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Matt Pennington (4/26/2008)
That simply isn't true though. Redistribution of wealth limits the value of success, but it doesn't limit the value of hard work and effort and ironically it's that that we tend to prize (although this doesn't appear to be a sentiment of the Americans).
I assumed that when you said "mark work pay" you meant in terms of money rather than the warm subjective glow of achievement (cue Stakhanov posters).
Matt Pennington (4/26/2008)
The marginal rate for high end jobs is theoretically close to 40% so tripling it might well be difficult, mathematically. Punitive tax regimes are one thing, but over 100% seems... harsh... For every pound you earn, you pay £1.20 in tax... That could be a problem Marios... I don't think the middle classes are going to buy it, not even in Hampstead.
Obviously you weren't paying attention during the discussions on basic wage - the resultant improvement in the economy would be so great that people wouldn't just be _able_ to pay 120% income tax - they'd _want_ to (as you say, you wouldn't have reduced the value of hard work and effort at all).
Matt Pennington (4/26/2008)
It might not win Gordon any votes in Essex but it would transform the incentives of low paid work.
Not sure about those numbers - have you done a back of the envelope to work out how much that adds to income tax? (+10 -> -20% on 10,000 -> 3,000/per person/per year earning 10,000 or more - something on the order of 33 million -> ~100 billion increase in an income tax which is currently 160 billion -> 63% increase in income tax divvied up however).
All of these analyses seem to be predicated on the assumption that there are all these vast numbers of high earners who can basically be supertaxed without any serious consequences, but actual earning distribution inequalities rather feeble:
http://www.statistics.gov.uk/cci/nugget.asp?id=285
After all, as you pointed out, it's the wage inequality that drives the system - it's worth working in MacDonalds if it funds your law degree/keeps hard to explain gaps off your CV which then cue you up for a high-stress/high-earning job. If you remove the wage inequality - if gang lords are taxed so they have no bling to recompense for the grief in becoming gang lords then selling crack is suddenly a much less tempting proposition (even if you do have 1/10 of a bling redistributed to you).
Matt Pennington (4/26/2008)
You can continue in this vein across the system, but those are just a few major changes I can think of in a few minutes. High paid work is already fantastically well rewarded, we're a rich country and under the continuously economically right wing administration of the last 25 years we've seen rewards for the best paid segment of society rocket. We need to reduce the rewards on highly paid work which is more than adequately incentivised and improve rewards for those on the lowest incomes.
But is high paid work 'adequately' incentivised? Having no numbers/models I don't know one way or the other - but you seem to have been saying that young people _aren't_ adequately incentivised (to go for high or medium paid work). Are we a rich country? Against what are we measured?
Sounds to me like you'd just be turning minimum wage work into an extended benefits system - like they did in Russia in the more successful years (they still realised pretty quickly that you need your wage inequality/gang-leader aspiration to motivate work beyond the minimum once the first flush of revolutionary fervour is past). Obviously, there are advantages - gets people off the streets, assures a minimum level of money for almost everyone and puts people where you can keep an eye on them. The downside is that your work sector is now work and benefits (you back it up with very strong labour rights and its very hard to boot people out - its very hard to earn more money so its not really worth working harder).
On the one hand, you have more people working in low paid jobs - on the other hand by redistributing the incentives from high/medium paid jobs you now have less in those - which of these are most important for the economy? That's a question you already answered when you said we could afford to augment the income of low paid a lot jobs by taxing medium and high paid jobs just a little. Basically, you're trading economy for crime - which is fair enough, but I'm just not convinced that this is an efficient way to do that at all.
Marios
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Marios (4/26/2008)
I assumed that when you said "mark work pay" you meant in terms of money rather than the warm subjective glow of achievement (cue Stakhanov posters).
I did mean money. You seem to have misunderstood me. I meant make work pay money. Not make the tremendously successful who are already incredibly well paid get paid even more, I'm talking about finding ways to reward industriousness in professions that are not currently well rewarded regardless of work put in. You seem to think that work is sufficient to achieve success, which seems a fallacy to me.
Not sure about those numbers - have you done a back of the envelope to work out how much that adds to income tax? (+10 -> -20% on 10,000 -> 3,000/per person/per year earning 10,000 or more - something on the order of 33 million -> ~100 billion increase in an income tax which is currently 160 billion -> 63% increase in income tax divvied up however).
