This essay elaborates on the issue of implicit tax rates that Greg Mankiw highlighted.
I am starting to get annoyed with the left-wing bias at Medium. It is one thing for the readers of the site to lean left. Fine. But my articles seem to get much, much less play than a lot of essays that offer nothing but left-wing drivel. And hardly anyone seems to come out of the left-wing echo chamber to read what I write. I get the sense that I am mostly being presented to the (few) people who already are sympathetic. It’s somewhat demotivating.
Excellent explainer. Thank you for posting it. I would have clapped but I have a thing against joining social media platforms. I do blog. I have one follower. I get one hit a day. But the hit is from someone who mattersvery much to me, and that is all that counts. Sometimes it is audience quality, not quantity, that counts. And when you get sick of all the leftist drivel in the world, spending 10 minutes reading Taki’s Magazine can be a fine restorative.
Different sites get different audiences and Medium is simply a left-wing site. Even though in theory is for everyone. I think the only one that is 50/50 is Twitter. Twitter gets a lot of a bad rap, but I don’t think it would be bad for someone like yourself (An educated and civil person). Economist Tyler Cowen seems to like it very much. Some accounts are remarkably interesting, like @pseudoerasmus and @asymmetricinfo.
Give it a try. Medium is for tech or hard left cultural complaining.
I’d favor a low UBI, like half or a third of where the Federal poverty line is. Even in addition to budget considerations, you don’t want to fully eliminate the desire to work.
I would combine that with eliminating the Federal minimum wage and replacing it with a marginal wage subsidy that is flat for everyone but declines as wages increase. So for instance, everyone might get a 100% subsidy up to some cut-off and then for the additional wages beyond that it would be a 50% subsidy and then 25% and then eventually 0%. We would need to adjust other income taxes so that it is revenue neutral.
I would agree that it is the audience not the platform that is driving the bias that you see. The publishing landscape is so competitive that I cant see how an organization could “skew” the tone of the content against the users views. They probably figured that a left wing bias was generating more activity than a moderate one. I noticed a similar trend with nymag, Washington post. The new Yorker and the economist have been surprisingly consistent in tone and view.
Arnold,
My main concern with UBI is that, in the long run, libertarians and Republicans are unlikely to dominate the government to the exclusion of Democrats. Once the Democrats are in, your analysis is thrown out of the window and the Dems will continuously raise the UBI to achieve a “livable” level. At some point, it becomes simply income redistribution and will be a huge impediment to seeking work.
Of course this is income redistribution from the get go…..
2018: Everyone who works full time should be able to support a family!
2033: Everyone who breathes full time should be able to support a family!
One thing UBI analysis usually leaves out – but which is usually mentioned in discussions of high tax rates on high earners – is the inecentives of tax avoidance. For the rich, this is usually just in the form of hiding or not reporting normal income, and isn’t usually very relevant to questions of upward mobiling. But upward mobility, at least in terms of income, is far from infeasible for poor people loosely attached to the mainstream labor market: it just usually means a focus on other kinds of unreported earnings, either under the table, grey or black market, or other forms of crime, with trade in contraband being the most common choice. Of course, while risky, these forms of commerce are so lucrative that even a serious reduction in the effective marginal tax rate on the poor is unlikely to have much of an impact in encouraging someone to transition to conventional employment, but still, there is likely to be some marginal positive effect.
Unfortunately Safran’s analysis is purely quantitative and does not take into account the many harmful effects on society, culture, and individual psychology that an easy path to a lifestyle of welfare dependency – especially in one’s youth – usually causes. Read a Dalrymple book or three to get the very ugly picture. Life at the Bottom and also DeParle’s American Dream are required reading.
There is also the sensitive but very real issue of welfare magnetism, in the case applying internationally to immigration flows.
So, I would add one more goal, which is that regarding these social, cultural, and psychological factors, implementing a UBI should leave things no worse than they are now.
Which, like it or not, it certainly would. Like Irving Kristol pointed out, making welfare programs universal makes them extremely popular, impossible to reverse or fix if broken or unsustainable, tends to build in a constituency for making the experience of receiving it pleasant, and removes all stigma and shame – which is a useful and indispensible social technology for which there is no adequate and less-obnoxious substitute from the state. Medicare and Social Security are prime examples.
