I haven’t been active in the debate between Crooked Timber members and various others (Bleeding Heart Libertarians, Matt Yglesias, Tyler Cowen) so far. Broadly speaking the claim on the BHL side has been that if only some minimal conditions (existence of a universal basic income, for example) were met, all employment contracts could be assumed mutually beneficial and there would be no need for governments to regulate their terms, for example to prevent sexual exploitation.
Most at CT have been dismissive of these claims, but I’d like to explore the question a bit further. Is the objection that the necessary conditions aren’t likely to be met in practice, or that the employment relationship is inherently unbalanced, simply by virtue of the fact that one party gets to boss the other around.
Suppose that the following conditions were met
* Full employment, so that the cost to a worker of finding a new job is no greater than the cost to an employer of hiring a replacement
* A minimum wage adequate to allow a decent living standard without requiring acceptance of degrading working conditions
* A universal basic income sufficient to ensure that, even without working no-one need be poor
* A default employment contract, incorporating prohibitions on sexual harassment, rights to regular breaks and so on, unless these are explicitly contracted out
Would we then feel that legislative restrictions on employment contracts were needed, and, if so, which and why? Or, is the question badly posed in some way
I can think of two ways to argue that the question might be badly posed.
The first is that capitalism could not sustain such conditions, and so the question could never arise in practice. For example, it might be argued that the tax rates required to finance a UBI would not be consistent with a high (post-tax) minimum wage, assuming that capitalists still had to earn a positive rate of return. I’m not convinced of this, especially since developed countries seemed fairly close to meeting these conditions towards the end of the postwar boom. But, arguably, that’s why the boom ended.
A second response, which I find more appealing, is that such conditions would give workers sufficient bargaining power to demand union representation, and that union contracts would embody the standard protections.
But I’m also attracted to a third view, one which would give a little more ground to the BHL position, though at quite a high price. That is the view that, if only we had the substantial measure of economic equality described in the conditions above, we could indeed dispense with a lot of government intervention, and thereby enjoy more freedom in matters such as contracting over working conditions (or, as discussed in another thread, selling kidneys).
I’m not convinced that this is right, but I think a lot of the heat in the debate reflects the extreme inequality of current conditions, particularly in the US. The BHL side of the debate wants to believe that a modest tweak to current conditions would provide sufficient independence to make free contracting on equal terms a meaningful concept. The CT side mostly takes it for granted that the required degree of equality can’t be achieved in practice, and that it’s therefore silly to concede anything to demands for freedom of contract.
Obviously, I think CT has had the better of the debate. Still I’m attracted to the idea that a more equal society would also be one in which there was less need for detailed and prescriptive government interventions. Against this, I share the intuition that bosses will always be bossy and (at least some) will always try to abuse their position.
So, I’ll leave it there, and request civil discussion,
John Quiggin 
To have UBI without minimum wage, it would be necessary to have a mechanizam for countering overwhelming employee power to negotiate. I would reccomend, in some situation where political power is above oligarchal power, to implement a clause:new tax rate=tax rate + unemployment rate*2. Well i would reccomend that formula at the present too.
P.S. For TerjeP and liberaterians; Remember that tax is applyed only to profits, not on operating expenses, so it would affect only savings.
Quasi relgious deducations from rational actors and 0 transaction costs suck. Its a good enough aproximation in many circumstances, labour conditions is obviously not one of them…..
@Ikonoclast
Clearly you were not paying attention and PML has rightly taken you to task for that. I’ll deal with one or two more minor points.
I don’t buy the aggregate demand argument but let’s humour it regardless. If we lower the minimum wage by phasing in a UBI or if we keep the minimum wage and nullify it’s price impact on labour demand via a NPT then in both cases the aggregate income of the workers effected ought to be higher. So any suggestion that aggregate demand will be lowered is a straw man.
Governments can raise armies. They can also disband them. The huge number of soldiers disbanded from armies at the end of WWII did not lead to high unemployment due to a decline in aggregate demand.