At the moment an entire segment of the labour market is mathematically unrewarding and we pay for this anyway by providing benefits to those people who quite sensibly opt not to work instead of doing minimum wage jobs to achieve a marginal rate of pay in the pence per hour bracket. The numbers were just off the top of my head and I didn't bother trying to calculate them since I'm unconcerned with the actual rates and more bothered about the principles. You've overestimated the costs as it happens, since the current rate of tax is not 10% on 10,000, but that's irrelevant. The point is to shift the tax burden, increasing it for the well paid middle classes on 25K a year jobs who form a significant proportion of our tax paying body and also on to the exceptionally rich who admittedly don't. In the end you can simply play with the figures and the tax curve until you get a neutral return, and you can do that in a way that reduces taxation for those on the lowest earnings at the cost of those on the highest, rather than the opposite approach being pursued by Brown.
All of these analyses seem to be predicated on the assumption that there are all these vast numbers of high earners who can basically be supertaxed without any serious consequences, but actual earning distribution inequalities rather feeble:
Not really, I've no time for punitive tax regiemes and jealousy based financial policies. The super-rich can afford higher taxation than they currently earn, but I've no desire to see a return to 90% rates nor do I imagine that it will net significant income. The burden of a more progressive tax system needs to fall on wealthy professionals, those earning 25K+ saleries.
After all, as you pointed out, it's the wage inequality that drives the system - it's worth working in MacDonalds if it funds your law degree/keeps hard to explain gaps off your CV which then cue you up for a high-stress/high-earning job.
Wage inequality is a motivational force in driving people to work hard, but I haven't suggested abolishing it, what I want to do is smooth out the current problems caused by a segment of the work market being uneconomic. If the benefits system didn't exist, this wouldn't matter, since the alternative would be homelessness and starvation (which would cause soaring crime which would matter), but because it does, it reduces the marginal rates of pay close to and below zero for some jobs. This is the issue I think needs addressing. A cleaner smoother system that graduated state support for those on low incomes instead of making them dependent on not working would be far better.
Matt Pennington (4/26/2008)
But is high paid work 'adequately' incentivised? Having no numbers/models I don't know one way or the other - but you seem to have been saying that young people _aren't_ adequately incentivised (to go for high or medium paid work). Are we a rich country? Against what are we measured?
We are a rich country based against any sensible comparison of ourselves with the other nations in the world or all the nations that have existed in history. I am at a loss that you cannot see that if you were to put the GNP of every nation that has ever existed in the history of humanity in a list then we would be very near the top. Easily in the top 1%, probably in the top 0.01% depending on how much history you want to include. If you just use existing nations then we're somewhere round tenth in the world give or take a few (out of a few hundred), so only about the top 5% of existing nations. None-the-less if you were to put the everyone in a line in order of height, I believe the word "tall" would be considered a fair description of the 5% of the tallest people in the line. YMMV.
Whether or not highly paid work is highly paid is difficult to argue philosophically apart from the obvious redundant truism. As a person who quit a reasonable paid job (20K) to set up his own business with the hope of eventually earning considerably more my personal perspective is that highly paid work is... highly paid... and more than adequately incentivised.
I'm not saying "young" people aren't adequately incentivised, I'm saying that the opportunities that exist for nice, white, middle-class, intelligent, well educated, young people are vastly greater than those available to people without these advantages. And that accepting and understanding that may give us some insight into why these people don't bother to work (the rewards aren't worth it) or engage in criminal behaviour (best opportunity available to them). It's the inequality of opportunity that is the issue.
Sounds to me like you'd just be turning minimum wage work into an extended benefits system
*shrug* Benefits systems are inversely linked to how hard you work. The harder you work, the less money you get paid by the benefits system. This fundamentally acts as a brake on aspirations for people in that category. My proposal for a negative rate of taxation links state funding to wages, getting a better job increases your benefits.
Moreover the minimum wage system, while very important, serves as a brake on employment by raising the cost of labour. Doubling the minimum wage would not, in itself, resolve the problems. One downside of my proposal is that it effectively subsidizes low paid employment at the cost of high paid employment and that needs to be balanced against the negative pressures created by the minimum wage. A nation of call centres is great for India, but it won't increase our GNP.
