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You're misunderstanding. If you do 0 work, you get $100 of welfare. If you do $100-worth of work, you get your wages plus $75 of welfare. You net more money w

You're misunderstanding. If you do 0 work, you get $100 of welfare. If you do $100-worth of work, you get your wages plus $75 of welfare. You net more money working than not working. This is opposed to having benefits "fall off a cliff" if you earn above a certain threshold, which is very much a disincentive to work. Instead, the benefits gradually taper off so that each step toward more employment is always a net positive for the worker.

thaumasiotes 8y ago
What exactly do you think I'm misunderstanding? Try to identify something I said that you think is a mistake. There is no difference, to the recipient, between "getting $100 of welfare and $75 of the $100 I earned working", or "getting $75 of my $100 of welfare and the full amount of the $100 I earned working". And there is no perspective from which a means-tested welfare program in which benefits phase out with increasing income does not represent a disincentive to work.
- function_seven 8y ago
  We're comparing not working to working. So it's a choice between $100 welfare, $0 working; or $75 welfare, $100 working. And anyone who still qualifies for public assistance is not paying income tax yet. Not 25% at least. But that's beside the point. The point is that it is possible to structure the benefits so as not to penalize gainful employment. You make sure that it's worth more money to work than to not work.
  - thaumasiotes 8y ago
    But the benefits you're describing penalize gainful employment very heavily. Look at the cash flow: Before: 0 labor output, $100 income. After: $100 labor output, $175 income. You've gained $75 by doing $100 of labor, which means that the welfare program is taxing your labor income at a 25% rate. This is a fairly strong disincentive to work, and a substantial penalty on gainful employment. In the reverse direction: Before: $100 labor output, $175 income After: 0 labor output, $100 income You'd expect losing $100 of sales to represent a loss of $100 in income. But it's only a loss of $75, because the welfare program will subsidize you to quit your job. This is, again, a disincentive to work. To evaluate whether the program is an incentive to work or a disincentive to work, you have to ask whether, in the presence of the program, more work or less work is done than would be done in the absence of the program. It's not at all relevant that the marginal tax rate implied by the program is always less than 100%. As long as it's more than 0%, it is a disincentive to work.

thaumasiotes 8y ago

What exactly do you think I'm misunderstanding? Try to identify something I said that you think is a mistake. There is no difference, to the recipient, between "getting $100 of welfare and $75 of the $100 I earned working", or "getting $75 of my $100 of welfare and the full amount of the $100 I earned working". And there is no perspective from which a means-tested welfare program in which benefits phase out with increasing income does not represent a disincentive to work.

function_seven 8y ago
We're comparing not working to working. So it's a choice between $100 welfare, $0 working; or $75 welfare, $100 working. And anyone who still qualifies for public assistance is not paying income tax yet. Not 25% at least. But that's beside the point. The point is that it is possible to structure the benefits so as not to penalize gainful employment. You make sure that it's worth more money to work than to not work.
- thaumasiotes 8y ago
  But the benefits you're describing penalize gainful employment very heavily. Look at the cash flow: Before: 0 labor output, $100 income. After: $100 labor output, $175 income. You've gained $75 by doing $100 of labor, which means that the welfare program is taxing your labor income at a 25% rate. This is a fairly strong disincentive to work, and a substantial penalty on gainful employment. In the reverse direction: Before: $100 labor output, $175 income After: 0 labor output, $100 income You'd expect losing $100 of sales to represent a loss of $100 in income. But it's only a loss of $75, because the welfare program will subsidize you to quit your job. This is, again, a disincentive to work. To evaluate whether the program is an incentive to work or a disincentive to work, you have to ask whether, in the presence of the program, more work or less work is done than would be done in the absence of the program. It's not at all relevant that the marginal tax rate implied by the program is always less than 100%. As long as it's more than 0%, it is a disincentive to work.