You want the poor to have more money? Well, doh! Splash the cash

Phillip from London writes in to note that I'm really not a fan of the minimum wage. So, given that we don't want the poor starving in the streets, or that we might actually think there is some minimum income that a rich country should provide just because, what's the recommended Worstall method of achieving this? To which the …

[Awil Onmearse]

"The existence of the welfare state raises my reservation wage. That obviously raises the amount the company must pay me: two loaves of bread, not just one"

How many loaves of bread is always going to be much more a function of labour demand than the "reservation wage" with an engineered pool of unemployed.

"Sweden is a rather nice place to live. Eye-watering tax levels...."

Hardly. Not living in a Somali-esque dump has actual value too.

[Jason Hindle]

Life without too much fear....

Have the economists put a numeric value on that? I think that's what economies like Sweden achieve above all else. I suspect pretty much any woman who remembers Iraq, pre regime change, will have similar feelings. Then again, I found Sweden a bit sinister. The fate of all nations that strive for a utopian ideal?

[Awil Onmearse]

Re: Life without too much fear....

I've been here nearly quarter of a century, and I suppose I get the "sinister" angle especially the opaque bureaucracy rendered totally impenetrable by the equally opaque language. But it's most definitely not more "sinister" in hindsight than what we Brits would call "The Establishment" and their perpetual class warfare.

One gets the feeling after a while here that you have stepped into a "Stepford Wives" society, that there must be something fundamentally and insidiously wrong, because it's just too fecking clean and ordered. But it's an illusion - Sweden suffers the same societal problems as anywhere else, just the symptoms manifest themselves differently, or to a lesser extent.

More recently though the free-marketeers have been successfully attacking the working class as illustrated by the rise of fascist politics, like elsewhere in Europe. Using their media mouthpieces to instill immigrant-ageddon fears into the populace that nasty brown people will take away their summer houses and shit in their surströmming. In a country with such a massive immigrant population and a history of populist authoritarianism, this is a very dangerous game indeed

For my part, living somewhere where working-class urban families can own a summer house in the countryside, can have their children looked after while at work without being bankrupted and the unions are together in a social contract with businesses and the government, made leaving Thatcher's desperate wasteland of despair a no-brainer.

[Matt Bryant]

Re: Awil Onmebiketogetbettersocial Re: Life without too much fear....

".....free-marketeers have been successfully attacking the working class as illustrated by the rise of fascist politic...." and there's the kneejerk Leftie response to any form of argument they don't wish to consider - "Fascist!" Just like Germany, Sweden needs a high level of immigration to keep the number of workers increasing to pay for the social system as the current workforce retires. It's like a pyramid or Ponzi scheme, and - like the majority of such scams - is destined to reach a point where the base is not broad enough to support the rest of the pyramid. In the UK the demographics are different, we don't need immigration as badly as Sweden or Germany, but we are already seeing the problems of reaching a tipping point with such issues as the State Pension. The Swedes are merely kicking the can down the road and pretending it is moral superiority rather than economic naivete.

".....made leaving Thatcher's desperate wasteland...." Well there's the solution, then - simply ship all our "socially-enlightened" slackers and wasters to Sweden.

[Awil Onmearse]

Re: Awil Onmebiketogetbettersocial Life without too much fear....

Dude, one small town in Sweden called Södertälje took in more refugees from your Iraq misadventure then your entire miserable shithole of a country and it's northern neighbour combined.

Your ignorance on the well documented rise of fascism in Europe is par for the course for an ignoramus, I suppose.

[werdsmith]

Re: Awil Onmebiketogetbettersocial Life without too much fear....

I spent some good times in Sweden working there in the 1990s, very impressive place. Interesting to see how they made a success of manufacturing and engineering, whilst similar neighbours that had plentiful oil did much less of that. Turns out that some of this manufacturing wasn't sustainable for a nation of less than 10 million heads. But to this day, I promise you can engineer something as good as you can, then pass it to their engineers and they will find ways to improve it. Geely know this.

I was also impressed that I could go and enrol on a degree and not have to pay a penny. I am disappointed that education didn't come up as a major manifesto point at the last UK election. Education is number 1, and your best path out of the social mires over the long term.

The size of the population is the important thing. I don't believe that you could apply a Swedish taxation/social model to a nation with 60 million+ population.

However, if Scotland would (please) hurry up and break any Westminster ties so that they are only ruled by Germany then the Swedish style system might work well there (although not the Systembolaget, there is no way the Scots are going to accept that sort of state interference - minimum unit price is bad enough).

[chrisf1]

Tax and spend!

Nice review. Although on:

By taxing we make ourselves poorer (the levying of any tax stops some economic activity from happening, however glorious the cause we're going to spend the money on).

At some point a tax in a democracy is what we , en masse, choose to spend our money on.

[Tim Worstal]

Re: Tax and spend!

Indeed. It's not some killer argument against taxing. Rather, it's just a reminder that a tax, any tax, has its economic cost. From which the lesson I take is that whatever we decide to spend the tax money on had better be worth more than the activity we've just destroyed by taxing in the first place.

A rough rule of thumb is that, at current taxation levels, raising £1 in tax destroys £1.30, £1.40, in economic activity. There's very definitely things we can spend tax upon (keeping those ravenous French hordes from our shores for example) which are worth more than £1.40 for each £1 we spend on them.

Other things that current tax money is spent upon, or some proposals for spending, not so much.

[Martin an gof]

Re: Tax and spend!

Never having studied economics beyond a "business" module to an electronics degree in the 1980s, I really enjoy your articles - even if I don't always agree with either your sentiments or your solutions. Apologies if I seem to have muddled thinking in what follows. This article was particularly interesting, and a question was forming in my mind, crystalised when you said:

A rough rule of thumb is that, at current taxation levels, raising £1 in tax destroys £1.30, £1.40, in economic activity

I've often had the feeling that certain flavours of government see that argument slightly differently, and it ties in with my unease about the VAT system as we have it in the UK. The fact is that if you give more money to the poor they are much more likely to spend it on life's necessities - many of which are VAT exempt - than on life's luxuries. New school uniform for the children, slightly better quality sausages for tea, putting a bit aside in the building society "for a rainy day", that sort of thing. I am not of the school of thought that there are hordes of lazy layabouts "out there" spending their benefits on fags, Sky Sports and foreign holidays, despite living in one of the country's poorest areas. A few, perhaps, but not hordes.

Taking money away from the rich conversely reduces their spend on luxury items which are all subject to VAT or a similar tax and hence it reduces total tax take, and some governments are afraid of that, ignoring the economic benefit to (say) the farmers who farm the pigs that end up in the sausages. These governments also use the argument that richer people, taxed more heavily, can take their "incomes" (and hence tax) elsewhere, but I wonder if that really has much of a genuine effect?

This is related to the dog-in-the-manger, or the "I'm alright Jack" attitude I seem to hear more and more often, particularly from those who don't have to worry whether they will have to cut back on the shopping next week in order to afford the travel costs to work. This attitude usually manifests itself in arguments such as "I pay for private health insurance, so why should I also contribute to the NHS?" or (and I get really cross about this one) "I have taken the decision not to have children, so why should I pay to educate yours?"