The notion that people do useful things besides paid employment isn’t in dispute. Asserting that it is in dispute is again a straw man argument.
Your suggestion that a minimum wage of 0.01 cent a day would find no takers seems an odd remark. If people don’t accept the legislated minimum then employers either go without workers or bid above the minimum. And in any case we already know that if the circumstances are right and the work is purposeful then many people will work for absolutely nothing. It’s called volunteering. If you like the work and also get paid some travel money it doesn’t make you less likely to engage than if you got nothing. It makes engagement more likely.
Critical Thinker – So if the unemployment rate is 50% we should have a 100% tax. Ensuring no business is profitable. Ensuring there is no business. Ensuring unemployment remains ridiculously high. Forgive me if I don’t embrace your prescribed madness.
To fund Australia’s unemployment of around 480,000 with a reasonable income of, say, $25,000 per person would cost $12 billion. This could be funded by a 4% universal duty on imports of goods and services. If you implemented such a scheme you would have to have a very vigorous policy to ensure that the unemployed figure did not rise to 10%.
I prefer this mechanism for funding the unemployment benefit as it provides a soft but natural balancing force. As unemployment rises exports usually fall and the balance of trade usually goes negative. A duty on imports provides a deterent to imports favouring local production. If unemployment falls then the economy is stronger and imports are more affordable. The cost of a universal import duty is shared across economy fairly evenly.
With such a policy a fair standard of living for the unemployed is fully funded. There then just remains the task of providing work for all and ensuring that those who can work take up the available opportunities. That is a more difficult task.
So I believe that the combination of
An employment bill of rights
An automatic standard of living derived minimum income
Unemployment funded from a universal duty on imports of goods and services
Government policy dynamically directed to achieve zero unemployment
……provides a workable solution to the question. So if the question is badly posed, it is still rational.
So PML proposes a negative payroll tax! Another handout for business! It’s funny how neolibs and business graduates always favour subsidies for the capitalists. Assistance for the unemployed or any other needy class must always be indirect according to these thinkers. The assistance must always be channeled through capitalists and owners thus giving them maximum opportunity to rent seek on the way. That is the real rationale of all such proposals. Negative gearing is another example of this “give through the owner class so they can rent seek” philosophy. it’s about time we slouighed off these tired old capitalist tricks.
I would certainly favour removal of the payroll tax but not implementation of a negative one.
Ernestine’s persistent attempts to debunk macroeconomics are quaintly Quixotic and very amusing.
@TerjeP
“And in any case we already know that if the circumstances are right and the work is purposeful then many people will work for absolutely nothing.”
Nice way to assume away the problem – the supply-siders dream world.
Yeah Wikipedia wouldn’t have been allowed in a social democrat nirvana. All that purposeful work for zero pay. Just evil.
@TerjeP
Using wikipedia as an example of people willing to work for free is bogus, are you actually being serious here?
That seems to be a rather unthinking remark. Yes it is a subsidy but not for capitalists in a general sense. It still has to be funded and whether it is funded by spending cuts to welfare (due to reduced unemployment) a general increase in corporation tax or by some other means needs to be resolved before you can say much about who is a net beneficiary. Clearly though the policy as articulated by PML is designed to advantage low skilled marginal workers suffering involuntary unemployment. So to criticise it as a subsidy to capitalists is a needlessly cynical reflex.
In many ways it is comparable in concept to a carbon price. It uses a price signal instituted by the government to encourage the private sector to efficiently solve what it considers to be a social problem. I personally think unemployment is a vastly more significant social problem than CO2 emissions but that is another matter.
And TerjeP forgets to prove that contributers to Wikipedia have zero life time wealth and zero life time debt.
If the work is purposeful to those involved then people often work for free. I give up many hours a week as part of a voluntary organisation. I see many other people do the same thing. I’m not making this stuff up. People will work for nothing if they find the activity meaningful. If you don’t believe this then open your eyes. And if you think paying people some travel money or offering them a little training along the way will suddenly discourage them then I think you are mistaken.