Obviously, there are advantages - gets people off the streets, assures a minimum level of money for almost everyone and puts people where you can keep an eye on them. The downside is that your work sector is now work and benefits (you back it up with very strong labour rights and its very hard to boot people out - its very hard to earn more money so its not really worth working harder).
It's a cheerful comparison but seems to bear no resemblance to anything I've outlined, so I'm going to choose to ignore it. As I've tried to illustrate, my proposals are fundamentally different to using minimum wage to extend the benefits system. The real danger of my proposal is that you effectively subsidize low paid employment, choking off the creation of better paid jobs and trap people on low incomes, not that you employ people to do pointless jobs (communism) or nothing (current British capitalism).
On the one hand, you have more people working in low paid jobs - on the other hand by redistributing the incentives from high/medium paid jobs you now have less in those
Not so fast. First prove to me that by improving the benefits for low paid work at the cost of reducing the benefits for high paid work, that people would immediately choose low paid work over high paid work. If you can convince me that City bankers would be quitting in droves to get a job filling shelves at Tescos, because giving up million pound bonuses meant paying less tax I'll accept what you're saying.
which of these are most important for the economy? That's a question you already answered when you said we could afford to augment the income of low paid a lot jobs by taxing medium and high paid jobs just a little. Basically, you're trading economy for crime - which is fair enough, but I'm just not convinced that this is an efficient way to do that at all.
Everything is a trade off. However I also want to reduce the benefits trap that we have created at the moment. And getting people off benefits and into work would improve the overall economy, so I'm afraid I don't accept that the results would be all negative. But yes, I'd be prepared to slow the economy a few percentage points to reduce crime significantly and have a more equitable society to live in. That's a trade off I'd vote for.
History is an important source for LRP. Along with other works of fiction.
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Matt Pennington (4/26/2008)
I did mean money. You seem to have misunderstood me. I meant make work pay money. Not make the tremendously successful who are already incredibly well paid get paid even more, I'm talking about finding ways to reward industriousness in professions that are not currently well rewarded regardless of work put in. You seem to think that work is sufficient to achieve success, which seems a fallacy to me.
Hmm - it sounds a bit like you're arguing that industriousness has some natural value distinct from what people are willing to pay for it (i.e. if you work very hard at organising your larp game and no one turns up you still _ought_ to be paid because your work has some natural value regardless of whether anyone wants to pay for it). I can see that there is a sort of "keeping you off the strees" natural value (although I do immediately think of Danegeld), but that doesn't seem to be what you're arguing.
I don't think "work" mandates pay - but I do think "work that people want to pay for" does (unless the government declares it illegal or taxes it so much that the transaction is no longer worthwhile for either party).
I grasp the idea of saying "No one desperately wants to employ these people - not enough to pay them a wage which they'd find attractive - but we don't want these people wandering around where they may cause trouble - how about we take some money out of the prison budget and put it into subsiding employment in the hope that it'll do the job for us". Which is fair enough and I think, to an extent, that's what people do (in some sort of targeted fashion).
Matt Pennington (4/26/2008)
At the moment an entire segment of the labour market is mathematically unrewarding and we pay for this anyway by providing benefits to those people who quite sensibly opt not to work instead of doing minimum wage jobs to achieve a marginal rate of pay in the pence per hour bracket.
And yet quite a lot of people _do_ work at minimum wage even when the improvement in their final take-home funds is marginal - clearly it's not quite as simple as that.
Matt Pennington (4/26/2008)
The numbers were just off the top of my head and I didn't bother trying to calculate them since I'm unconcerned with the actual rates and more bothered about the principles.
In principle it would be lovely to give everyone lots of money. I think the point is that, when you do the maths the grand idea of giving everyone 150 pounds a week gets rapidly reduced to giving almost everyone 40 pounds a week at the cost of increasing income tax by 75% - if the principle is that "everyone deserves a decent income" then I think the practicalities of the situation demand a reevaluation.
Matt Pennington (4/26/2008)
In the end you can simply play with the figures and the tax curve until you get a neutral return, and you can do that in a way that reduces taxation for those on the lowest earnings at the cost of those on the highest, rather than the opposite approach being pursued by Brown.
