (b) today’s programs are much more generous than they were when the experiments were done.
2. Accordingly, I hope Brink would support an effort to wave the magic wand and replace current programs with a universal flexible benefit.
3. Why have wage subsidies on the one hand and payroll taxes on the other? Why not instead introduce a graduated payroll tax, which is lower for low-wage workers, possibly even zero below a certain income level?
4. There are going to be people who simply cannot work. You don’t want to force them to live on minimal resources just because you are afraid of giving other people the incentive to loaf. My solution would be to have the universal flexible benefit, which would come from taxpayers at the national level, provide minimal resources. However, state and local governments as well as charities might supplement these benefits on the basis of needs.
“There are going to be people who simply cannot work.”
I am not sure I agree with this. On my campus a few months ago I saw a woman with pretty severe disabilities using a push-broom to pick up grit on entryway carpet runners. She was in an electric wheelchair and it took her a LONG time to maneuver the broom, move it back and forth a bit, move her chair, repeat. In the time it took me to eat lunch (30 minutes?) she was able to “clean” two carpets.
Her productivity may have been 10% of an “able” person, but she was working. I have no details on how she was hired or anything like that, but I admired the fact that she wanted to do something and someone gave her the opportunity to do it (I would assume the state: large public university).
I have a hard time imagining a disability severe enough to prevent ANY kind of work, under the assumption that a reverse income tax would make the cost to the hiring company almost zero.
It may reduce supply but that doesn’t mean it is undesirable. If some prefer to stay home and take care of children or volunteer that is still production even if not market production. Too many fetishize work as the only value.
Such a program can be procrustean though as needs can vary considerably and I am doubtful state, local, and charities are up to it though it could be combined with partial designated block grants.
Would I better off under your Universal Benefit? I currently get $720 Dole, $180 SNAP Food Stamps, $40 Utility Compensation, $10 Obamaphone, $400 Rent Subsidy, and $500 Medicaid, for a total of $1,850/month.
It should be clear that The Great Government Charity is a vote buying scheme. If you say no, then why is it limited to the geographic US? If your concern is to soften the impact of poverty, then why is it a concern only for the poverty of Americans? Why not everyone else in the world? Well, they don’t vote.
The Great Government Charity is not a noble idea. It is supported by force. People go to jail if they don’t hand over the determined amounts, enough people to convince the others not to resist. My Idea of charity does not include pointing a gun at people to encourage their contributions, then taking credit for doing good.
Legitimate State Violence
The city council is asking for donations to build a new park.
Mike: Why are you pointing a gun at me?
Fred: I thought it would put you in a more generous mood.
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09/24/10 – National Review by Kevin D. Williamson [edited]
It is reasonable to shove a gun in someone’s face to stop murder, rape, or robbery. It is entirely unreasonable to extort money to study monkeys high on cocaine. It is illegitimate for government to use force or the threat of force for projects that are not inherently public in character.
This useful distinction is not a figure of speech. A project is a legitimate concern of the state only if you are willing to haul off someone at gunpoint because of it.
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10/23/10 – WiselyManaged – The right way to think about taxes
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[edited] Pick a friend or neighbor who you like. Call him Steve. Pick a government provided service.
Would you put Steve in jail if he refused to help pay for that service? That is the proper way to view taxes and government spending, because that is precisely how things function. Do you see why this works only if you like Steve?
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The inchoate ideas and intuitions about the social and psychological importance of keeping people engaged in some vocation need to be fleshed out into more tangible models if they are going to form the basis or weigh in our judgments about policy. We need to be able to see the uncomfortable dark matter of our impression of the human condition that are invisibly lurking in the background but around which these conversations seem to orbit.
On the one hand, there is the idea that this is all charity and should be going as much as possible to the innocent, deserving poor who are unlucky or disabled, but not to able folks who got themselves into trouble, or are choosing subsidized subsistence over labor. Charles Murray argued that telling the difference consumes more time, effort, and resources than can be justified. But that is just what ‘means testing’ means too – that we are going to use a pretty bad proxy of wealth and income to avoid the administrative burden of having to identify how genuinely ‘deserving’ someone is. Age is a pretty bad proxy for maturity too – for driving, drinking, voting, etc. – but since we don’t want to get into the business of measuring maturity (as hard to define as ‘deserving’, perhaps), we pick some arbitrary line.