Currently, it’s pretty horrible and shameful for most normal folks with sufficient human capital to be capable of upward mobility to collect from certain parts of the welfare system, and that horribleness serves an important and underappreciated (and definitely unaccounted-for) social function, which is like a heft tax on welfare benefits, but which is felt in status and utiltiy terms, instead of ‘legible’ reported income. As one substitutes income for welfare, one’s commercial-transaction-consumption profile may be very flat, but one’s utilty is still rising steadily, which tells us that the EMTR we are measuring in terms of legible profiles is likely greatly exaggerated in terms of actual transformations into welfare, right conceived.
A UBI policy will destroy most of what remains of that social technology, in addition to causing other problems, and, as I pointed out in the previous post, probably wouldn’t even be effective in preventing the existing system from re-emerging anyway.
I wouldn’t say you’re wrong, exactly, on incentivizing tax avoidance, but I would like to point out that tax avoidance is already heavily incentivized. I don’t know that UBI would make a noticeable difference in this regard.
Handle,
The more cynical amoung us might conclude that the primary purpose of the tax system from the elite view is to roll logs on aspiring capital accumulators who might challenge elite power one day. In the same way, campaign finance reform was meant to squash outside challengers to incumbents.
Why a UBI instead of targeted programs? Targeted programs can provide more for people in need while costing taxpayers less.
In any case, Democrats will never accept a basic income which provides only $10,000 for a family of four unless it is in addition to existing programs, rather than a replacement.
This is my thought as well. Every discussion of UBI in the US should take into account current political realities.
While it’s true that Medium does tend to lean left, looking at your essay, there are some out things going on that could lead to less traffic.
First, you don’t have a header image, which means there’s no thumbnail image when people are browsing the site. That will lead to fewer clicks, as the visual makes it pop out in a list.
Second, since Medium launched its optional paywall, the Medium ranking algorithms give much more weight to articles placed behind that paywall. You’re posting your essay publicly–instead of changing the setting to “earn money from this post,” which moves it behind the paywall–and so Medium isn’t promoting it to readers as much. Medium’s business model depends on people becoming paid members, so it naturally wants to highlight paid content.
Medicare-for-All, is somewhat similar to UBI, and would be a good experimental first step towards a UBI. If the US could eliminate the tax exemption for health benefits and all the disortions that creates, consolidate the plethora of costly and redundant federal health insurance programs, and actually provide health insurance that provides meaningful access to quality health care (unlike Medicaid), at a reaonable cost, without destroying the private health insurance market, it would be much easier to know how much a reasonable UBI should be.
One can safely bet against this ever happening even with the current 70% support Medicare-for-All.
Sanders’ Medicare-for-All bill is falsely labelled because it would leave the Veterans Health Administration intact. As I understand it, this is because Sanders’ ultimate goal is to grow the veterans health system into a direct health care delivery system in which all health care is delivered exclusively by federal employees and that would supplant all other health care delivery outlets.
The truism is that it is always easier to imagine a better state of affairs than it is to make any sort of marginal improvement. With the metastasized condition of the federal government, it may be likely that it has to be left alone to destroy itself before we can take advantage of any real opportunity for improvement. Given the candidates running in the mid-terms, such an opportunity may arrive soon.
It probably would not be “helpful” in advancing the objectives of UBI, but it would certainly be revealing to consider the creation, allocations and imposition of obligations necessarily involved in all the nuances of each of the proposals.
Is there some great underlying Social (as in “Social Contract”) obligation, universally recognized and accepted – and we proceed from there? Are there just issues of “how” we should arrange for the performance of that obligation?
I think your essays would find a more natural home at Quillette.com, the unofficial magazine of the IDW
What market failure is UBI supposed to be correcting for?
If a single mom without a job gets free food, housing, health care, and daycare, but if she works hard and gives up most of her waking life to the highest paying job she can hold down, she can barely afford the same food, housing, health care, and daycare, and has the same neighbours and social status, then she has little motivation to work at all unless she absolutely has to. So if she gets the free stuff regardless, then the money earned from any job she gets is mostly money in her pocket, so motivating again.
Trouble is, people who argue for UBI don’t really take those “poverty trap” graphs seriously. The feasible UBI numbers come out small, but the subsidies to transfer recipients is much higher in many cases. If the idea is a high, generous floor on individual welfare, the program is unaffordable without the clawbacks that disincentivize work.
