@JordNZ best way to talk yourself out of #UBI is listen to advocate list new taxes required
01 Apr 2016 Leave a comment
in economics, income redistribution, labour economics, labour supply, politics - New Zealand, poverty and inequality, Public Choice, public economics, welfare reform Tags: universal basic income
@garethmorgannz the @TaxpayersUnion #UBI report isn’t bonkers @JordNZ
31 Mar 2016 Leave a comment
in labour economics, politics - New Zealand, poverty and inequality, welfare reform Tags: child support, deadbeat dads, do gooders, expressive voting, New Zealand Labour Party, New Zealand superannuation, old-age pension, rational irrationality, single mothers, social insurance, universal basic income, welfare state
A clever man can climb out of the hole a wise man would not have fallen into. In responding to my Taxpayers’ Union paper on a Universal Basic Income, Gareth Morgan just kept digging.
His first response was to say a Universal Basic Income would not be implemented immediately. This avoids retirees taking home $50 per week less than currently under NZ Superannuation.
Gareth Morgan’s solution is to say that only those currently under 50 will have to rely on a Universal Basic Income.
Only people who are today under the age of 50 could be expected to retire under the UBI policy, the policy would not apply to existing superannuitants.
Generation Rent have to pay higher taxes to keep current retirees in the superannuation style they have become accustomed. Those aged over 50 are also grandfathered in to the existing level of income support from New Zealand Superannuation.
Home ownership rates among Millenials are on average 16 percentage points lower than those recorded by Generation X https://t.co/QNcCXvFbif—
ResolutionFoundation (@resfoundation) February 13, 2016
Generation Rent will have to save their Universal Basic Income so they do not live in poverty when they retire in as little as 15 years from the date of introduction. As Gareth Morgan explains when referring to 40-year-olds:
For the 25 years prior to retirement they will receive the UBI on top of their wages. If they save a good portion of it they will have nest egg at retirement which they can use in retirement to supplement the UBI (which is more modest than today’s NZ Super).
At least the Labour Party admitted that a Universal Basic Income of $11,000 per adult was inadequate and will have to be supplemented so that no one is left worse off:
After all, $11,000 is a lower income than what is currently paid out as part of New Zealand Super. If the figure is too low, then the benefits of security and freedom promised by a UBI may not be realised.
On the other hand, if the figure is pushed higher, taxes will have to rise, possibly to an unrealistically high figure. (Morgan’s $11,000 UBI is funded through a flat tax of 30%.) There is, therefore, a real feasibility-sufficiency trade-off.
It may be that a UBI has to be supplemented by other transfers to ensure that the most vulnerable groups have enough income.
As for single parents relying on a welfare benefit, they are $150 a week short under a Universal Basic Income. Where is Sue Bradford when you need her to go on about beneficiary bashing.
Gareth Morgan’s proposed solution to this $150 per week cut in the incomes of the needy is to suggest that the non-custodial parent of the child should give up part or all of their Universal Basic Income to support their child:
Each child has two parents, the UBI is paid to both whether they live together or not.
It is totally feasible that the UBI of both parents could be required to be directed to support the children in the event of separation. In the Kahuna the amount paid per family would be $22,000 after tax – more than is paid to a sole parent family now.
This hard line on child support will make being a non-custodial parent of a child a rather risky venture under a Universal Basic Income. A Universal Basic Income is supposed to make you feel very secure against misfortune as Gareth Morgan explained back in 2011:
…let’s agree on what is a minimum income every adult should have in order to live a dignified life and then see what flows from that. We begin by specifying the income level below which we are not prepared to see anyone having to live.
If you are the non-custodial parent and down on your luck – unemployed, sick or an invalid – you cannot rely on your Universal Basic Income as a backstop because part or all of that is already transferred to support your child.
Paternity suits will take on a new meaning because you can lose your Universal Basic Income. The Universal Basic Income with Gareth Morgan’s ad hoc amendments this week has strings attached on whether you or someone else receives your Universal Basic Income. That make or break decision will be up to the Family Court and the Child Support Agency at IRD.
I am not sure how a Universal Basic Income deals with deadbeat dads at home and living abroad. Central to its funding is abolition of the welfare state bureaucracy to save $2 billion.
Those down on their luck will not have a welfare state bureaucracy to turn to if their child support does not come through or have nothing to live on after their child support is paid.
Now let Gareth Morgan explain why he wanted to get rid of that welfare state bureaucracy and replace it with a Universal Basic Income:
We must finally admit that with all the paternalistic will in the world there is no chance that public servants can adequately identify and monitor eligibility for a needs-based benefit regime.
