Comment by Misdicorl
2 years ago
My personal position is to abolish the minimum wage and update the tax scale with negative tax rates that support a reasonable quality of life at all income levels. The market will find its own balance for what a true minimum wage is in that environment (and not have weird perverse incentives like you state).
Yes, this is UBI. But phrased as a tax cut makes it politically viable (at least in the US).
I would be interested to see this modeled.
One of the classic unintended consequences of social welfare is making someone at the bottom unwilling to work. We saw this during the pandemic when people in formerly low-wage jobs got a lot of cash assistance and stopped being interested in low-wage jobs. (Remember all the "help wanted" signs and early closing hours at local restaurants?)
I'm curious to see an example scale that would continue to incentivize social behavior the whole way up the chain - avoiding the "oh I don't want to make $100 more dollars because I'm in a sweet spot now and bad things happen at $99."
You can certainly argue that many of the current disincentives are bugs in the bureaucracy. I'd like to see a proposal for the UBI tax scale you describe that doesn't have any bugs (that is, bumps in the distribution where people are afraid to reach for state C from state A, because the intermediary state B is worse than A).
> One of the classic unintended consequences of social welfare is making someone at the bottom unwilling to work. We saw this during the pandemic when people in formerly low-wage jobs got a lot of cash assistance and stopped being interested in low-wage jobs. (Remember all the "help wanted" signs and early closing hours at local restaurants?)
I remember this, the cash assistance gave people back their time to focus on starting their own businesses, pursuing self-education, taking care of their kids, etc. It was fully apparent to me that these low-wage jobs effectively trapped people by sucking up all the time they had for self-improvement.
Very much agreed that there should be no cliffs. Every dollar earned should at minimum increase your usable cash flow by at least X amount no matter where you are in the income distribution and other tax incentive phase space
> We saw this during the pandemic when people in formerly low-wage jobs got a lot of cash assistance and stopped being interested in low-wage jobs. (Remember all the "help wanted" signs and early closing hours at local restaurants?)
Unwilling to work or temporarily not desperate to stay alive? How many receiving assistance were still working, just doing it less?
The only studies on outcomes I recall is that a lot of kids were no longer experiencing food insecurity.
I can’t imagine they were very compelling studies if the only changes they could come up with was “some kids were less hungry”
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That "classic unintended consequence" was specifically tested many times in UBI context, and study after study doesn't find it in any noticeable amount.
In any case, given how badly broken the current system is, surely it's at least worth a try?
We should not make it more than $1000 per month. Very few would choose to be poor. It would put a lot of pressure on companies to pay decent wages, though.
$1000/month is $12,000/year. Thats far far below poverty levels. It needs to be enough that people can choose to supplement in order to engage with luxury consumption. If people are forced to supplement to just survive, then we need to maintain the minimum wage and a whole host of other weird baggage.
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It is important that this is based on all income levels equally. Yes, some will pay back that money in taxes, but the important part is keeping the amount equal. It would be even more effective if you gave them a monthly check (even if you would eventually take it all back via a consumption tax on people earning more). A ~25% national sales tax should be sufficient to cover a UBI program. (We should still have an income tax, though.) Furthermore, a consumption tax would decrease unnecessary spending since you can target only new products and not used products to encourage people to reduce, reuse, and recycle.
If UBI is encoded as a negative tax rate at low income levels, it no longer really makes sense to talk about it as applying to all income levels equally. It naturally gets distributed as
1) A check (issued by Social Security service?) if income is less than X
2) Less of your paycheck being withheld if your income is greater than X (or more if you're significantly above X, depending on how this gets funded)
We have a tax rate with negative tax rates at the low end of the scale. For sketchy social policy/political tenability reasons it doubles as a child subsidy and phases in up to a nominal amount of preexisting so-called earned income, but functionally that's what the earned income tax credit is.
Expansion of the EITC program is fairly well-regarded among economists and has been historically quite popular! We should do more of it!
True. It would be nice to decouple it from children and expand its scope of economic impact dramatically.