The problem with the tax system is that it seems many people don't actually understand what it is, how it works and what it's for. Your "tax and redistribute" concentrates for simplicity's sake on direct redistribution, but ignores the vast benefit of indirect distribution afforded in this once enlightened country by the very existence of state-funded schools and the fantastic National Health Service which has paid my family back, just in the case of one child, probably more than I have personally paid in over the 20-odd years I've been working. We have friends in two other families who have benefitted even more than we have.

I also have long wondered if, in these days of everything computerised, there's a way of avoiding the high marginal tax rates that you correctly point out can be a disincentive to some kinds of work. Can we not have such a fine-grained progressive tax system that there are effectively no step-changes at all? Stamp Duty on house sales would be an excellent place to try it out because the step-changes in that tax very obviously distort the market - if house prices in a particular street are around the £250,000 mark (for example) then it is nigh-on impossible for any individual house to break through that £250,000 barrier unless it can make the jump to somewhere around £270,000 - this is a big ask if you're trying to justify adding a kitchen extension!

Might fine-graining income tax also help to alleviate the problem of marginal tax increases, particularly as benefits begin to be withdrawn?

Crumbs, sorry, didn't mean to get carried away. Better go do some work!

M.

[Tim Worstal]

Re: Tax and spend!

We usually think of VAT working the other way around. The rich save more money (not subject to VAT) and the poor spend all their money (much subject to VAT). As it turns our,m empirically, it's a bit of a wash. As you note may of the things that the poor will spend upon do not carry VAT. And the rich still save a higher portion of their incomes.

So, in actual effect, VAT is roughly neither regressive nor progressive. That's for the UK though. Change what is subject to VAT (Sweden's VAT covers food I think?) and you can easily make it regressive, meaning that the effect you describe comes into play.

" but ignores the vast benefit of indirect distribution afforded in this once enlightened country by the very existence of state-funded schools and the fantastic National Health Service "

One interesting calculation which I've regularly mentioned, even if not around here. The TUC o0nce worked it all out.

Income, between the averages of the top 10% and the average of the bottom 10%, is about 30:1. When you get to consumption, so including all tax and benefits, and also the effects of things like the NHS and free schooling, is about 6:1. That's a pretty highly redistributive system over all.....

[Doctor Syntax]

Re: Tax and spend!

"this is a big ask if you're trying to justify adding a kitchen extension"

That depends on why you want the kitchen extension. Are you wanting it because to satisfy your desire to live in a house with a bigger kitchen or as an investment?

[Quip]

Re: Tax and spend!

"Duty on house sales would be an excellent place to try it out because the step-changes in that tax very obviously distort the market "

It may have escaped your notice but that particular problem was fixed nearly a year ago. (and in July another anomaly re tax relief on BTLs was addressed, if not yet actually implimented.)

[David Roberts]

Re: Tax and spend!

"Stamp Duty on house sales would be an excellent place to try it out because the step-changes in that tax very obviously distort the market - if house prices in a particular street are around the £250,000 mark (for example) then it is nigh-on impossible for any individual house to break through that £250,000 barrier unless it can make the jump to somewhere around £270,000 - this is a big ask if you're trying to justify adding a kitchen extension!"

Haven't the government already done this? A year or so back?

No step change at 250k any more and the price distribution has smoothed out. An apparent side effect is that once prices started moving past 250k they achieved a bit of momentum and were soon pushing 270k.

The cost/price increase justification applies mainly to developers (professional and amateur). If you need a bigger kitchen for quality of life and you aren't planning to move before you have your use out of it then increase in capital value is just an added bonus . Most assets depreciate from new so housing is in some ways a special case.

[Martin an gof]

Re: Tax and spend!

Re: stamp duty, yes, sorry, I'd somehow missed that point. Ho hum. Perhaps not exactly what I meant by "fine grained" but a whole lot better than the previous situation.

Regarding adding kitchen extensions (or in our case a kitchen / dining / bathroom / several bedroom extension) you always have to have an eye on the effect on the "market" value of the house even if (like us) it is not your intention to put the house to the market any time in the next four decades. Morgages (for one) rely on such things ;-)

M.

[Doctor Syntax]

Re: Tax and spend!

"From which the lesson I take is that whatever we decide to spend the tax money on had better be worth more than the activity we've just destroyed by taxing in the first place."

Which puts us right back with the problem of computing utility, which is what you need to determine the "worth more" bit.

[Anonymous Coward]

Re: Tax and spend!

I must admit that I am no expect on economics but your rough rule of thumb must completely ignore what they spend the tax upon.

In the UK for example the taxes paid for all manner of things including CEGB, BR, BT, HMPO etc we have since sold all these off to people who mostly do not pay taxes here and have all had to pay more for the same service ever since. Also your premise seems to fail to take all the staff training that is still making money albeit for the private sector now.

That £1 of tax invested in infrastructure pays dividends and allows all sorts of new businesses to be created off the back of a not for profit state infrastructure. If they had not collected the tax then all those business would have failed and the loss in job and necessary infrastructure would have cost much more.

Does current economics as a subject make no reference to history at all then? does the money appear from nowhere ?

[Charles Manning]

Need to tax fun

For there to be fairness, we need to tax fun.

Person A: spends copious hours learning, getting good marks, goes to university gets into the workforce at age 23 with a mountain of debt, no income for their student years and a nice tax burden. A works hard, including extra studies/research on week ends to keep current with a complex technical job. A does not get paid overtime.

Person B: dicks around at school, LOLs with his pisshead mates and does not go to university, starts earning at 16 with a whole lot of dole and social services paid for by A. B does not have to keep refreshing skills to keep earning. B never works more than 9-5 unless he gets paid overtime.

We're told that this is fair because A has surplus income and B has a need (really a want) for some of that.

The only way for this to be fair would be if B was taxed some of his leisure to give it back to A. But how do you tax leisure?

Easy: B can come mow A's lawn and do other chores which allows A to get some leisure time back.

[Sam Liddicott]

Re: Need to tax fun

Absolutely, tax the leisure.

If they want the money, they MUST sacrifice the time.

Some would prefer to keep the time and not have the money.

http://blog.sam.liddicott.com/2014/01/a-plea-for-social-equality.html

True democratic wealth is time: everybody has 24 hours of it a day.

The significant social inequality of the day is that some peoples time is not exchangeable for much value, while other peoples time is very much in demand and exchangeable at a high rate.

I simplify somewhat, for a person can sometimes exert control over their exchange rate by means of how much effort they put in; but even at maximum effort there is still a large disparity between the exchangeable values of the time of different people, or in different locations.

In the corrupt imperial west there is a notion that 8 hours of effort per day should be exchangeable for necessities of life (and some discretionary comforts) but the opportunity to make this exchange is not granted equally to all people (and nor is the standard of life).

In the name of social conscience and humanity, this inequality is often reasonably addressed by moving a surfeit of value from those who found favourable exchange, to those who who found a poor rate of exchange.

Yet paradoxically, the extreme inequality of those who found no exchange is addressed by an attempt to provide the value of life necessities with no exchange required.

This does not introduce equality but instead introduces further inequality for in transferring the surfeit of value to those who find no exchange, it leaves them with a surfeit of time. It reduces them to the status of beggar and provides no way to contribute.