A neutral return? Can you take money away from one income group without there being negative consequences? Do you have any argument to suggest that the consequences of doing so would be balanced (in whatever sense) by the gains from the redistribution on the other end?
Matt Pennington (4/26/2008)
Wage inequality is a motivational force in driving people to work hard, but I haven't suggested abolishing it, what I want to do is smooth out the current problems caused by a segment of the work market being uneconomic.
It sounds like you're trying to do two things at the same time:
(i) Render the after-tax income graph smooth as a function of hours/increasing pay (no big redistribution, just fiddling with the current tax and benefits rules)
and
(ii) Redistribute something on the rough order of 100 billion from middle-income earners to low-income earners
(i) Is reasonable, but not trivial and no one seems to have tried to quantify what effect it would have (it relies on the assumption that people can't plan and can't think past discontinuities - it's not really clear how meaningful that is).
(ii) Sounds like an echo of the Basic Wage arguments which seemed to boil down to "Consequences don't matter - it's the principle that counts. Anyway, it might work out." which I view as basically conceding it as a serious proposal and shifting to "wouldn't it be great if ...".
Matt Pennington (4/26/2008)
*shrug* Benefits systems are inversely linked to how hard you work. The harder you work, the less money you get paid by the benefits system.
That's always going to be the case sooner or later - sooner or later your negative tax rate will have to cease. All you'd be doing is shifting the point where that happens and giving more benefits to people who are getting more money (the person who is earning 8,000 and struggling to make ends meet is receiving less support than the person on 10,000 who is relatively comfortable).
I think there's a basic problem which is that Welfare Systems are, by definition, supposed to be progressive - if you are worse off, you get more support. You're rightly pointing out that this provides negative incentives and suggesting that (part of it) be replaced by a regressive system. If your entire tax system doesn't remain regressive then there's still going to be a point where it you get less 'effective benefits' by working longer/in a higher paid job.
Matt Pennington (4/26/2008)
The real danger of my proposal is that you effectively subsidize low paid employment, choking off the creation of better paid jobs and trap people on low incomes, not that you employ people to do pointless jobs (communism) or nothing (current British capitalism).
What's the difference between a job that interested neither employed/employee until the government subsidised it and a "pointless" job? That aside - I agree, I'm hoping to see your argument that the benefits of subsidising low paid employment would be in some sense greater than the costs of increasing the tax burden on better paid jobs (straw men aside, this seemed to be the main economic problem that the 50's-60's Russian Communists had - they reduced income inequality and consequently they'd reduced the incentives operating on economic growth - in the end they had to work the inequality back in, but it was restricted and didn't provide enough impetus to keep up with the West, even taking Western economic instability into account).
I don't know what the answer is, but reducing the income inequality to get a 5% of the workforce into work might not be worth it if it cripples the economy for everyone
Matt Pennington (4/26/2008)
Not so fast. First prove to me that by improving the benefits for low paid work at the cost of reducing the benefits for high paid work, that people would immediately choose low paid work over high paid work. If you can convince me that City bankers would be quitting in droves to get a job filling shelves at Tescos, because giving up million pound bonuses meant paying less tax I'll accept what you're saying.
Kids on the street are sensitive to changing economic incentives, but middle-class people aren't? I'm running with your basic assumption that people are, in general, affected by incentives. You can't argue that they are when you want them to be, but not when you don't, unless you've got some evidence to back that up!
Matt Pennington (4/26/2008)
But yes, I'd be prepared to slow the economy a few percentage points to reduce crime significantly and have a more equitable society to live in. That's a trade off I'd vote for.
Okay, what's your argument for it being only a few percentage points? Income tax is currently 160 billion - how much would you increase that and what do you think the consequences would be? Can we have a rough estimate of what the effect on crime would be?
Marios
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Marios (4/26/2008)
Hmm - it sounds a bit like you're arguing that industriousness has some natural value distinct from what people are willing to pay for it (i.e. if you work very hard at organising your larp game and no one turns up you still _ought_ to be paid because your work has some natural value regardless of whether anyone wants to pay for it). I can see that there is a sort of "keeping you off the strees" natural value (although I do immediately think of Danegeld), but that doesn't seem to be what you're arguing.