My reply to Tom is in moderation. Not sure why.
@TerjeP
I partly agree to your comment, people editing wikipedia (including net users from all over the world) are doing it for free. However the reason I find your example critical is because people don’t edit the wikipedia as a full time job. They will usually do it as a leisure or desire to contribute their personal knowledge. I personally know people who spends at least 1 day per week doing volunteer work, but that doesn’t equate to people don’t need a paid job.
In fact, people who works for free as well as having a paid job proves that they are willing to “work for free” only to the extent that they have enough money to get by from their paid job.
corrections: “I find your example critical”
should be: “I’m critical of your example”
@TerjeP
It’s not an unthinking remark, TerjeP. (By the way, I admire your courage in commenting on a blog where you get a lot of people against your views. I am not sure I would have the courage or maybe patience and persistence to comment regularly on Catallexy.)
As I said, I have noted in neoconservative and libertarian economic prescriptions a prediliction for indirect approaches to economic problems. These approaches have a consistent features. They deal democratic government and direct government action out of the game. I’ll write more on this sometime.
Tom – you seem to have lost track of the context. If somebody is paid a low wage but also receives a modest UBI then they may be satisifed to have the low paid work if it is meaningful and able to get by materially given the combination of the two. It may not be everything they aspire to but it may be enough to keep them engaged in making a contribution. Obviously people’s circumstances, skills and motivators vary and those that want to pay a low wage in a zero unemployment environment will have to keep that work as meaningful as possible or else bid more in wages.
@TerjeP
Interestingly Terje, there is a body of literature suggesting that paying volunteers does not increase volunteering and in fact decreases it. This is related to the literature on motivation and the interplay between monetary and non-monetary motivation. Obviously, paying volunteers a high enough rate will increase motivation but at that point it is called employment and not volunteering.
“Obviously, paying volunteers a high enough rate will increase motivation but at that point it is called employment and not volunteering.”
However in the psychological literature this is a switch from intrinsic to extrinsic motivation. It is not at all obvious that paying a “high enough” rate will incearse motivation. At bet it changes motivation and, in fact, may decrease the motivation to perform the ‘work’. It may increase the motivation to get money.
In an educational context, paying students for grades may change their intrinsic motivation to learn to an external motivation to pass the course. Learning becomes tangential? I don’t know if anyone has checked this out but it certainly follows from theory.
I think Danial Ariely’s first book–which ref I have apparently lost–deals with this in a behavioural economics framework.
Good point. Better to have someone that wishes to do the right thing, than having to incentivize the unwilling.
@TerjeP
@TerjeP
Correct if you asume that corporations would not be incentivized to solve the unemployment problem way before it reaches 30%. Corps would solve the problem way faster then the government because they hold the power over government and even if not themselves thy would force the government to do it for them.Very simple.
If the person receive modest UBI as well as having a low paid (or unpaid) job while able to get by materially would mean that at least the person is unable to get by without the income from UBI. So assuming that UBI exist, it would need to be funded by the government through taxation. Several questions now arises:
1. If an organisation is employing somebody to do work for them, why would the government have to pay for their labour cost?
2. If such condition applies where UBI will also be paid to employed workforce, is there a means test for receiving UBI? If so how can the scheme avoid being exploited by the market? E.g. setting the industry wage level artificially low while relying on UBI to provide the income necessary to satisfy the household materially needs.
3. If UBI also applied to employed workforce, is taxation associated with UBI elastic to meet obligation of UBI?
4. Assuming an organisation is not-for-profit organisation and the people applied to work there is doing so for volunteering or community service purposes (since zero unemployment is assumed by the BHLs). Would the purpose and meaning of volunteer work be defeated?
5. If the individual accepts the low wage work because the individual knows he/she can pass the means test to receive UBI (remember zero unemployment is assumed). What would be the reason for the public to provide the individual with UBI? To put it in the usual libertarian speaking, why should we pay for other people when they choose to accept low wage and accept being exploited by the market?