It would be more equitable to provide opportunity of exchange to those who found no exchange, making all equal contributors to society from the universal and collective wealth of time, and condemning none to the status of beggar.

TLDR: Or in other words, why in the UK when taxes are going up, and public works are going down, why, are we paying people to do nothing?

It is no socialist triumph to lose the working class and gain another idle class (however unwilling).

Let the time of each be valued equally - sufficient for life, and let all contribute.

And here's hoping for a shorter working day for all, enough time for dancing and singing.

[Dr. Mouse]

Re: Need to tax fun

Let the time of each be valued equally - sufficient for life, and let all contribute.

Interesting. However, if you value everyone's time equally, there is little incentive for a person to better themselves.

Let us take 2 people. A is highly intelligent, B is near the bottom end of the intelligence scale. A could be a scientists, or a mathematician, or an engineer. B can only do "menial" work, labouring or stacking shelves. In our system, A would go to university and get a good, well paid job. B would work for a supermarket. They would both do their best, to achieve the best wages and/or quality of life they possibly can.

Now, move to a world where all time is valued equally. While going to university, getting a good education and getting a good job can be their own rewards, they often come with a great deal of stress. As all jobs are valued equally, what is to stop A from taking a job which does not tax him? He could work as a low-end office worker, pushing papers. Boring, yes, but easy and stress free. He can coast through life, getting paid exactly the same as someone of the same intelligence who chooses to work hard. He is also depriving the world of his contribution. Meanwhile, B is in the same position as before, albeit with possibly a little more pay.

So, to make this fair, we would need to grade people on their abilities, and pay them in relation to the "effort" they put in, and how close to their maximum potential they are working. But how would one objectively measure this?

So, as you can see, this is not a simple system to administer fairly. It would be easier to administer it fairly than the current system, but is more likely to create an unfair system where effort is not rewarded.

[Anonymous Coward]

Re: Need to tax fun

@Charles Manning

You assessment is both flawed and niave:-

Person A and B are the same age, Person B is paying for person A to attend higher education until Person A starts paying tax. Even with the loan system Person A is relying upon a loan which is of course obtained from tax payers. Yes the tudents pay some interest but typically it is below what they would normally pay for a private loan for the same amount. Person A finally starts putting back into the system directly( assuming they didnt fail their course) but will typically start working at a rate only slightly above person B who has been working all this time and ideally will have been promoted or at least had their wages increase due to their greater experience. It will take quite a while before Person A has paid off his loan and caught up with the lost tax revenue assuming he didnt fail and that he studied something that person B could not do without the benefit of his higher education only then was the investment worth while for the country.

Person A is younger than Person B and this one is even more unbalanced against person B, he never got to go for higher education and has spent years paying tax so Person A can enter higher education. Person B is told that by paying for Person A to obtain higher education that results in more money comig into the country than just having 2 Person Bs however this requires that the education system is cutting edge and that Person A obtains a qualification that proves valuable to the country that funded his studies. Typically those Person As without a Science/Engineering qualification end up as middle managers robbing Person B of the job he would have got otherwise and also the incentive to keep plodding on in his go nowhere job.

Person B is the younger, his parents paid a percentage of the costs for Person A to attend higher education and so obtain either a job which brings in more money to the country or more typically restricts Person B from progressing, that is assuming he can find work that will allow him to eat and pay taxes simply because Person A wants someone to cut his lawn for him so voted to relax immigration laws flooding the country with cheap labour however Person A doesnt want to pay high taxes either because "hey cut the ladder off behind you"

Given that Science and Engineering are hard lots of students in higher education are allowed to study courses that result in the participant ending up as a middle/higher management, i.e. they took higher education in a subject where there are no jobs or little demand.

Given that Person B and his parents might have started out as a ignorant dicks doesn't change the fact that without them Person A would not have any access to higher education.

Before the masses had "free" access to higher education the old grammar school system cherry picked the very best and yet most were still limited to advanced rather than higher education up until the '60s. The pension generation of workers spent years when they werent killed in wars paying taxes so higher education and social support systems have been availible for a couple of generation. These people may also include your parents in which case they too paid a percentage towards giving you the chances they never had but then again maybe your parents werent in this country at that time in which case you are not only robbing Person B of his legacy of access to education but also you want him to slave for you too.

There are only so many jobs availible without contineous investment in people however this country is bringing in more people all the time, the premise being to pay the taxes for persions etc. However the chances are that during your lifetime the goverments have not been investing in the country and so will be unable to provide access to higher education for the masses for much longer. If there are more people than jobs then the wages and hence taxes paid are lower, additionally the people coming here are going to also want their children to have access higher education/social care etc and there is no longer any real investment in this country at all.

Resources are going out of the country and little money is coming back in again, we only lasted this long because we have been living on borrowed time because this country used to be so insanely rich and even with the last two major wars there was still money left to last this long.

Now a few hold all the money and all the family silver/publicly held assets we no longer have to sell to people who do not pay tax here. We stopped investing in Education, Science and Engineering etc because services is "cheaper" than industry because services only require semiskilled workers resulting in this country being on the last part of the slope to what we used to call 3rd world economies.

Those high tech companies still having a base in the UK will very soon be moving to where they can access cheap highly educated workers i.e. not here and all because you would prefer someone to cut your lawn than pay for education for you and your children.

[Anonymous Coward]

Re: Need to tax fun

Yes, Person A can have Person B cut his lawn when he pays B for the 9 years+ he was carried. Include the interest and the fact that the money has been devalued. Hell, I will cut your grass at £30000 per garden no problem gov'nor.

No one forced Person A to enter higher education, they chose that for themselves and person B had to pay for it. Staying at work outside of 9-5 is all Person A choice and to be frank if the company needs person A to work more than 9 to 5 he is preventing another tax paying person A from having a job.

Ignoring that going to University is the best time in your life you now have a career in a subject you presumably love, Person B never got a choice about anything he took the best job he could find and his pleasure is only at getting off shift.

Try having a little humility for the people who paid for all the best years of your life and a career in a subject you love. Yes you worked hard maybe even as hard as Person B but now your days are like a holiday compared to Person B's and his isn't going to change until he looses his job or he dies.

When the works dries up here you can take your qualifications and go to another country, Person B is stuck here in the mess you walked away from with no chance of escape for him or his children nor any compassion from the people he supported with the sweat of his brow. Shame on you

[dogged]

Re: Need to tax fun

Person B pays tax on his overtime. Person A spent that tax on getting pissed in the Student Union bar.

Person A can fuck right off.

[werdsmith]

Re: Need to tax fun

Regardless of how well you are educated and how nice the jobs are, most people still end up being held to ransom for the debts that they took on in order to support the lifestyle they expect.

Until we break the Mortgage shackle then we never become truly free.

So the only real way out is to do something extraordinary and gain true financial independence.

[nijam]

Re: Tax and spend!

> At some point a tax in a democracy is what we , en masse, choose to spend our money on.

Only in the most tenuous sense. In terms of what we get to vote on, there is little if any choice about tax levels and government expenditure.

[graeme leggett]

Jobs and unemployed

It strikes me that the desired target is a net income generating job for everyone who is 1) capable of working 2) available for work and 3) needs/desires to work.