Ok, but what is our model for how work-ethic becomes corrupted? How devilish social pathologies emerge from idle hands? Why is it so important to maximize the incentive for work and achieve something like ‘mandatory full employment’? I don’t see a lot of arguments on the basis of pure economic productivity.
Instead I see two arguments. One is anti-libertarian paternalistic wisdom: many undirected individuals left to their own devices will make bad, time-inconsistent choices that tend in the direction of the vices and that will put them in a regretful position later on. Lindsey seems to be echoing Murray here, and says we shouldn’t encourage them. From this argument, we should reduce the comfort level of living on the dole to the absolute minimum, but tax whatever other income they receive at a very low effective rate.
The second argument is the social pathology one, which says that we all suffer when lots of folks become untethered from the world of regular employment and traditional bourgeois virtues and practices, and especially those people who live in communities with more than a critical mass of such people. In other words their behavior creates a kind of social externality, and the question is which side in the Coasian bargaining should pay for the mitigation of social pollution? That would seem to be the rest of functional society, since it has the deep pockets.
The second argument points in the direction of a strongly negative income tax like EITC. If the labor market cannot provide the compensation needed to attract and retain our potentially problematic population, then we can ‘plus up’ the wages above what the employer finds it economical to pay until the monetary and social status rewards of working are sufficiently higher than subsidized subsistence to achieve full-ish employment.
But now we’re in the mode of market-mechanisms for the purpose of central planning. We want everyone to be taken care of, so we have a social welfare program. But we also want all people to work as much as they can. So we need the gap between the minimum wage and ‘be taken care of’ to be high enough to encourage all people that can to enter the workforce, while at the same time providing enough jobs at that wage to employ everyone that can work. But there’s no guarantee the market will create such a fortuitous gap on its own unless the capital to labor ratio is very high. So the government must supplement the full-employment market wages on the demand side with whatever it takes to attract every able body from the supply side.
Obviously, we are not achieving anything like that result at present, so I don’t want to make even minor improvement the enemy of the perfect.
But it seems that the answer is to do both. And if you do both, then one should analyze how immigration – in all the various policy regimes – affects the cost of the program. My guess is that open or low-skill immigration would greatly expand the cost of the program or undermine its ability to achieve the desired effect, but that selective, high-skill immigration would have zero impact on it.
This should be called the “Please go away and die quietly or at least stop bothering me minimum monthly payment.”
There are going to be people who simply cannot work.
We need to be able to see the uncomfortable dark matter of our impression of the human condition that are invisibly lurking in the background but around which these conversations seem to orbit.
As the machine/technology age advances, more and more of us will be those “who cannot work”. At some point we need to recognize this, and examine the aesthetics of who and how many. As it always has been.
Why have wage subsidies on the one hand and payroll taxes on the other?
Because then you control the flow of resources and can divert some for your own benefit and to protect the power structure you’ve created. If you’re actually asking why, that’s the answer. If you’re just pointing out that the existing system is horribly inefficient and makes no sense, well, why bother?
It just seems so pointless to me that observed inefficiencies in democratic institutions are still a topic of conversation 60 years after public choice economics. It’s the expected result, and it’s demonstrably extremely robust against being pointed out. Pointing it out seems about as relevant to stopping it as pointing out the value of private property to thieves in a dark alley pointing a firearm at you and demanding you hand over your wallet and Rolex.
If you’re a moral guy who loves private property and hates fistfights, a sermon may be the natural response. But it isn’t going to work. And if you don’t like getting robbed, you need to find a better defense. Same goes for inefficient institutions.
Think about this from the employer’s point of view. Money from the government always comes with strings attached. Any program that features “wage subsidies in the form of graduated payments to employers” is destined to attract intense political lobbying. Also, public employee unions will expand their reach. The result will be complicated and difficult regulation. (More onerous even than existing employment law.)
Any such wage subsidy program will therefore have a much smaller benefit to employment levels than one would predict by looking merely at labor supply price elasticities.