We should save ourselves the torture of continuously getting it wrong and designing an endless stream of discriminatory “fixes” to cover our mistakes in finding targeted perfection.
The reality is that people’s circumstances are dynamic and that they will change their behaviour to suit the design of the benefit regime making the chicken and egg nature of determining “needs” an exercise in futility.
The important thing is to be fair and to have a consensus on the level of income that we all have an unconditional entitlement to in order to live a dignified life.
Gareth Morgan seems to throw Generation Rent and non-custodial parents under the bus to deliver on his dream. They both have to give up much of their Universal Basic Income either to their children or their KiwiSaver to fill the growing number of gaps in his Big Kahuna. Their unconditional entitlement to be able to live a dignified life through a Universal Basic Income of $11,000 per adult has a lot of strings attached to it and cracks to fall through with no safety net.
Wear a condom, do not divorce and do not be under 50 are the secrets to enjoying a Universal Basic Income. If not, you are on your own. Your Universal Basic income is already spoken for.
Questions for @grantrobertson1 on the #UBI @JordNZ
30 Mar 2016 1 Comment
in labour economics, labour supply, politics - New Zealand, poverty and inequality, welfare reform Tags: flat rate tax, New Zealand Labour Party, top tax rate, universal basic income
Labor Party finance spokesman Grant Robertson yesterday ruled out an income rate tax of 50% to fund a Universal Basic Income. Labour is considering a Universal Basic Income. It released a background paper for that purpose as part of its Future of Work Commission.
Source: Taxpayers’ Union rubbishes Universal Basic Income idea | Stuff.co.nz.
Questions arise as to how the Labour Party will fund its Universal Basic Income after ruling out a tax rate of 50%. As Brain Easton said:
Many advocates put the UMI forward without doing the sums. Those who do find that the required tax rates are horrendous or the minimum income is so low that it is not a viable means of eliminating poverty. Among the latter are New Zealanders Douglas, Gareth Morgan and Keith Rankin.
The Labour Party’s background paper already has said that the Universal Basic Income proposed by the Morgan Foundation is insufficient because many beneficiaries and all retirees will be much worse off. They receive much more in income support under the existing welfare state and they would under a Universal Basic Income of $11,000 per adult as proposed by the Morgan Foundation.
The solution proposed by the Labour Party is a supplemental income transfers to ensure no one is worse under a Universal Basic Income. This will greatly increase the cost of a Universal Basic income in comparison to the Morgan Foundation proposals.
https://twitter.com/grantrobertson1/status/711758860659240960
A series of questions come to mind that the Labour Party and its finance spokesman Grant Robinson must answer if they are to go anywhere with a Universal Basic Income;
- Is not the point of a Universal Basic Income to replace the welfare state, not supplement it?
- How will the Labour Party fund its Universal Basic Income plus the supplemental income transfers without introducing a $8 billion tax on capital income (including the family home) as in the Morgan Foundation’s proposals?
- The Universal Basic Income proposed by the Morgan Foundation requires $13 billion in extra taxes ($8 billion from taxing capital and $5 billion from a 30% flat-rate income tax) so how much more to that will Labour need for a Universal Basic Income plus supplemental income transfers?
- What is the maximum top marginal income tax rate that Labour will consider to fund a Universal Basic Income?
- Will the Labour Party’s Universal Basic Income be funded by a flat rate income tax or a progressive income tax system?
Source: How we pay for a universal basic income – Whiteboard Wednesday.It would have been my first point
@garethmorgannz’s #UBI finishes the job on #GenerationRent @JordNZ
29 Mar 2016 Leave a comment
in fiscal policy, labour economics, labour supply, macroeconomics, politics - New Zealand, population economics, poverty and inequality Tags: Edward Prescott, New Zealand superannuation, old age pensions, social insurance, timing inconsistency, universal basic income, welfare state
Gareth Morgan revealed today a hitherto unnoticed design feature in his Universal Basic Income of $11,000 per annum. It will be phased in over a long time. That will mean that Generation Rent will continue to pay taxes to fund a universal old age pension for their parents and grandparents, but will not be fortunate enough to receive that themselves.
Source: Morgan Foundation (2016) Taxpayers Union Critique of the UBI just bonkers – again
They are not left of their own devices. Generation Rent is expected to save the Universal Basic Income they receive over their working lives to avoid living in poverty in their retirement. Does not strike me as a political winner.
The Morgan Foundation does not understand the implications of time inconsistency for retirement savings policy:
- Which is better? Save for your retirement through the share market or save to own your own home and then present yourself at the local social security office to collect your taxpayer funded old-age pension?
- Under this fine game of bluff, you bleed the taxpayer in your old age and pass on your debt-free home to your children.