(I'll leave to one side the mythical horde who are desirous of nothing more than self-medicating themselves through daytime tv because they are adequately supported by benefits - if they do truly exist in huge numbers, I've no idea how to sort them out)

Where do we find these jobs? Do we trust that if we invest in the right places, that jobs will beget supporting/related jobs which in turn will generate further cash to spent in the local economy until it's wall-to-wall artisan producers of 'stuff'?

At what stage can we aspire to Star Trekkian levels of utopian employment where no one need fear being unable to afford the latest zipperless jumpsuit?

Or is it that we are still in the long slog of development and these current generations have to accept that while better than a hundred years ago, it is not us but our descendents that will stand on the balconies of silver sky cities. And the only pause to their joy will be reflection on how their great-great grandparents suffered in call centres or as supermarket shelf stackers.

[ecofeco]

Re: Jobs and unemployed

The kinds of jobs that pay a decent living and are long term that do not rely on market whims were usually provided by macro engineering projects, something the Western Alliance of the U.S, GB, and Japan seem to longer have the balls for.

[Charles Manning]

Creating jobs is easy - creating value is hard.

Want to create jobs? Easy.

Ban all machinery for building roads. Don't allow people to use even picks and shovels. They can just use plastic teaspoons. That would create jobs building roads and making plastic teaspoons. Making a square foot of road a day would be a great accomplishment, as would whittling the 50 teaspoons each road worker would wear out.

But of course that does not generate value.

The reason we have stuff better than what our forefathers had 200 years ago is that we have been able to free up skilled people and surplus resources to create more value. 200 years ago not starving to death each winter was a major accomplishment. Now we can redirect our talents into creating much, much more.

As our technology gets better we can use more and more technological means to create value. That means people need to find new ways to generate value to make themselves useful.

[Anonymous Coward]

Re: Creating jobs is easy - creating value is hard.

Wrong, think for a moment about what you spend your extra money on, what percentage is essentials( food, heat, water, a roof over your head) and what luxuries and savings both of which are out of reach of the people of an increasing number in this country.

200 years ago the majority may have been as risk of dying during winter but that was because like you the minority believed they had more right to the wealth than anyone else and actively caused the deaths you are referring to.

Technology has not increased jobs infact it has done this opposite and as to value, this is always relative to the individual, name any wealth you like and I bet you will trade all you own for a weeks worth of food and water when you are starving.

I am not anti-technology it is simply that I dont believe people should have to starve when there is food going to waste only keep the prices high. We do not need to reduce population the west we already have far fewer children than the developing countries so why are you advocating starving people to obtain your meaningless value.

Your idea of value is tat, yes work is easy to create and can have lasting benefits see "the new deal" but unfortunately the people in power now are just like the ones 200 years ago and prefer to see their countrymen starve until a thinking goverment forces them to put back some of what they never had to work for.

[Anonymous Coward]

I know it would be more complicated but wouldn't NIT (negative income tax) be better than UBI?

[Tim Worstal]

Depends how much you worry about marginal tax and benefit rates as you go past the minimum income level. I worry a lot about it so prefer the UBI. The advantage of the NIT is that it's much cheaper. And we already pretty much have it really: working tax credits. That's what Friedman's original NIT did morph into when people tried to actually apply it.

[dogged]

The problem with UBI is Housing Benefit.

If your UBI is not high enough to pay for a roof over your head, you still have to maintain the whole means-testing infrastructure.

[dotdavid]

I would have thought that UBI paying for housing would also have the problem that housing costs hugely varying amounts countrywide but hardly anyone wants to move to where it is cheaper*. Scrapping housing benefit and replacing it with UBI might result in forced migration and perhaps "poor people ghettos" in cheaper areas with no jobs and no hope for the inhabitants to ever get off "the basic".

* often for good reasons, like "there are no jobs there", granted.

[Warm Braw]

Where's that perfect world when you need it?

Taxation and redistribution are not without their problems. It's an inefficient system - you need an army of bureaucrats to collect the tax and then decide who deserves to get what in the share out, plus you're going to end up giving at least a portion of the money you've collected to people who don't really need it. Also, in practice, it's entirely unpredictable for the recipient - a change of government, a change in tax credit thresholds or housing benefit rules and you're literally out on the street: the purpose of welfare is supposed to be to prevent vulnerable people being subject to calamitous changes in their lives owing to circumstances outside their control.

A minimum wage is very simple - very little administration and your income is not subject to constant political interference, at least to the same extent. The present government seems to have ignored the obvious consequence, though, that it too will have to pay more for the services it procures (most importantly, care) and is pretending that the "living wage" is all upside. It isn't - the cost of the higher wages has to come from somewhere. But that's just a form of redistribution too, and the market will presumably work out where people are most gainfully employed.

[nijam]

Re: Where's that perfect world when you need it?

> you need an army of bureaucrats to ... decide who deserves to get what

I think the whole point was that you don't need them, everyone gets the same. Remember that means-tested benefits are perniciously-stealthy income tax; I think, and suspect Tim will too, that income tax is OK but it would be even better without such distortions. And don't even get me started on the pathetic pretence that (employees') NI contributions are somehow not income tax.

[Will 28]

The child sized elephant in the room

It strikes me (and therefore is probably irrelevant) that most discussions on reducing poverty and ensuring a fair distribution of wealth always conveniently ignore one of the biggest financial costs to a family, which is the kids. I can see why, as Tony Blair demonstrated with his education x3 speech, once you start pulling on the parenting strings, people lose objectivity.

Without this consideration it kind of makes all the rest seem redundant. It's all very well to guarantee an income to an adult, but if they've got 3 additional mouths to feed then they're signficantly worse off than the person that doesn't. You could easily argue that kids are a luxury, but there are unplanned pregnancies, and if there's a moral imperative to help the adults out of poverty, surely it applies to the children too? There's also the economic point that we need to keep fresh people coming through to pay for those retiring.

I'm not suggesting I have an answer, just that without it taken into account we're not really addressing a real world problem.

[Martin an gof]

Re: The child sized elephant in the room

...most discussions on reducing poverty and ensuring a fair distribution of wealth always conveniently ignore one of the biggest financial costs to a family, which is the kids...

It's all very well to guarantee an income to an adult, but if they've got 3 additional mouths to feed then they're signficantly worse off than the person that doesn't. You could easily argue that kids are a luxury...

Start down that route though and you end up tangled in such pleasantries as eugenics. Are people poor because they have (too many) children, or do they have too many children because they are poor (and have nothing better to do / and need to send them out to work)?

I have four children and there have always been people who seem to make it their job to make me feel guilty for that. Now, of course, it's the government, talking about removing child-related benefits from child number 3 (or is it 4?) onwards. Anyone fancy a one-child policy?

We are not the best-off family on the planet and part of the reason for that is the children. My wife, who is far more highly qualified than I, has effectively taken a career "pause"(*) of fourteen years in order to look after the children, only recently getting back into a job that values her and where there are real prospects for progression. We took the hit on income because neither of us has a career where the income we could bring in by working full-time outweighs the childcare costs and the disruption to family life costs of going part-time.

The thing is, now that we're beginning to have an income where we can consider expanding our small 3-bed bungalow to cope with four upcoming teenagers, our marginal tax rate is going through the roof as it seems as if every extra pound the wife earns come off our income in reduced benefits and increased taxes.