So far these questions arises in my head from your reply. In my opinion UBI is best to act like unemployment benefit, indeed the BHLs initially suggested UBI as an alternative and option for the employees to leave employment if he/she faces coercion in workplace (to provide freedom of choice for employees as a protection to workplace coercion). I would not think they meant UBI to be provided for everyone even the employed.
If such that there is zero unemployment, a person looking for low paid or unpaid work because the person finds it a meaning job should not receive UBI. If so, this also means that the person have sustantial wealth to allow the person to not receive enough income for necessary material consumption.
Th fallacies in the Negative Payroll Tax notion are that
a) ultimately everyone has to eat, so the gross minimum income base line amount is relatively constant for any one level of unemployment, regardless of how it is funded. If business pays a small amount and the government tops that up, the top up has to be raised somehow, and that falls on the community which ultimately falls on business turnover. Nothing is gained.
b) the argument that providing business with cheap labour somehow solves the unemployment problem is false because business will let go more expensive employees in favour of the cheaper ones. Employment level constant. Where there will be a small difference is that richer business people will take on desperate people as domestic servants to make their lives easier.
c) the argument that people deliver a constant level of performance regardless of how badly you treat them is very false, and that if you pay people less then they will work harder is even more so. (Else why do executives get performance bonuses)
The whole thing is an exercise in wishful thinking.
The only real issue is that of incentivising people to move from income support to full or parttime work at a different income level.
One of the things that PML has said that I fully agree with is that self employment is the best model. And to that end there are practical things that we can do.
I am going to add to my model that Self Employment should be a High School subject before year 9. Everyone should learn the basics of running a small business and understand the notion of being a self employed contractor. if people themselves never become a self employed contractors they will by default have the knowledge to take on contractors through their lives with more confidence and knowledge of the pitfalls.
I would venture to say that the knowledge of how to be a self employed person instilled in people from high school level would provide the confidence to earn a living independently, and would at least halve the unemployment level.
The other thing that I was thinking was for there to be a social score card with a penalty tax rate for negative scores. but I can see plenty of problems with that.
Thinking.
I’ve thought about it a bit more. What I would try to incentivise people off income support is a requirement to engage in re-employment courses or self employment courses, two or three days a week, and then apply a diminishing level of income support which moves from generous to meagre.
That is for single poeple. Family bread winers require a different model which I have no idea for yet.
At the bottom end of the “incentivisation programme” for individuals, after one year on income support those who choose to remain being supported by the community would be inducted into a “Land Army” where they would be organised to do useful work around the country while continuing to receive training for employment opportunities.
@BilB #24
Please widen your thinking, I don’t disagree with the fact that there are people who uses unemployment benefits as a source of income to not work, however that is only a proportion of the unemployed (very small proportion in my opinion). I doubt that you believe the near 12% unemployment rate for the 15 – 24 age group and the people that are underemployed are all lazy or lack necessary skills.
I agree, Tom. Most people want to work. It is only some who have an extended problem. People in that group will have a very large range of special circumstances which our compassionate system needs to cater for. This is our social contract.
Youth unemployment is a difficult area whichwill require some very clear innovative thinking, and understanding, to resolve. This is very specifically an empathy failure of the command generation. The young highly media technology driven generation have very different needs to that of the older physical consumer products driven generation who have control over industry, government and infrastructure.
The NBN is the first real departure from traditional industry that plays to the strengths of the young, and its full implementation will see a significant shift in unemployment trends. It is no wonder that the arch conservative Coalition want to kill off this information highway.
So I do not believe that the 12% 15-24 underemployed are lazy. They just have different expectations and do not wll want to be builders labourers, or process workers. They want to be graphics people, rock stars, sports stars, computer games builders, etc. What is missing is the high speed cross communication pipe line that will allow all of this type of genius to blossom. Vital in amoungst this is the self employment thread as I have said above. The knowledge of how to commercialise individual exploits which is only now beginning to be developed with the Creative Industries Academic theme now under way.
