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I wonder if at a certain level of development, the bottom is so low that welfare will make life slightly better but sustainable work and pay will sufficiently c
by rubyfan 11y ago
I wonder if at a certain level of development, the bottom is so low that welfare will make life slightly better but sustainable work and pay will sufficiently change the standard of living. Therefore welfare doesn't deter work because incremental standard of living (attainable only by working) is sufficiently divergent from the alternative of relying solely on welfare. I'd also wonder if by contrast in developed countries the standard at the bottom is sufficiently high or the next level up is not sufficiently different enough to encourage working to get there.
The Vox article mentions other studies in the US and Canada, particularly negative tax and earned income tax credit. I'm not sure those actually act as welfare or a one time economic stimulus. As a former recipient of earned income tax credit, 1. I definitely didn't plan for that income 2. It didn't change my work incentive (I was already working and low income) 3. I probably spent that refund almost immediately either on paying down a credit card, a car down payment, appliance, etc.
Earned income tax Had no effect on my desire to work or to increase my income; the fact that I worked full time and had a low income was incentive enough. The earned income tax was kind of like a bonus on an otherwise hard existence.
I suppose what is important here though is the question, do the program's incentivize people to move out of poverty and remove the need for future subsidization? If my hypothesis on upward mobility is correct then government welfare programs don't really do much to move people out of poverty, they are really economic stimulus and you know, keeping people from starving and freezing to death. If we wanted to address the question of deterring work, I'd suspect a lack of upward mobility is enough to deter work toward the bottom.
- evanpw 11y agoThis is the reason a lot of economists think it would be better to implement the earned income tax credit as a wage subsidy rather than a tax credit. Instead of a getting a big lump sum at tax time, you'd get a bigger paycheck: kind of like a negative tax withholding.
- rubyfan 11y agoThat would make sense if it is intended to be welfare. I could honestly say when I was getting a bigger tax refund than what I paid in taxes, I really didn't know what it was or understand why I was getting it and when it would go away. As a once a year thing that I didn't understand, it had little influence on my thinking about work and I certainly didn't think about it as welfare. As a more frequent payout I'm certain I would have gave it more thought and it would have an influence on thinking and behaviors. As a working person I'd likely have considered it welfare and would have given it consideration as my pride and ego would have to grapple with that.