This is the absolute basis of any non-purely free market economy. Any form of redistributive tax, benefits system and arguably education or health system is built around accepting that a purely free market solution is not always desirable, that expressing everything through the commercial value put on it, does not automatically produce the best outcome. I'm not arguing for value for things people don't want to pay for, I'm arguing for enhancing the value of low paid work, a point you seem determined to ignore.
In terms of the inherent value of work, this thread started out about crime and punishment and rapidly drifted in the first few pages to a discussion about how terribly lazy people are. In a purely economic terms anyone on benefits is engaged in a commercial activity (doing nothing) that pays the market rate for that activity (draw benefits) and thereby makes non-viable other forms of work that require more effort for similar returns. If you want to argue that things are only worth what people will pay for them, then what these people are doing is absolutely fine, given the way the market has been set up. But nobody accepts that argument and everybody feels that people should have jobs and get paid. Because instinctively we do feel that work has an inherent value and we don't consider it acceptable to do nothing and still be paid. It really pisses people off.
Being on benefits doesn't bother me, if a country is stupid enough to have a benefits system and then expects people to work for low to zero marginal rates of pay then the country has no-one but itself to blame. Why should people choose to work a 40 hour week and not get paid? But I do think that the system is inefficient and economically weak. Moreover I think it reduces people's sense of self-satisfaction (work *is* it's own reward) and critically it reduces people's involvement and "buy in" to society. And those factors affect their propensity to commit crime. I repeat again that people on 25K a year jobs don't mug people. So I do think there are ethical advantages to encouraging people to take low-paid work in preference to drawing benefits above and beyond the economic ones.
I don't think "work" mandates pay - but I do think "work that people want to pay for" does (unless the government declares it illegal or taxes it so much that the transaction is no longer worthwhile for either party).
I'm afraid I don't share your sense of satisfaction in the ability of the market to set pay rates in a way that produces an equitable low-crime society, rather than in a way that is in the best interests of the employer. I admit that my proposal subsidizes low paid work, but the current system penalizes it. Neither is ideal, I prefer my method.
And yet quite a lot of people _do_ work at minimum wage even when the improvement in their final take-home funds is marginal - clearly it's not quite as simple as that.
No, because we're not all perfect economic vehicles and because pay is not the only reward. Most middle class parents when asked would prefer their children to get a degree and become a professional rather than a plumber even when told that a successful plumber can earn significantly more than their child is likely to earn as a professional. Status is an issue in a society that remains class-ridden where anyone from the building trade is a commoner.
In addition the current process of attempting to get people off benefits by making life as difficult as humanly possible for them has some motivating effect in encouraging people to take minimum wage jobs. I think this process would be far more effective if a carrot accompanied the stick and if the stick was physical and time based, rather than verbal (workfare requirements over arguing cases with a benefits officer).
In principle it would be lovely to give everyone lots of money. I think the point is that, when you do the maths the grand idea of giving everyone 150 pounds a week gets rapidly reduced to giving almost everyone 40 pounds a week at the cost of increasing income tax by 75% - if the principle is that "everyone deserves a decent income" then I think the practicalities of the situation demand a reevaluation.
Presumably this is why the current chancellor is increasing the tax burden on the lowest paid so that he can decrease the tax burden on the labour voting middle classes in a desperate attempt to cling to power? We can afford the current situation and when the Financial Times starts having leader articles bemoaning the explosion in inequality in modern Britain over the last 10-20 years I'm inclined to accept their verdict over yours that there is room for more redistribution within present British society.
Negative income tax rates are one method I favour, as society becomes wealthier you can use increasing tax revenues to increase support for those at the bottom of the bell curve, by changing percentage rates and moving bands.
A neutral return? I meant tax revenue neutral, I thought that was pretty clear.
Can you take money away from one income group without there being negative consequences? I've never met anyone other than myself who likes and is proud to pay tax. Most people seem to regard it as some kind of moral outrage, so increasing it rarely meets with approval unless you can convince people that the net effect is worthwhile. I wasn't suggesting that my proposal was anything other than political suicide. No-one likes poor people, and they don't vote anyway. As Labour has realised, there are more votes in putting them in prison and giving the tax back to the middle classes.