And (to return to a subject I mentioned earlier), VAT is a particular problem for us. Ok, so it's a large extension we are planning but a quantity surveyor we employed calculated that because VAT is applied to extensions, but is not applied to "new build", we could knock down the whole house and rebuild it from scratch for hardly any more than it would cost to build the extension. We'd benefit in other - less tangible - ways too because a new build that we project-manage is bound to be longer-lived and better "quality" than a 1960s developer-built house, and will definitely be better insulated, not so damp and cheaper to run.

But I wouldn't be without the children. They are all going to be huge assets to society when they enter the world of work, and some would say that they are already making their mark - entrepreneurial eldest son funds his expensive Hornby hobby by cutting elderly neighbours' lawns.

M.

(*)Apart from the maternity leave periods, she has continued to work in (or near) her chosen field, but her jobs have all been part-time and nearly all on temporary contracts which make it flippin' difficult to plan family finances more than a few months in advance. They also seem to confuse the tax credit people :-)

[Tim Worstal]

Re: The child sized elephant in the room

"because VAT is applied to extensions, but is not applied to "new build","

I can't recall which Chancellor brought that in but I would still call it one of the great idiocies of he UK tax system. Truly cretinous in fact.

[Anonymous Coward]

Re: The child sized elephant in the room

its been like that a long time. Its not just extensions but also renovations, that's why you quite often see building that could be renovated and converted pulled down and something new built in its place

[Anonymous Coward]

Re: The child sized elephant in the room

Some might suggest that the same government had lots of finacial support from the building trade and introduced many changes to benefit said group.

[Will 28]

Re: The child sized elephant in the room

Indeed, a good illustration of the added complexity that we seem to be avoiding in the discussion.

Just to be clear, I was not seeking to be one of those people who make you feel wrong for having many children. I think when I said you could "easily argue that...", I intended something more along the lines of "lazily dismiss this factor by saying that...".

[Richard 12]

Re: The child sized elephant in the room

At some point, we *do* need to get the average family below 2.0 children - or to put it another way, the average offspring-per-person below 1.0.

Otherwise the planet is not going to be able to provide sufficient (insert stuff here) in the future - infinite population growth is obviously not sustainable in a closed system.

The part that really should worry everyone is that we don't know what the carrying capacity of the planet is.

We may only find out once it's been greatly exceeded for quite some time, which will have pretty hideous results.

A lot of people think we've already exceeded it. This may or may not be true - the error bars are large - but we cannot be that far off.

[DaveDaveDave]

Re: The child sized elephant in the room

"A lot of people think we've already exceeded [the carrying capacity of the planet]. This may or may not be true - the error bars are large - but we cannot be that far off."

I really don't think we're even vaguely close to it, or even to a point where we'd be undesirably crowded. We're still a very long way off from any crisis point, and will almost certainly never reach it. The more moderate predictions are that the global population will peak at around 8-10 billion, some time in the next century or thereabouts.

As far as living conditions go, it's noteworthy that the US has a population density about a quarter or third of the EU's - and the EU is hardly a densely built up urban area, it's a perfectly pleasant place to live with a variety of land uses including extensive nature reserves etc. Essentially that means you could triple or quadruple the US population - an extra billion or more people - without noticeably impacting on anyone's quality of life.

Or there's the UK's population density - double the above figure again, and while we're not hermits here, we're not massively overcrowded.

Japan's definitely crowded, but it has at least ten times the population density of the US without being a total shithole.

And of course there's New York, which has about 25k people per square km. If they all lived in cities that densely populated, a billion people would take up just 40 sq km, which is nothing.

So, pretty clearly land area isn't a problem. What else will be? There's plenty of un- or under-used agricultural land, let alone things we could do with sea farming - and actual peak capacity would include Soylent Green... - so food's not a limitation. Power could be, except we're moving off fossil fuels anyway. And as our esteemed host has written a book about it, we can't argue that metals etc are in short supply.

[Anonymous Coward]

Re: The child sized elephant in the room

@DavDaveDave - your tolerance for crowded living conditions must be greater than mine, then. I start feeling uncomfortable when the villages are less than fifteen minutes apart and the towns are over about 10K population. I've managed to adapt to living in a city (only moved here because at the time I was unemployed and my then new parter wasn't), but I still try not to think of all those miles and miles of tarmac and brick and concrete and uncountable people around me - creepy (shudders). It's existence, but I wouldn't call it a healthy way to live.

On a different point, as well as mites and overuse of pesticide, over-abundance of local farmland has also been implicated in the decline of bee populations, so I wouldn't be too gung-ho about how much we can do with agricultural land unless there are some serious changes in the way that farmland is managed over current practices.

(Commenters please note - I am not a back-to nature Luddite - I'm often techno-skeptical, but I like my shinies as much as the next geekette, and I know very well that my personal ideal world is highly unlikely to ever exist even if it isnt actually impossible. Certainly much lower chance than winning the lottery two weeks running!)

[DaveDaveDave]

Re: The child sized elephant in the room

"@DavDaveDave - your tolerance for crowded living conditions must be greater than mine, then. "

Probably, you seem to have pretty strong feelings on the subject - but really, I think it's just a matter of taste. What I was trying to do was to look at it as a practical matter: there are places which I also feel are a bit densely populated for my taste, but they're not generally considered notably bad places to live. It's illustrative to see how higher-but-still-low densities would work out in terms of the US population. That really is a staggeringly empty continent still.

I'd also note that your definition of being uncrowded would round and about seem to describe Norfolk. Even rural Norfolk has a population density 4x or so that of the US.

"I wouldn't be too gung-ho about how much we can do with agricultural land unless there are some serious changes in the way that farmland is managed over current practices."

To be clear, I'm not suggesting there are no problems with increased population. Just that we're a long way yet from the point where those problems require us to make really serious choices/compromises.

[9Rune5]

Maximum population

"I really don't think we're even vaguely close to it, or even to a point where we'd be undesirably crowded."

AFAICT the UN disagrees. They are promoting insects as the next big thing: http://www.fao.org/forestry/edibleinsects/en/

It may be linked to their less-than-impressive IPCC efforts (food production emits CO2 hence must be stopped) for all I know, but they seem concerned with the rising population and all it entails.

In Norway, we long ago passed the mark where we are able to feed ourselves (and not rely heavily on food imports). The ocean seems less willing to sustain our population and there is not much land left to grow food. Yet our previous government argued that our population must increase, otherwise there won't be enough punters around to wash our backs as the current generation of worker bees grow old.

YMMV I suppose, but I do worry.

[Peter Gathercole]

Re: The child sized elephant in the room @Richard 12

No, we really don't need an average family size below 2. One-for-one replacement in the global population as a whole, yes, but...

Because of lifestyle choices and mortality, if you're talking about the average 'family' - defining a family as a social unit that includes kids, which would exclude people living on their own or couples not having children, the average family size needs to be between 2.3 and 2.4 children in the UK to achieve a stable population. In other countries with higher mortality rates, it could be higher.

The current plan to eliminate child benefit in the UK beyond 2 children will actually detrimentally affect the demographics of the country, IMHO.

<contentious><generalised>The financially responsible families, who are most likely to have children who grow up to be like them will be choose to keep their family to two children (or if they're real do-gooders, to just one child). The families who have a have children now and worry about how they're going to raise them later mindset will not really care, and will still expect state support. Kids tend to grow up like their parents</generalised></contentious>.