@BilB
While agreeing self employment can help the youth unemployment problem Australia is facing, I believe it does have it’s limits. There are a number of cases of successful business created by the youth age group, often including innovative business ideas as well.
With that being said, there are some issues in regards to youth self employment:
1. It’s hard to believe there will be unlimited innovative ideas
2. Lack of work experience and understanding can create business failures which can be quite damaging to the youth’s future e.g. declaration of bankruptcy
3. Some business models, such as e-businesses (from impression, a business model often used by youth), while successful, does not always employ much people
4. One of the biggest limits, which is that some industries are very difficult to enter, due to competition and the ability to enact oppressive business behaviours by monopolies
While self employment have it’s benefits, these above issues are difficult to address.
With regards to the Art industry (music, art etc.), it’s a very difficult industry. The employment opportunity is the lowest compared to all other industries. In my opinion, demand for art is just not enough, especially in a capitalist society where people are busy working, as well as the culture does not emphasis the importance of art.
Tom,
Being self employed does not necessarily require innovation. When I was at high school I earnt quite a lot of money repairing the upholstery at the local milk bar. I knew a bit about sewing because we did a fair bit in first class primary school in New Guinea, a skill which I used many times. I made many a marble bag in primary school, and I have done miles of French Knitting (cotton real spool and 4 nails). So some knowledge of sewing, knowledge of the use of contact adhesive, and access to a Singer sewing machine meant money to buy things.
The son of a friend of mine earnt a lot of money because he was good at arcade games, so he would build up credits on machines and sell them to other kids at half price.
Another guy I know and a friend, fresh out of high school, developed an electronic musical instrument. That became the Fairlight.
To be a business it does not require employing other people. Just feeding oneself and ones family is an excellent level of success, which feeds other families indirectly from materials and services supplies. (your point 3)
Business failure is not all bad, in fact it is seen in the tech world as being a right of passage to fail and learn. Bankruptcy is not a big deal for the young who do not have a mass of assets to protect and lose. It is much easier move on at that age. (your point 2)
The new field of Creative Industries (take a look at John Humphreys’ profile on his blog) covers a huge field of endeavour which is seen as playing a vital role in the future world of economic growth without resource consumption. This is what I mean about the rift of understanding between the young and the command generation (us). We just don’t get it, but fortunately they do.
@BilB
I must admit I missed the viability of small business such as those you suggested, a big failure on my account. With regards to having economic growth (depending on how growth is defined) without resource consumption, I’ll be spending more time to look into that, but I’m not so convinced at the moment
As TerjeP already pointed out, this isn’t a subsidy for “the capitalists” as it’s linked to the hiring that happens (including self employment). And where do you get off with that neolib crack?
Er… None of this helps a “needy class”, as such. It helps people not be needy. That is precisely why helping the needy directly is so problematic, because help like that only goes to the needy and cuts off if their situation ever improves – which makes for a poverty trap.
Didn’t you notice that all this is the beginning of a pathway towards making everybody more of a capitalist and an owner? Recall the Distributist G.K.Chesterton’s remark that “the trouble with capitalism is not that there are too many capitalists but that there are too few”. So of course it helps that group – along with helping everybody into that group.
It’s the opposite of rent seeking; it’s undoing a bias in the opposite direction.
As articulated by me and by Swales, it’s not designed for that, it just has more effect at that level, i.e. that’s just the way it works out after starting with different design objectives. However, Professor Phelps did start with those objectives, which led him to broadly the same solution – and, as one would expect, his reasoning and presentation didn’t bring out the other gains so much.
Of course – because those are part of the problem. Democratic government has an incentive to maintain the poor rather than promote them out of dependence, and direct action on the poor tends to create poverty traps (see my earlier comment).
No, in two respects:-
– The NPT approach deliberately bypasses the funding issue by using tax breaks instead (follow up the material I linked for detail on this). That’s why I prefer to call it a virtual rather than an actual or real wage subsidy.
– It is entirely realistic to fund an actual UBI through a revenue yielding portfolio once that has been built up, and indeed I envision this as one of the transitional stages on the way to full resourcing at the individual or mutual level.