Do you have any argument to suggest that the consequences of doing so would be balanced (in whatever sense) by the gains from the redistribution on the other end?
Yes, ones I have made over the last four pages. I'll summarize but not repeat. Reducing benefits but increasing incentives to work would make being on benefits less financially preferable to low paid work which would decrease net benefit payments and make the country more economically efficient. Better prosecution rates and stricter sentencing polices coupled with better economic support for low paid work would reduce the economic bias in favour of crime over work which would reduce crime rates. People aren't purely rational but they aren't stupid and they certainly aren't moral, it's better to assume that we're economic agents driven by our biology than that we're angels descended from heaven but driven mad by close proximity to so many other humans in a modern society.
Matt Pennington (4/26/2008)
It sounds like you're trying to do two things at the same time:
(i) Render the after-tax income graph smooth as a function of hours/increasing pay (no big redistribution, just fiddling with the current tax and benefits rules)
and
(ii) Redistribute something on the rough order of 100 billion from middle-income earners to low-income earners
Pretty much, the precise figures aren't important to me (and as I already pointed out, your calculation is wrong, if you want to throw my numbers back at me, please do the job properly), my point is that we are currently moving in the opposite direction, to increase the tax burden on low earners so that we can redistribute wealth back to middle-income earners. I want more movement in the opposite direction, I want a negative tax rates band if it can be achieved without massive increases in taxation.
(ii) Sounds like an echo of the Basic Wage arguments which seemed to boil down to "Consequences don't matter - it's the principle that counts. Anyway, it might work out." which I view as basically conceding it as a serious proposal and shifting to "wouldn't it be great if ...".
As far as I can see there were lots of arguments for and against the minimum wage and the arguments against were all calculations of the millions of unemployed it would create. We brought it in and millions of unemployed were not created. Any attempt to produce a quantitative description of the outcome of policy changes are deeply flawed in my book, the science of economics is simply not that precise. To me it seems a reasonable notion that if work paid considerably better than being on the dole then people would choose it in preference, particularly if the alternative was workfare. You may feel free to disagree with this notion, since I cannot produce a precise mathematical calculation to prove it however.
Matt Pennington (4/26/2008)
*shrug* Benefits systems are inversely linked to how hard you work. The harder you work, the less money you get paid by the benefits system.
That's always going to be the case sooner or later - sooner or later your negative tax rate will have to cease. All you'd be doing is shifting the point where that happens and giving more benefits to people who are getting more money (the person who is earning 8,000 and struggling to make ends meet is receiving less support than the person on 10,000 who is relatively comfortable).
Yes. The problem with the current system is that the system is so poor designed that the at the lower end of the spectrum there is a massive economic disincentive to work. Marginal rates of pay can be close to zero for people with low earnings potential, precisely because of the current system. It is very easy for people on benefits to end up worse off by taking temporary work, very easy for them to end up no better off if they take part time work and quite easy for them to end up no better off if they take 40 hours a week of low paid work. Negative tax rates produce a diminishing return of support, that provides support at low levels turning to a "tax" at higher levels. Provided the tax rate doesn't climb above 100% you're always better off working harder and earning more money. That fundamental equation is often not true for people with low earnings potential in modern Britain.
I think there's a basic problem which is that Welfare Systems are, by definition, supposed to be progressive - if you are worse off, you get more support. You're rightly pointing out that this provides negative incentives and suggesting that (part of it) be replaced by a regressive system. If your entire tax system doesn't remain regressive then there's still going to be a point where it you get less 'effective benefits' by working longer/in a higher paid job.
Absolutely, but rewards at the higher end of the wage spectrum tend to be disproportionate. I've had a conversation with an investment banker who ran the Russia desk for Soloman Smith Barney back when they existed and when having a Russia desk was worthwhile. He told me the long hours he had to work every year to get his two million bonus. My partner pointed out that those were the same hours she did as a teacher... Those at the higher end of the wage spectrum have never lacked for incentives as far as I can see.