The effect on the population could result in the rise of a new 'chav' generation, skewing the population towards under achievers, hangers on and people with an expectation that the state will take care of them. Exactly what is not required.

I know that I'm generalising, but in general most developed countries have a population stability problem, with some countries like Japan actually having a declining population some time back.

What the world really needs is sensible population control policies, together with education to back up these policies, targeted at all countries, especially those with the highest population increase. It won't happen, as the UN charter actively prevents one country from interfering in another countries internal affairs, and the countries that most need the control are the ones least likely to implement or accept it.

[Anonymous Coward]

Re: Anyone fancy a one-child policy?

China has it for a damned good reason, they had too many people and needed population control..

Now in the UK we don't have that issue, but families that are on benefits breed kids that are more likely to be on benefits, it is an ugly truth...

The ugly solution is to stop them having kids (or limiting the number)

The nice solution is to raise the education standard and indoctrinate kids into the idea that working is the right thing to do and it is wrong to sponge off the state, unfortunately State schools will never do this.

[Graeme Sutherland]

Re: Anyone fancy a one-child policy?

Nearly half the world's population lives in countries with sub-replacement levels of fertility, so it doesn't look like a one-child policy is necessary.

As for China, the government has been watering down the birth control laws in recent years. But people still aren't that keen on producing far more children.

[Dan Paul]

Re: Anyone fancy a one-child policy? No!

The fact is that the ONLY REASON why China has been successful in having such a "One Child " policy is that it is effectively a Dictatorship and that "Benevolence" doesn't enter in to the equation.

We have a similar issue in the States with multi generation welfare clients having more children just to get more welfare benefits. It is difficult to actually limit the number of children one is allowed to have, but it is not difficult (Only politically unwise) to limit the amount of welfare money being paid per child.

Same goes for "immigration". Who is going to pay for the upkeep of wave after wave of immigrants; since they did not come here legally with a sponsor and a job?

The left uses these issues as a wedge and a vote buying tactic. From now on, the money to pay for these concepts should only come from registered Democrats pockets. That will fix the problem.

[Squander Two]

@ Martin an gof

> I have four children and there have always been people who seem to make it their job to make me feel guilty for that.

Agreed. Some people are utter arseholes about your having children. Especially the environmentalists.

> Now, of course, it's the government, talking about removing child-related benefits from child number 3 (or is it 4?) onwards.

Er, what? How is that trying to make you feel guilty? The government didn't pay for my last laptop, but I don't think they're trying to make me feel guilty about owning one.

> Anyone fancy a one-child policy?

Are you seriously suggesting that a government who pay you money for your first two living children and a government who outright ban you from bearing more than one child even if that first child dies are somehow behaving similarly?

[Anonymous Coward]

Re: The child sized elephant in the room

but at the end of the day I take it you chose to have 4 kids. I don't think the state should be paying for more than 2 in child benefit. Last time I looked the little buggers cost a bleedy fortune, I know our little girl does at £850 a month for full time nursery fees! BUT you kind of know this before you have them!

[Loud Speaker]

Re: The child sized elephant in the room

Poor people are poor because they graduated in Engineering, and got a series of highly paid jobs for a series of employers who ceased trading because of:

Random decisions taken by a parent company in another country.

Political decisions resulting from change of government.

Company going bankrupt because of withdrawl of support after bank manager found to be corrupt.

Company going bankrupt because of government interference in the market,

Company going bankrupt because of retrospective change in tax interpretation.

Company going bankrupt because managers corrupt.

Company going bankrupt because of global economic disaster,

Company going bankrupt because of Ebola

You get the general picture. If you are employed, you are at risk of your employer, your government, the world, or yourself making unfortunate decisions, with catastrophic consequences for your income. This is far worse in STEM jobs than in garbage collection, or supermarket shelf stacking.

It is no wonder there are not enough engineers in the UK. Anyone with half a grain of sense will have sussed out that it is in the same risk league as being an Actor, but without the prestige. The rest of us learned the hard way.

[werdsmith]

Re: The child sized elephant in the room

Yes, Loud Speaker, this is the thing that goes against what I want from life. Having my livelihood dependent on the whims of some idiots in boardrooms is really not the way I am happy to live my life or subject my family to.

I am doing everything I can to ensure that I am protected from their tinkering.

[Steve Knox]

Re: The child sized elephant in the room

The one thing I remain continually surprised at is that in this day and age, as advanced as we consider ourselves as a species, the concept of having children as a choice that people make rather than a state that they suddenly find themselves in remains so elusive to us.

We have plenty of ways to prevent or terminate unplanned pregnancies. We have informational and planning resource. We have laws against rape and support groups. We have all of the tools necessary to ensure that no child is born except to people who choose to have a child.

Yet due to outdated patriarchal pro-reproductive moral frameworks, we vilify rape victims, fight against both contraceptive programs and abortion rights, and work to prevent those of us who are least prepared to handle their new sexual maturity from understanding and being able to manage the consequences of sex.

Slightly off-topic, I guess, but my point is that the problem of children isn't really relevant to the discussion of redistribution of wealth, but is its own problem rooted in our society's inability to progress past a moral framework constructed thousands of years ago for a small nomadic population in which women were reproductive resources and every birth was necessary for the survival of the society.

/rant

[Anonymous Coward]

Re: The child sized elephant in the room

"outdated patriarchal pro-reproductive moral frameworks, we vilify rape victims, fight against both contraceptive programs and abortion rights, and work to prevent those of us who are least prepared to handle their new sexual maturity from understanding and being able to manage the consequences of sex."

I'd like to think things are better on this ( Western) side of the Pond. But I'm prepared to be disappointed.

[ecofeco]

Re: The child sized elephant in the room

"outdated patriarchal pro-reproductive moral frameworks, we vilify rape victims, fight against both contraceptive programs and abortion rights, and work to prevent those of us who are least prepared to handle their new sexual maturity from understanding and being able to manage the consequences of sex."

I'd like to think things are better on this ( Western) side of the Pond. But I'm prepared to be disappointed.

That WAS the description of "this side of the pond".

[nijam]

Re: The child sized elephant in the room

> That WAS the description of "this side of the pond".

In that case the original post deserves a downvote. Or several.

[Matt Bryant]

Re: Steve Knox Re: The child sized elephant in the room

"......Yet due to outdated patriarchal pro-reproductive moral frameworks, we vilify rape victims, fight against both contraceptive programs and abortion rights, and work to prevent those of us who are least prepared to handle their new sexual maturity from understanding and being able to manage the consequences of sex....." Ah yes, all that "old, conservative thinking" is bad, right? My own experience is that may apply in a few cases but is not a definitive. I know two families that definitely did NOT apply to, one Muslim and the other Christian, and both which had a large number of children. Both would be considered "non-pregressive" families and from different ends of the social spectrum, the Muslim family being that of an immigrant taxi-driver and the Christian one a surgeon, but what mattered was both families instilled in their children a sense of self-responsibility, self-dependence and a work ethic. All their kids have graduated with degrees and are now in full-time work, benefiting the population as a whole by paying taxes. However, I did also have the "fun" of dealing with a "progressive" family when I helped a relative evict them when they were squatting in one of his houses (he's a landlord). They had one teenage kid being raised on a diet of entitlement and other such "progressive" claptrap, and like his parents had never worked a day in his life, despite not having to "suffer" those "old, conservative thinking". IMHO, instilling responsibility, self-dependence and a work ethic seems a lot more important.

