3 ms·

I never argued against this for "fairness" nor did Krugman mention the societal opportunity cost. It's more an issue of signaling. People won't go through the

I never argued against this for "fairness" nor did Krugman mention the societal opportunity cost. It's more an issue of signaling. People won't go through the pain necessary to learn a new skill if there's no incentive. High wages are encouragements to endure the discomfort inherent (for most) in change necessary for the rebalancing of the labor force. Low wages signal that the skill is not in high demand (relative to supply) and that there may be other more opportunities more attractive. The negative income tax reduces the incentive to move from one segment of the labor force to another and could be analogous to a tariff, in a way.

anigbrowl 13y ago
It's equally arguable that people won't engage in time-consuming activities of uncertain return if there's too much financial risk. 'Lack of demand' is often a stumbling block for new technologies that are ahead of their time.
dragonwriter 13y ago
> The negative income tax reduces the incentive to move from one segment of the labor force to another The negative income tax also removes the friction that prevents people from being able to move from one segment of the labor force to another, which is the need to continue working where you have the skills in order to survive, which reduces the opportunity to invest time and energy in learning new skills. Which of these forces would be most dominant depends on details of implementation, but what is clear is that the effect isn't one sided.