Or, you could land on the a solution that has already been implemented (if weakly) for 20 years, and simply make work a legal requirement for eligibility for benefits, which means if you don’t work, you get very little, which fixes the tax rate problem.
There is talk about upward mobility, but people are often very furtive regarding their true model of employment potential for most transfer recipients, which seems to be implicitly highly optimistic.
You should keep trying both at Medium and Quillette and even Twitter.
A Job Guarantee is much better than UBI — because it’s very important for people to work. No gov’t program can give Self Respect. One must earn it, in one’s own eyes. Work does that, and for most people, most of their working lives, nothing else is as consistently self-respect enhancing.
Push gov’t to help change laws on the bottom so more poor folk become working poor, with the gov’t being “employer of last resort”. Maybe lousy, low-paid jobs — but all have to work to get gov’t benefits.
I don’t know if low status low wage work actually grants self respect in this day and age. It did back when such work meant a meaningful change in material living standards (starving vs not starving). And it may or may not be fun or formative for people that are “just visiting” such work for a short while (teenagers part time). Mostly though it seems to me that is you hold subsistence constant many people at the bottom rightly see the gains that can come from free time pursuits to outweigh those from low end work.
This seems especially true for young men, who gain very little status from low end service jobs. Nor is such work intrinsically valuable to them. Meanwhile, while women are more suited to such things their welfare benefits often include dependent care, meaning their benefits are way higher then what they could earn. If we force her to work all we do is have the state pay for daycare an amount basically equal to what these women earn in the market. We pay them to have someone else watch their kids with little or sometimes negative economic or social gain compared to her staying home with them on the dole.
One of the main gov’t jobs for low ed women with kids would certainly be … day care center work.
Say 10 women have 10 kids, 1, 2 …10.
Set women 1 & 2 together to watch the last 5 kids (6, 7 … 10), and women 9 & 10 together to watch the first 5 kids (1, 2 … 5) so that 4 mothers take care of 10 kids, but no mother is taking care of their own kid in day care half-day (3/4 day? full day?). The mothers do take care of their own kids at home.
This leaves 6 women available for other activities, especially taking care of older folk & sick folk & other institutionalized folk, where the funding already comes to a large extent thru gov’t.
For young men, it’s not at all clear that those who work do not earn self-respect. I note you use the word “grant”, and I fully agree that the current culture denigrates low-paid menial work. This is part of the culture that should change. However, I repeat that while social respect is granted, or not, self-respect is earned. By oneself, by the actions one takes that one thinks are worthy.
It’s almost certainly true that a large number of Democrats will claim that menial work is no better than full free time. I believe some work, for any “willing” to work, is better than no work.
Further, I believe that cutting off the non-work dole for those “unwilling” to work, so that they become more financially uncomfortable, will make more of them “willing” to try some work.
Finland’s already tried a small experiment with a form of UBI. We need more trials of Job Guarantees. I note that one advantage of UBI is the simplicity of decisions: a) UBI yes?, and b) how much for all.
Job Guarantee is far more complex with more variables — but this is a feature, one that should be used starting with fully voluntary programs and converging towards what settings for which variables seem optimal. With variable choice and quantity levels to be politically made, as is inevitable.
Except you aren’t counting the overhead, management, taxes, and transportation costs of daycare vs watching own kids at home. I doubt there is any efficiency gain here. And that’s before considering that one on one care from a mother is better then disninterested care from a daycare worker.
It seems like spending time working out, pursuing hobbies, or getting dates would give more status/respect to most young men versus a low wage job. That’s the revealed preference.
Heck being good at a video game probably gives a young men more self respect then a low wage job (it probably involves greater skill development and more “hard work” compared to grunt menial labor, modern competitive games are hard).
Imagine that someone was guaranteed enough money to get by at a tolerable level, with all his ordinary wants satisfied to satiation, but the one thing he really enjoyed, for which there was no remotely similar substitute in terms of his utility, was expensive but important enough that it kept him working hard throughout his life, so he could earn enough income to afford it.