[Primus Secundus Tertius]

Long article

TL;DR

Dear el Reg, if you want people to read 4-page aricles, bring back the "read in one page" facility.

[Dan 55]

Re: Long article

Switch over to the mobile view, replace www with m.

[Primus Secundus Tertius]

Re: Long article

@ Dan 55, Irony Deficient

Thanks for those workarounds.

[Irony Deficient]

Re: Long article

Primus Secundus Tertius, it still exists; you just need to insert Print/ in the proper place in the article’s URL.

[Anonymous Coward]

Re: Long article

Quite why anyone with anything else to do would want to visit even page 2 of one of Tim's political/econmic/general bollocks articles is beyond me.

That the article is split across 4 pages at least saves you from downloading all of the tripe. Small mercies!

[Squander Two]

Re: Long article

> Quite why anyone with anything else to do would want to visit even page 2 of one of Tim's political/econmic/general bollocks articles is beyond me.

Quite why anyone who thinks even visiting page 2 of the article is too much hassle has nevertheless gone to the effort of reading the comments and replying to one of them is beyond me.

[John H Woods]

I came to the same conclusion ...

... from the opposite direction: realising that some people could not afford to do a couple of hours work a week if they could get it, without incurring huge financial penalties. How can that make sense? Every hour that one is prepared to work should make one marginally better off, unless it is an explicit (whether stated or not) aim of the government to keep some people out of jobs.

We could also save a huge amount of money by dismantling the enormous, massively intrusive system of benefits and replacing it with non-means tested alternatives. A system which couldn't be gamed, i.e. housing costs + a minimum income with additional benefits reserved only for special needs would seem to be much more useful.

[Alien8n]

Re: I came to the same conclusion ...

Many years ago when Tax Credits first came into being I was actually put in the rather difficult position of having to turn down pay rises as the loss in credits and other benefits was greater than the pay rise I was offered. In the end it took a change of jobs to increase my salary sufficiently enough that I no longer needed any credits or other benefits. Ironically I'm now in the position of no longer receiving tax credits again (they upped the limits some time after I changed jobs, it took a few years before it was pointed out that we were eligible for them again) as my salary has again crept over the threshold for them.

[Dan Paul]

Re: I came to the same conclusion ...

But that's the way they keep you voting for the same leftist numpties that proposed those stupid regulations... If you work AT ALL your benefits are reduced excessively. They say to you in one manner or another, (Wink, wink; nudge, nudge) "You don't really want to work do you?" If they say it enough, you begin to believe it. This removes any impetus to better yourself, keeping you and your family on the dole and provides a permanent pool of eligible voters for socialist politicians. Although, once you get hit by their "banhammer" of regulations, you soon stop trying to leave the fold. Cause and effect in practice!

I would rather have responsible people double dipping (Welfare and Employment) while she/he got out of the entitlement trap than those who just laid around on the dole and never even tried to get out.

[Anonymous Coward]

Excellent article

Nice one, Tim! I understood the entire thing without once thinking 'this is just mad!', ie: given that the current economic system is what we've got, what you've said and are advocating, made sense to me.

I'm interested in Will28's point about children, above, and also in my personal bee-in-my-bonnet regarding the increasing automation of work and so decreasing requirement for paid labour. With regard to the latter would I be correct then, in thinking that your preferred solution to keeping as many as possible in work would be to have the state slowly lower the maximum number of hours per week that an employer can demand of a single employee and/or numbers of days a year they can be expected to work? Or do you see shorter hours and more days holidays as being effectively part of what the individual worker contracts for (as they certainly do have value) and thus best left alone by the state?

What worries me, you see, is the possibility of a situation whereby so much is automated that there are simply too few jobs left for actual humans to fill at the current 37-40 hours a week and three weeks holiday or so. And, (points at the current unemployment figures as against those from 35-40 years ago) it seems to me that if we haven't reached that point yet, then we're right on the edge of it. Sensibly, we should all be able to work fewer hours for a living wage and have longer holidays, if automation is handling more and more. But that doesn't seem to be what's happening.

[Tim Worstal]

Re: Excellent article

This applies to Mage as well.

"What worries me, you see, is the possibility of a situation whereby so much is automated that there are simply too few jobs left for actual humans to fill at the current 37-40 hours a week and three weeks holiday or so."

I come from the other end of this argument. We start by assuming that human desires and wants are infinite. It's a basic assumption of the economic way of thinking.

So, if people get displaced from what they're currently doing by automation that leaves their labour free to go off and satisfy some other human need. If we were all still sowing and reaping the fields by hand then we wouldn't have nail bars: even though the need for them was probably higher back then. So, by automating farming we made nail bars possible.

It is of course possible that human needs and desires are not infinite. Which would mean that at some point there will be no new desires that that newly freed labour can go satiate.

Hmm.

But that means that all human needs and desires are satiated: why should anyone work at that point?

And there's no point in stating but, if people don't have jobs then they can't get any of the stuff: because at that point we're back to human needs not all being satiated so there's still jobs to do.

The end state can only be that either people don't need to work in order to be able to consume or that there will still be jobs to do.

As to maximum hours of work and so on I don't see any state need for it at all. Because all of history has shown us that as people get richer they take more of that increased income as leisure. Sure, seems to have slowed down in recent decades but not really. We've been taking it as reduced household production hours and increasing our leisure that way.

[Tim99]

Re: Excellent article

Tim,

Nasty cynical me (OK, I'm old so maybe I should call it life experience) suspects that governments don't want people to have an "excess" of leisure. Spare Time allows people to become politically active, educate themselves, and have time for reflection and critical analysis (or carry out petty crimes and riot on the streets). Governments, and the small fraction of people that effectively appoint governments, really don't like that idea.

I should declare that I may be biased, because I worked in a government department that worried about what the population at large might get up to. I do like your basic idea of taxation, but perhaps the rate should be more progressive and go to a higher rate - In my lifetime the top rate of income tax was dropped to "only" 90% from the wartime rate of 99.25%. It will be interesting to see what happens when the true rate of un(der)employment in the Developed West hits 40+% in the next generation.

[Mage]

Worstal does sort of believe in a minimum wage.

Summary:

Worstall does sort of believe in a minimum wage.

But not one that will interfere (much) with the market, so difference between that and a "living" wage has to be made up by welfare payments. Welfare payments have to ultimately come from Taxation. Any other Governmental income will be minuscule?

You need means testing.

Obviously this sort of scheme also ultimately applies using same means testing to actually unemployed, no matter if traditionally, or due to a Robot Apocalypse. While most people made unemployed (or their children) by Robotics/Automation find other activities, perhaps the underlying trend will be upwards.

Royalty income from Copyright for people deciding to be creative (IMO less likely to be replaced by AI than most AI enthusiasts think) is important. So the push by Google and friends to have only their Intellectual Property count has to be squashed.

It's important to see the big picture.

