From the
"Department of what everyone already knows":
If you live in an expensive city and are acquainted with families collecting welfare the book confirms what you might have noticed, i.e., that it would be irrational for the adults in the family to enter the workforce. Here in Cambridge, Massachusetts, for example, the welfare families that I have spent the most time with occupy apartments with a market rent of about $4,500 per month ($54,000 per year in post-tax income) in a building with a swimming pool, two gyms, and a variety of other luxurious facilities. Their health care is free through some combination of Medicaid, Obamacare, and a city-run health system. Their food is mostly free through food stamps. They can get cash from TANF and some similar programs. They would need to earn at least $160,000 per year pre-tax to obtain the same standard of living at market prices. However, even if someone were to offer the adults in the family a $160,000 per year job it would not be rational for them to accept it. If they were ever to lose that job it would take many years of paperwork, bureaucracy, and waiting lists to get back to their current welfare lifestyle.
It's irrelevant whether this is intentional by the Democratic party (to create a class of clients who reliably vote Democrat) or simply a reflection of the Iron Law of Bureaucracy (where the departments administering welfare create a system that requires a department to administer welfare, rather than end it).
But the core of Mulligan’s analysis is that income-based government handouts function as a high marginal tax rate in that if the low-income person earns a bit more he or she qualifies for fewer government benefits and therefore has only slightly more spending power than before. Mulligan looks at the 2009 expansion of means-tested welfare in at least the following areas:
- unemployment benefits
- food stamps
- mortgage forgiveness
- non-mortgage debt forgiveness
- health insurance subsidies (Obamacare; not yet implemented during the period of Mulligan’s analysis)
Underlying Mulligan’s work is an assumption that policymakers (and family court judges) reject:
A basic economic principle in this chapter, and much economic analysis of the labor market, is that the pecuniary reward to working is an important determinant of how much people work. When social programs increase what they pay to someone who does not work, they diminish this difference, and the result is that some people work less.
Shorter analysis: you get more of what you pay for. If you pay more for people not to work, you'll get more people not working.
So once again, story time sharing...
ReplyDeleteAs many of you know I am on disability, I draw about 15k a year, I preferred 90k a year in security, but health and brain tumour issues killed that career. I am one of the few people I know on disability, actively trying to get retrained and off of disability. I have returned to school, and have self funded 2 different experimental treatments, combined the seem to be working and the outlook is positive. All that being said...
At 15k a year to cover expenses aquire a vehicle, insurance improved housing, clothing everything else that working requires, I would need to make about $18 an hour minimum to break even. How many people are willing to work 40+ hours a week at a medium skilled job just to have the same benefits as sitting around and doing nothing? That is the real problem, there is basically 0 incentive for people to get back in the workforce and eveb if it was net neutral, the government schedules benefit levels so that I would lose tonnes of benefits completely before I got anywhere close to replacing my income. The welfare/entitlement system needs a complete overhaul and despite how annoying single payer is for medical services, single payer for entitlements would be a good idea as it would cut down on people applying for multiple iterations of the same basic benefit.
Of course the ideal would be to eliminate entitlements altogether then allow the local populace to decide how to support those, like myself for a long tome, are simply too bad a shape to work. Oh and of course getting peeps back to work.