Because the employer is not facing the true pattern of costs and benefits, since the spillover cost of unemployment is spread – a negative externality.
Not restricting it and having the labour market respond to it is the object of the exercise. It would be a false economy to divert this response, like pressing the accelerator and the brake at the same time.
This is a separate issue we need not go into in detail. Suffice it to say that personal taxes should not take the income source into account, just as benefit recipients with other income still pay tax in general.
Again, this is “orthogonal” to everything else. But a properly tuned UBI would deliver less than is needed to live, so such a volunteer would still need some private means or outside paid work to live.
See above – no means test. If there were one, it wouldn’t undo the labour market externality. And it’s not “we pay them”, it’s “we undo the load that has been thrown on them as an externality” – which is why “we” should, since it’s undoing something that makes an unfree market.
Then you have not followed the material up but are substituting your own preconceptions about it.
Well, the UBI phase ought to end as soon as that switch to private resourcing can be made. But until then, yes, of course those people should get that UBI. Just remember that it would be lower than “enough”, and that it is not the best initial phase.
Wrong. You didn’t follow up the reasoning or the further detail at the linked material, did you?
That amount is already a cost on everybody, from the need to fund unemployment benefits. So nothing is lost with an NPT – it’s the whole short term revenue neutral, loong term budget neutral thing I cover in the linked material and the other stuff that leads to in turn. Contrariwise, people hired or not fired under the lower NPT marginal employment costs end up doing more work than the zero when unemployed – which is why there is a gain there, leading to Swales’s finding that GDP would typically rise by about half as much as employment in percentage terms. There is a gain.
False. You made up the idea that only the previously unemployed qualify to generate the tax breaks. Read the material – it emphasises that NPT is an across the board thing, for everybody. And before you jump in with the usual next mistake, no, that does not mean it needs massive funding to cover everybody; look at the bits about virtual wage subsidy and revenue and budget neutrality.
Why on earth would you make that bit up? If anything, people would get more options to get out from under adverse conditions like that. Read the material and the other commernts if you want to see why.
Then stop making things up and look at the material that was really presented.
Please do not misrepresent me as “agreeing” with something I did not claim.
What I asserted was that more survival options would open up under an NPT or a limited UBI, one of them being a more realistic self employment option, and that this would discourage employers from offering poor conditions. But it would be just as bad to push everybody towards self employment as to push everybody towards working for despotic bosses, since some people would fare badly under each – just usually not the same people.
Whether they want to or not. Please don’t try to force people to be free.
No, it wouldn’t, unless and until the resources were there for them to apply. Without that it’s as realistic as farmers looking for tenancies when the landlords are switching to raising livestock – just having the skills is not enough.
By the way, that analogy is drawn from many independent cases in economic history, so it’s realistic.
Suffice it to say,PML, that I generally don’t agree with your thinking. Moreso not that you recant the value of self employment.
I will repeat that nothing is gained through this “mechanism”. It is false to say that more people will be employed simply because some people are cheaper for business to hire. There may be some gain but most likely efficiency is lost and costs go higher, no gain.
The long and the short of it is that we need more entrepreneurs finding more opportunity niches to operate in, niches that it takes time for big business to over ride or external competition to undermine.
I think that it is smoke and mirrors, PML. But in case I missed something explain it again below in compressed point form specifically highlighting where the employment is created and the commercial opportunities to absorb that labour is created.
@TerjeP “People will work for nothing if they find the activity meaningful.”
Terje is acting the innocent; obviously those that engage in unpaid work are not dependent on that work for income. Examples of unpaid work could include lawn mowing, weightlifting, bird watching and cake decorating.
ABS notes that unpaid work has no market value as “services emanating from unpaid work are not produced for the market, so there are no appropriate monetary prices to use in the valuation of these services. Accordingly, the System of National Accounts, 1993 (SNA) excludes the value of unpaid work from its definition of economic production..”
http://www.abs.gov.au/ausstats/abs@.nsf/Previousproducts/1301.0Feature%20Article451996?opendocument&tabname=Summary&prodno=1301.0&issue=1996&num=&view=
I repeat, that never was my position, and that was no recantation. For you to suggest that is to imply that I held a position I did not, and that is offensive. Do not misrepresent me.