Then imagine the price of that thing quickly blew up an order of magnitude higher than his wages or anything else, to the point where nothing he can do can earn enough to afford it. What happens to that person? Well, they will likely “check out” of the normal life script and quit any typical attachment to the conventional labor market. Whatever one might try to say about “the” general inflation rate or price level, it’s clear this individual has a particular kind of ideal basket which makes him or her extra sensitive to the price of a particular item, changes in which will cause a huge change in behavior and life pattern, even if offset by lower prices for most other items.
If you’re still following along, none of that seems particularly controversial. But let’s say that special item is “family formation” for a young man. All of a sudden people start raising their ideological shields preparing for battle, which is unfortunate.
But the reality is that the threshold position in the income distribution that it takes to attract and retain a mate and afford a family home in a decent location has risen an enormous extent in the last several decades, locking a significant number of people out of the traditional life path and the respectability and satisfactions derived thereof.
Now the real controversy begins, because if the fundamentals of human nature mean that affording the above in practice requires a typical income gap between men and women and at least a mild amount of effective dependency, then giving the same amount of money to everyone as a guarantee tends to exacerbate the existing problem with any positive boost from lower effective marginal tax rates being neutralized by the reduced buying power of the additional income in terms of what these individuals actually want to afford, what they would be motivated to work hard to acquire.
In your view, is there reason to believe that the Left’s domestic policy agenda is in part motivated by a desire – presumably not by most politicians themselves but by the academics, think-tankers, public intellectuals and activists – to put family formation out of reach for a large part of the population? In other words, that for informed progressives, putting family formation out of reach for the hoi polloi is a feature, not a bug?
Not that the Republicans have not contributed to this situation, but, since this trend is against the GOP’s political interests, I tend to think that they are just blindly following the selfish preferences of their donors.
Woman are a constituency. That constituency would like to get married, but only to the top X% of men. Woman would like to have independent income (either earned or provided by the government or a mix of both) while they pursue that goal.
That isn’t a conspiracy to destroy family formation in the bottom half. But it’s a result of subsidizing women’s ability to spend more of their fertile years engaged in a zero sum striving for the same limited set of men.
Asdf, I’m asking about progressive elites who set the agenda, not the motivations of ordinary voters.
No, I wouldn’t put it that way. There indeed have been some infleuntial and zealotous “feature, not bug” anti-family fanatics out there, and the mainstream “Overton Window for Family Life” has shifted significantly in the progressive direction, but their efforts were not the really important factors leading to where we find ourselved today, which is mostly the confluence of unexpected technological and economic developments (a view bolstered by global, simultaneous developments uncorrelated with local politics or context) with the unintended negative consequences of more typical progressive projects and, just as importantly, the mechanism of progressive ideology-clientalism feedback derived from our system of democratic politics.
One legacy of various awful failures over the past 60 years or so has been that the only way remaining for many people to pursue legitimate and very widely-shared interests is by means of intense, zero-sum price discrimination, which, by its very nature, locks a lot of people out.
Good, sane government, by providing an alternative to price discrimination via behavioral discrimination and other tools, is a wonderful windfall in welfare for the lab-abiding laborers of limited means even without much redistribution: it means a much higher chance of “A Decent Life for Decent People.”
Thanks for the response, Handle.
Do you know of any source that systematically enumerates all of the changes (political, legal, corporate, technological) that have led to this situation? A few obvious ones immediately come to mind, but it would be useful to see it all put together somewhere, if this has been done.
To be fair, cultural changes that developed somewhat (but not entirely) independently of the above variables played a role, too.
One legacy of various awful failures over the past 60 years or so has been that the only way remaining for many people to pursue legitimate and very widely-shared interests is by means of intense, zero-sum price discrimination, which, by its very nature, locks a lot of people out.
Good, sane government, by providing an alternative to price discrimination via behavioral discrimination and other tools, is a wonderful windfall in welfare for the lab-abiding laborers of limited means even without much redistribution: it means a much higher chance of “A Decent Life for Decent People.”
I liked your original comment but I don’t understand what you’re trying to say here.
Do people have neighbours in the modern world? Do they live in neighbourhoods and join bowling teams?
If people don’t live in a community then they can’t feel ashamed about this non-existent community’s disapproval. So the loneliness and isolation of the modern world is something else to factor in. If you live in a non-place, knowing no-one, then having no job is is no loss.
Good point. This is one of, if not the, reason all Amish communities forbid cars and TV, regardless of what other technology may be allowed.