Matt Pennington (4/26/2008)
What's the difference between a job that interested neither employed/employee until the government subsidised it and a "pointless" job? That aside - I agree, I'm hoping to see your argument that the benefits of subsidising low paid employment would be in some sense greater than the costs of increasing the tax burden on better paid jobs (straw men aside, this seemed to be the main economic problem that the 50's-60's Russian Communists had - they reduced income inequality and consequently they'd reduced the incentives operating on economic growth - in the end they had to work the inequality back in, but it was restricted and didn't provide enough impetus to keep up with the West, even taking Western economic instability into account).
I don't agree, I think the problem the Russians had is that they used state control to provide employment. Actually, as I repeatedly pointed out, we're just more honest about it, since we ask the people employed by the government on benefits to do nothing and I'd rather have civic work programs than see people do nothing. Negative tax rates coupled with a market economy require people to get "real" jobs (albeit real in part because of this effective subsidy) and reward people for seeking out better paying jobs. In Russia the net effect of their model was that people were employed but not gainfully employed because their work was useless, whereas my proposal requires employment by the market not the state (which I repeat IS our current model).
Matt Pennington (4/26/2008)
Not so fast. First prove to me that by improving the benefits for low paid work at the cost of reducing the benefits for high paid work, that people would immediately choose low paid work over high paid work. If you can convince me that City bankers would be quitting in droves to get a job filling shelves at Tescos, because giving up million pound bonuses meant paying less tax I'll accept what you're saying.
Kids on the street are sensitive to changing economic incentives, but middle-class people aren't? I'm running with your basic assumption that people are, in general, affected by incentives. You can't argue that they are when you want them to be, but not when you don't, unless you've got some evidence to back that up!
If the economy suddenly booms as a result of the Darling's decision to increase tax on low earners so that he reduce on tax on the middle income bracket we'll see that you're right. It's true that increasing the drag on middle to high income earners decreases their motivation to work hard enough to earn those incomes, but you too are trying to have your cake and eat it. You costed my tax proposal at 100 billion while claiming that the effects of higher taxation for middle and higher income earners would negligible. If it's negligible then the economic impact of them being less motivated would be negligible. I don't believe that a modest increase in taxation rates for middle and high income earners will have a significant effect on the economy that isn't offset by increasing work output from those currently unemployed. To now more you'd have to have access to better tax data to calculate outcomes, which I admit I don't have.
There is a balance to be sure but I think that at present the changes are in the wrong direction. They will increase the tax burden for the lowest paid, decreasing their motivation to work and increasing the attractiveness of crime.
Okay, what's your argument for it being only a few percentage points? Income tax is currently 160 billion - how much would you increase that and what do you think the consequences would be? Can we have a rough estimate of what the effect on crime would be?
You can't have a rough estimate, but all such calculations are nonsence. They're done by people who think that putting a number on something shows they're serious when in fact it just proves they're innumerate, they don't understand their own ignorance of the mathematics of the system they're dealing with. The system is too complex to predict outcomes in a quantifiable manner and pretending otherwise makes you a fool.
I don't actually believe my suggestions would reduce growth. There are nations with highly redistributive societies amongst the top ten richest nations, which is enough to prove they don't all end up like Russia and nothing more. I'd prefer a smaller gradual change because I'd rather watch the impact of changes over time to try and judge their effects over modelling it in advance. The current system works, I just think it could be better, if the affluent middle classes could be persuaded to vote for a higher tax burden. The repeated failure of the Liberal Democrat party standing on policies of increase tax burden for the better off suggests that that may not be possible.
History is an important source for LRP. Along with other works of fiction.
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Wag
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Matt Pennington (4/27/2008)
This is the absolute basis of any non-purely free market economy. Any form of redistributive tax, benefits system and arguably education or health system is built around accepting that a purely free market solution is not always desirable, that expressing everything through the commercial value put on it, does not automatically produce the best outcome.
Yes, but it wasn't clear what value system you were going to replace it with - it sounded like you felt that, like Marx, there was some sort of obvious 'natural' value that work ought to have and you were getting frustrated that I was being dense in not immediately seeing. When I try to guess what value it is you're proposing you act as if I'm being deliberately fraudulent in pretending not grasping what you're suggesting.
Matt Pennington (4/27/2008)
I'm not arguing for value for things people don't want to pay for, I'm arguing for enhancing the value of low paid work, a point you seem determined to ignore.