I know you are repeating it. That is argument by repeated assertion, which is not a valid argument.
I, on the other hand, am not merely repeatedly denying what you put. I am repeatedly drawing your attention to the reasoning at the link I gave earlier and in the material it references – such as Professor Swales’s modelling, which is independent of mine. If you find flaws in that, by all means bring them out – but don’t just assert that there are flaws.
No. Follow the link. I have neither the space nor the time to achieve what you request in a simple comment, since you do not accept the summaries I have been able to post here. However, all that is already covered fully in the places I directed you to. By all means use that material.
I’ve had a bit of a read of your page on NPT, and it seems to me that you are treating employment one dimensionally,..as though it is an end in itself, not part of a large semi chaotic system.
@P.M.Lawrence
‘ people would get more options to get out from under adverse conditions like that.’
Yeah, lets hurt people more so they get strong incentives to get out from under it.
LOL
Understanding your reasoning i would recomend making tax rate for corporations to be Tax=tax rate+unemployment rate*2+rate of people under substinance income.
@TerjeP “People will work for nothing if they find the activity meaningful.”
Terje is acting the innocent; obviously those that engage in unpaid work are not dependent on that work for income. Examples of unpaid work could include lawn mowing, weightlifting, bird watching and cake decorating.
ABS notes that unpaid work has no market value as “services emanating from unpaid work are not produced for the market, so there are no appropriate monetary prices to use in the valuation of these services. Accordingly, the System of National Accounts, 1993 (SNA) excludes the value of unpaid work from its definition of economic production..”
Look again. Nowhere do I suggest putting incentives on people to take up any of these options, let alone hurting them more. The incentives go on actual and potential employers to offer work, which only flows through to workers in the self employment case – but no pressure is placed on the unemployed to stop receiving unemployment benefits, above and beyond what that situation already throws on them.
I respectfully suggest that you do not understand my reasoning. It is open to you to follow that up in what I have provided in these comments or in the material I linked to, or in what that material references.
Over and above that, by chance the Cambridge Society of Victoria is hosting some five minute talks on various topics this evening at Campari House, 23-25 Hardware Lane, Melbourne (6 p.m. for 6.30 p.m.), and I shall be talking about this. Some readers may find it convenient to get in at short notice – it’s $25 for platter food (including gourmet pizza), with drinks at bar prices.
Who is hurt by an NPT other than the taxpayer who has to fund it?
“Still I’m attracted to the idea that a more equal society would also be one in which there was less need for detailed and prescriptive government interventions. ”
I tend to agree and I assume you, JQ, know exactly why – the minimum wealth condition in a model of ‘freedom’ is much stronger than UBI and NPT however implemented. This model of ‘freedom’ has strong moral assumptions. The moral premise of this model of ‘freedom and private ownership’, never strictly applicable in reality, is nevertheless the fibre on which people have been raised. It is now worn very thin, particularly at the top of many societies. People are angry everywhere in ‘the free world’.
The mess is so big now that the German President felt obliged to publicly criticise the greed of the ‘leaders’ of the commercial world (usually called CEOs) and warned if things aren’t going to change regulatory measures may have to be considered. Note, the unemployed are not considered to be the problem but some of the employed, who call themselves ’employers’..
The French President announced plans to reduce the budget deficit by ca Euro7 billion. It is apparently not an easy job. Things look different for a Wall Street banker. J.P. Morgan announced the loss on its gambling (derivative) operations so far is about US$4 billion (could get higher). J.P. Morgan is still making profits! I don’t think it is necessary to multiply the Euro amount by 1.25 to arrive at US$ to make precise the problem with the numerical relationships.
Politicians and CEOs have their incomes determined by an ‘independent body’ (tribunal, remuneration committee respectively). No enterprise agreements for the public and private managers. Interesting.