This strategy of not saving much for retirement is rational for the less well-paid. The family home is exempt from income and asset testing for social security. If you lose you bet, sell your house and live off the capital. For ordinary workers, this is a good bet. The middle class might prefer to live in a more luxurious retirement.
For ordinary workers, whose wages are not a lot more than their old age pension from the government, a government funded pension is a good political gamble. The old-age pension for a couple in New Zealand is set at no less that 60% of average earnings.
Edward Prescott argues for compulsory retirement savings account albeit with important twists because it is otherwise irrational for many to save for their retirement against the background of a welfare state:
The reason we need to have mandatory retirement accounts is not because people are irrational, but precisely because they are perfectly rational — they know exactly what they are doing.
If, for example, somebody knows that they will be cared for in old age — even if they don’t save a nickel — then what is their incentive to save that nickel? Wouldn’t it be rational to spend that nickel instead?
…Without mandatory savings accounts we will not solve the time-inconsistency problem of people under-saving and becoming a welfare burden on their families and on the taxpayers. That’s exactly where we are now.
The brutal utilitarian calculus of @NoahSmith @livingwageNZ @berniesanders
29 Mar 2016 Leave a comment
in applied price theory, applied welfare economics, labour economics, minimum wage Tags: living wage
The bleeding heart concerns of the Left for job losses from economic policy changes such as from trade liberalisation disappears as soon as they discuss the losers from a living wage increase.
Instead of may the heavens may fall but a manufacturing job must not be lost from trade liberalisation, a brutal utilitarian calculus overtakes Noah Smith and the living wage movement about the small number of job losses that result from modest increases in the minimum wage.
Most are those who support the minimum wage shift gears their applied welfare economics in all other social context to emphasise how the losers should be given priority and greater weight when adding up the social gains and social losses of economic change.
The social cost of the minimum wage is not discussed in this way: how many jobs are lost and that these job losses are much more important than any gains to society.
All that is done is the number of jobs lost is compared with some other social metrics such as how much the wages go up for those that still have a job and that is enough to conclude that there is a socially beneficial change from a minimum wage increase.
Any low paid workers affected by the minimum wage increase are just reduced to numbers and added and subtracted with great ease and few moral compunctions about interpersonal comparisons of utility.
A minimum wage increase is not free if one worker loses their job. The Paretian Criterion states that welfare is said to increase or decrease if at least one person is made better off or worse off with no change in the positions of others.
As Rawls pointed out, a general problem that throws utilitarianism into question is some people’s interests, or even lives, can be sacrificed if doing so will maximize total satisfaction. As Rawls says:
[ utilitarianism] adopt[s] for society as a whole the principle of choice for one man… there is a sense in which classical utilitarianism fails to take seriously the distinction between persons.
Minimum wage advocates fail to take seriously that low paid workers who lose their jobs because of minimum wage increases are real living people who suffer when their interests are traded off for the greater good of their fellow low paid workers, some of whom come from much wealthier households.
It's pretty simple: Minimum Wage = Compulsory Unemployment http://t.co/6xiX6YCp9Z—
Mark J. Perry (@Mark_J_Perry) July 25, 2015
As Rawls pointed out, a general problem that throws utilitarianism into question is some people’s interests, or even lives, can be sacrificed if doing so will maximize total satisfaction. As Rawls says:
[ utilitarianism] adopt[s] for society as a whole the principle of choice for one man… there is a sense in which classical utilitarianism fails to take seriously the distinction between persons.
Minimum wage advocates fail to take seriously that low paid workers who lose their jobs because of minimum wage increases are real living people who suffer when their interests are traded off for the greater good of their fellow low paid workers, some of whom come from much wealthier households. Obviously the teenagers and adults thrown onto the scrapheap of society by an increased minimum wage don’t count in the brutal utilitarian calculus Noah Smith and the living wage movement employs.
All part of @BernieSanders’ good old days before the top 1% looted everything
26 Mar 2016 Leave a comment
in applied welfare economics, economic history, economics of media and culture, politics - USA, poverty and inequality, technological progress
@suemoroney the Maori economy is not $39 billion, it is much more @Maori_Party
26 Mar 2016 Leave a comment
in economic history, economics of education, human capital, labour economics, politics - New Zealand Tags: Maori economic development
Much of the non-European human capital in New Zealand is Maori and it far exceeded $39 billion 20 years ago or more. Attempts to quantify the Maori economy by counting up the value of Maori institutions and businesses distracts from the main priority for Maori economic development which is education, education, education.
Source: Lˆe Thi. Vˆan Tr`ınh, Estimating the monetary value of the stock of human capital for New Zealand, University of Canterbury PhD thesis (September 2006), Table 4.6: Aggregate human capital stock by ethnicity.