But isn't that exactly what you're doing with the ~100 billion pounds? Making some product/service that people didn't want/didn't want to provide cheaper/more rewarding until they do want it?
Matt Pennington (4/27/2008)
But nobody accepts that argument and everybody feels that people should have jobs and get paid. Because instinctively we do feel that work has an inherent value and we don't consider it acceptable to do nothing and still be paid. It really pisses people off.
If this really is the case then how come there are people who are unemployed? Why doesn't the "inherent value" of work and the unacceptable nature of unemployment compelled them to seek out jobs which leave them only marginally better off?
I think this is the crux of the problem - it's not that all British people feel that work has a very significant inherent value - if they did there'd be no need to incentivise people to do what they already want. Incentives are for making people do what _you_ want them to do - i.e. Joe Bloggs doesn't want youff/single mothers wandering around unemployed. Okay - how much is he going to pay to make work more attractive to them?
Matt Pennington (4/27/2008)
Moreover I think it reduces people's sense of self-satisfaction (work *is* it's own reward) and critically it reduces people's involvement and "buy in" to society.
Who is in a better position to evaluate that than the individuals involved?
Matt Pennington (4/27/2008)
So I do think there are ethical advantages to encouraging people to take low-paid work in preference to drawing benefits above and beyond the economic ones.
But lets be clear - it rests on the assumption that you know better than them - i.e. knowing their life they decide that actually, considering all those factors, they prefer to be unemployed. I think it's fine for you to say:
(i) "Well, I don't give a shit what they think, _I_ want them off the streets and I'm willing to propose that we all reach into our pockets and pay for that to happen." _or_
(ii) "I _do_ care what they think, but actually I'm cleverer/better educated/more experienced - they don't actually know what's in their best interests so I think we should help them out by adjusting their interests from what they _think_ they are to what I _know_ they are with a bit of cash, because that's all they can be expected to understand."
These are both reasonable positions - but what you can't do is criticise posters for not considering the decision-making capacity of individuals for making informed decisions while at the same asserting that money needs to be spent because they are making the _wrong_ decisions for them, unless you claim some special foresight (which below you've argued doesn't exist).
Matt Pennington (4/27/2008)
I'm afraid I don't share your sense of satisfaction in the ability of the market to set pay rates in a way that produces an equitable low-crime society, rather than in a way that is in the best interests of the employer.
I'm neither satisfied nor dissatisfied with the market, but if you think some commodity should be prices other than what people are willing to pay for it/what people are willing to sell it for, then I think that requires a bit of justification. I'm not really sure what you mean by "equitable" - it's difficult to immediately see why taking money from some people to give to others is equitable. Again, I'd be interested to see some information about what makes a society "low-crime".
Matt Pennington (4/27/2008)
I admit that my proposal subsidizes low paid work, but the current system penalizes it. Neither is ideal, I prefer my method.
That's the thing - if you said "I'm not going to increase/decrease net tax rate, I'm just suggesting that we change the distribution of benefits payment so that it no longer penalises low paid work" then we could look at that on its own (had a glance when I was looking at the Citizen's Wage stuff - looked nontrivial).
However, you're saying do that _and_ increase tax by ~100 billion which is very confusing. It sounds like you're trying to do two things
(i) make the effective tax-benefits curve monotonous (if you have a look at the link in the benefits topic for Citizen's Wage that was there idea also - however, the current curve isn't actually that bad (given that they are paying for housing and child support which the citizen's wage isn't) - there are some dips - depending on your individual circumstance there must be people with local maxima - but they aren't all that enormous). Here it is (bear in mind this is done by people with every incentive to emphasis 'poverty traps'):
http://www.citizensincome.org/filelibrary/Citizen%27s%20Income%20booklet.pdf
It's a bit flat below 10 hours a week (presumably this is on the assumption that people without alternate means working 5 hours really need those extra benefits), but otherwise it _does_ increase monotonously (if anything the increases jump too far in places 14 -> 16 hours , 28 -> 30 hours. As they say, it's not a question of income not rising - it's a matter of whether it's rising _fast enough_.
(ii) take ~100 billion pounds and pay people to work instead of taking benefits as means of reducing crime
It's difficult to know what effect this would have on crime without lo | | | |