But then, if monetary wealth is the absolute measurement of ‘value’ in a society one should not be surprised that rent-seeking, ‘independent bodies’ for some but not for others, and outright theft become the new norm.
The problem started with the deregulation of financial markets, and level playing field talk together with tax distortion arguments. This so-called micro-economic reform was, as you know, oddly uninformed by the then available economic literature.
Good on you for keeping public discussion open.
Exactly, that is why recomend those who benefit from it to pay for it and to prevent abuse.
TerjeP, Critical tinkerer, this is a misunderstanding. Taxpayers do not have to fund an NPT; it does not require funding – that’s an important part of the design. There are no new funds outgoing, just the existing outgoings on unemployment benefits until those drop, and the mechanism collects just as much tax immediately after it is implemented as just before – short term revenue neutrality – and thereafter any decline in tax collected is matched to declines in outgoings on unemployment benefits – long term budget neutrality (or a gain, if the GDP increases flow through to other parts of the revenue base). The only effects of this sort are that, since GST is allocated to the states and the federal government gets the reductions in outgoings, they would need to revise their intergovernmental transfers. But it’s no skin off the taxpayers’ noses.
Also, the only opportunities for “abuse” would be if someone who was not entitled claimed as working under it. But everybody is entitled if they are entitled to unemployment benefits. You would only get people who were not entitled if you set it up wrongly, with some people not covered. As for illegal immigrants and the like, well, they are being sought out anyway. As for completely fictitious people that employers might register, they wouldn’t have valid Tax File Numbers, and/or the employers wouldn’t have the NPT vouchers from the employees to submit along with their taxes.
@P.M.Lawrence
I really do not get problem you are trying to solve with NPT.?
I tried reading your recomendations at spectacle, but i can not get past the wrong assumptions there like ?of paying people to be unemployed and of penalising employers? which is just moralizing from nowhere.
Majority of people do not want to be morally dissabled by not working even if it pays less.
Employers employ because they need employees, not because it costs them. They will not employ uneeded people even if you compensate some of the costs.
We had had conditions similar to NPT when there was no worker income tax and no minimum wage in 18 and 19th century so what happened? Crises hit just as same, wages are offered at low and still unemploymentr was there.
Just what problem are you trying to solve, besides employers problem of production cost???
ANd if you say there would be no unemployment with NPTthen why not implement my formula if it would have no impact in your ideal market??
In my opinion, you just trying to regurtitate old formulas which bringing us the race to the bottom; Let’s reduce production costs other matters less important. Why not reduce cost by untaxing idustrial production and tax rent-seeking high? Since corporate and income low marginal tax is incentive to empty corporate budget and reduce workers pay by money going to menagers only, it hurts corporations, people and economy.
Why do not you study how low marginal taxes are incentives that made the high inequality possible and how it works against corporations, people and economic development? Try to figure that out and you could be famous, maybe Nobel, not some marginal ideas that were before.
@P.M.Lawrence
Here in USA employers got the choice to reduce labor cost by getting temp agency labor for menial work, permanently, so they fire better wage workers for low wage worker at the government cost (less SS and Medicare payments and tax) and economy cost (less buying power). Same with outsourcing to small business. It is a race to the bottom.
@P.M.Lawrence
If NPT is linked to unemployment (in aggregate) then businesses do have an incentive to fire people (create unemployment) and then rehire (not necessarily the same people) and get paid for it. In the corporate sector the ‘competition’ for profits (and bonuses) is such that there could be race for strategic head culls (contemporary management language) and smal business owners wouldn’t necessarily mind making more profit. There is a serious incentive compatibility problem.
Without further restrictions, your argument about the fiscal position does not hold.
However, if NPT is linked to economic conditions, experienced by a segment of businesses and considered temporary, and management’s performance is satisfactory with respect to a set of specified conditions (eg debt/equity ratio, business internal gini coefficient), then NPT could provide a mechanism in the area of industry policy. In other words, management would have to apply for NPT.