Unemployment rates across the OECD in 2015
26 Mar 2016 Leave a comment
in business cycles, economic growth, Euro crisis, global financial crisis (GFC), great recession, job search and matching, labour economics, macroeconomics, unemployment
Was Occupy Wall Street based on a measurement error?
26 Mar 2016 Leave a comment
in applied welfare economics, economic history, entrepreneurship, human capital, labour economics, poverty and inequality Tags: entrepreneurial alertness, superstar wages, superstars, top 0.1%, top 1%
Piketty and Saez (2003, updated) estimated the share of income held by the top 1% from 13 percent in 1991 to 23 percent in 2012. The new Bricker et al. research shows only a 7 percentage point increase to 18 percent in 2012. The share held by the super-rich, the top 0.1% has increased much at all.
Source: Measuring income and wealth at the top using administrative and survey data via How super-rich Americans get that way is changing – AEI | Pethokoukis Blog » AEIdeas.
Source: Measuring income and wealth at the top using administrative and survey data via How super-rich Americans get that way is changing – AEI | Pethokoukis Blog » AEIdeas.
The gender pay gap, adjusted and unadjusted, USA, UK, Australia, Germany and France
26 Mar 2016 Leave a comment
in discrimination, econometerics, gender, human capital, labour economics, labour supply, occupational choice Tags: gender wage gap
https://twitter.com/adchamberlain/status/712647716229111808
Source: Demystifying the Gender Pay Gap: Evidence from Glassdoor Salary Data – Glassdoor Economic Research via Wednesday evening links – AEI | Carpe Diem Blog » AEIdeas.
https://twitter.com/adchamberlain/status/713097526878953472
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Drug testing helps minority job applicants @jacindaardern
25 Mar 2016 Leave a comment
in discrimination, economics of information, entrepreneurship, human capital, labour economics, personnel economics Tags: asymmetric information, counter-signalling, employer discrimination, racial discrimination, screening, signalling, statistical discrimination
Statistical discrimination is a harsh mistress. If reliable measures of the quality of job applicants are unavailable for short-listing, such as credit checks, coarser, less reliable screening devices will be employed. That was the case when credit checks were prohibited in employment recruitment:
Looking at 74 million job listings between 2007 and 2013, Clifford and Shoag found that employers started to become pickier, especially in cities where there were a lot of workers with low credit scores. If a credit-check ban went into effect, job postings were more likely to ask for a bachelor’s degree, and to require additional years of experience.
There are other ways that employers could have also become more discerning, Shoag says. They might have started to rely on referrals or recommendations to make sure that applicants were high-quality. In the absence of credit information to establish trustworthiness, they may even have fallen back on racial stereotypes to screen candidates. The researchers couldn’t measure these tactics, but they’re possibilities.
Drug testing allows employers to dispel less accurate stereotypes about drug use among different ethnic and social groups. They increased hiring of minorities because a reliable measure became available of their drug use:
…after a pro-testing law is passed in a state, African-American employment increases in sectors that have high testing rates (mining, manufacturing, transportation, utilities, and government).
These increases are substantial: African-American employment in these industries increases by 7-30%. Because these industries tend to pay wage premia and to have larger firms offering better benefits, African-American wages and benefits coverage also increase. Real wages increase by 1.4-13% relative to whites. The largest shifts in employment and wages occur for low skilled African-American men.
I also find suggestive evidence that employers substitute white women for African-Americans in the absence of testing. Gains in hiring African-Americans in these sectors may have come at the expense of women, particularly in states with large African-American populations.
Employers test for drug use both for health and safety reasons and as a way of screening out less reliable employees. People who break the rules are not reliable employees and that includes taking drugs. In low skill jobs, what employers seek is a recruit who is friendly and reliable.
Testing of the skills of workers also showed similar results. What happened is that the ratio of black to white hirings do not change. The administration of these skills tests allowed the more productive of both white and black job applicants to be identified and hired.
Employers already had an accurate stereotype of the average skills of different ethnic groups. Administration of tests allow them to identify which members of each group were the most productive.
It is a standard result that statistical discrimination improves the chances of below-average applicants subject to the stereotype but harms those of above average quality. For that reason, applicants look for what methods of counter-signalling to show that they are indeed a quality applicant – make themselves stand out from the crowd.
Employers profit from developing screening devices that go beyond stereotypes to identify above-average applicants. They want screening devices that find those who do not otherwise stand out from the crowd because of difficulties in transferring credible information about their quality. This is a special difficulty with low-skilled vacancies because hiring is made based much more than on character than experience.
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