EDIT: PS: to Tim Worstall

Keep doing these good thoughtful articles. It didn't seem long at all. Even if we don't all agree with all of it. What's the point anyway of posting stuff everyone agrees with, that would be stuff like "rain is wet"?

I like your engaging comments in the comments.

[xeroks]

THIS IS PORN.

I think it's well understood that there various types of porn available in mainstream media : property porn; food porn; car porn; gadget porn; sex porn and the rest. It's also understood that the audience these cater for, are quite interested in the subject, but not enough to actually do anything about it.

So the people watching Masterchef are less likely to whip up a beef stroganoff from scratch than the people actually in the kitchen with ingredients scattered over the worktops.

I think these economic articles are great, I feel I have learned something, but don't have to get down to properly understanding anything, or having to apply it.

One time in the pub, a few months back, I tried to explain this idea of the "give EVERYBODY cash but tax it back from the earners". (I'm sure Tim covered it in a previous article) No one got why it was a good idea, and, frankly, i didn't completely understand or remember the economic benefits myself.

Still it's a start. Though I'd feel happier if el reg also had an equally accomplished economics writer with leftish leanings as a balance.

[Tim Worstal]

Re: THIS IS PORN.

"Though I'd feel happier if el reg also had an equally accomplished economics writer with leftish leanings as a balance."

"Accomplished" is very nice of you, thank you.

However, one slight problem from my point of view. Yes, I know, I make little jokettes about being a capitalist plutocratic running dog and all that, but I actually consider myself (as do most of my colleagues at the Adam Smith Institute consider both me and themselves) as being a lefty, a leftist.

My arguments always start with "What's going to make the poor richer?" and in my book that makes me a lefty. That the answer seems to be markets, trade, non-excessive taxation and so on is only a means to that end.

[xeroks]

Re: THIS IS PORN.

Ah-ha! That probably explains why i can get to the bottom of your articles without blowing a fuse; something even the most innocuous Daily Mail piece tends to do.

I suppose then, in rhe interests of balance, el reg should look for contributions from a more right leaning economist?

[Morrolan]

Re: THIS IS PORN.

You're falling into one of the common traps.

Capitalist economists are not trying to find the answer to the question "What is going to make the poor poorer?" They're asking the same question as the socialists (which is, how do we make people in general better-off), only coming up with different answers. It's the answers that you come up with that distinguish you into one group or the other.

[Matt Bryant]

Re: Tim Worstal Re: THIS IS PORN.

".....My arguments always start with "What's going to make the poor richer?" and in my book that makes me a lefty....." Why do people insist that being Rightist means only self-interest, that Rightwing must equate to "keeping the poor down"? If you look at capitalism it requires the population in general to benefit or there is no-one to consume the goods and services a capitalist system produces. Advances in competition between nations requires the workforce to be better educated, including the "poor". You can see this most clearly in just about all Europe in that, despite there being so many unemployed, we still end up with only immigrants being willing to do the dirty, nasty, low-paid jobs. Even the Thatcherite policies the Left hated were aimed at improving the lot of all, not just the elite, though the Left hate to admit that. A simple look at the difference between the "poor" of capitalist countries and the really poor of socialist countries like Venezuela just goes to show capitalist countries have raised the standard of living of their "poor" far more than such socialist "paradises". Even the example of Sweden is based on free market and capitalism to keep it afloat.

The reality is a whole generation have been indoctrinated with the idea that "Rightwing is bad", that it's not "cool", to such an extent even those obviously quite accomplished and educated are wilfully blind to the also obvious fact they are Rightist. They forget there is a whole range of Rightism, not just the extremes of Fascism the Left want to pretend is what being Rightist equates to. Nowhere is this more apparent than amongst the intelligentsia, whom seem utterly ashamed to even think of themselves as Rightist. Tim, you are, IMHO and based on your writings, a Center-Rightist at worst, if not a closet Thatcherite.

[John 62]

Re: THIS IS PORN.

I thought the etymology of left vs right was to do with the French revolutionary parliament. One party wanted more state control and sat towards the left of the room, while another party wanted more individual freedom and sat towards the right.

Progressivism is extremely poorly defined, but in my view the self-identifiers are merely hiding their Marxist dialecticalism.

[dotdavid]

Re: THIS IS PORN.

Political labels are all screwed up. The Liberals don't like liberty, the right-wingers are national-socialist and the conservatives want to change things. No wonder everyone gets confused.

[Uncle Slacky]

Re: THIS IS PORN.

It's not really a left/right issue - there are supporters of UBI across the political spectrum. See for instance:

https://www.reddit.com/r/basicincome/wiki/index#wiki_who_supports_the_basic_income_guarantee.3F

[Graham Marsden]

I'll be damned...

... a TW article I actually agree with and pretty much approve of as the "Cui" who "Bono" are the ones who actually need it!

(Of course you'll have to convince Uncle Rupert and the Daily Mail of the benefits of the idea, which won't be so easy...)

One suggestion, though: Make it optional. There are (it may surprise some readers) some of the better off who would be happy to say "thanks, but I'll forego my share as I've got enough to get by on, so please pass it on to someone/ something else".

PS one minor point: " Venezuela is a shithole", yes, but is that just because of their economic policy or also because of the massive levels of corruption which are endemic in that part of the world?

[Sandtitz]

Re: I'll be damned...

PS one minor point: " Venezuela is a shithole", yes, but is that just because of their economic policy or also because of the massive levels of corruption which are endemic in that part of the world?

Spot on, Graham. I was about to post the same thing. Venezuela is annually ranked in the bottom 20 of the Corruption Perception Index, whereas Sweden is on the other end of the table.

[Tim Worstal]

Re: I'll be damned...

That's an interesting point.

So, what's worse for an economy?

1) Corruption on truly Herculean scale?

2) Idiot* socialism?

Answers on a postcard to Nicholas Maduro, Presidential Palace, Caracas, please.

*Yes, there is non-idiot socialism. John Lewis for example. Building Societies.

[Zog_but_not_the_first]

Re: I'll be damned...

I was about to troll "communist!" until I realised it was you Tim. Phew, close call.

Any sign of an article on "What is money?" Only when you have a minute, of course.

[Graham Marsden]

Re: I'll be damned...

> So, what's worse for an economy?

Oh come on, Tim. I was actually enjoying feeling well disposed towards your arguments and then you blow it with a False Dilemma. They're both undesirable, arguing about which is worse doesn't help matters and just distracts from how to fix the problem.

As for DaveDaveDave's (unsurprising) claim, I think you'd agree that it doesn't matter how perfect the economic policies are if most of the money gets siphoned off before it gets to those who need it.

[Tim Worstal]

Re: I'll be damned...

Erm, well, I think that's where we disagree you see.

Thieving, lying, aggrandising, bastards appear to be less damaging than pure idiots.

We, with Willy the Conq etc, had the thieving, lying, aggrandising, but we ended up richer than those places with the idiots, no?

Corruption is bad, M'Kay? Idiocy is worse.

[Graham Marsden]

@Tim Worstall - Re: I'll be damned...

> We, with Willy the Conq etc, had the thieving, lying, aggrandising, but we ended up richer than those places with the idiots, no?

Sure, it only took the Black Death wiping out enough of the population to cause the downfall of the Feudal System (with a few of those thieving, lying, aggrandising bastards at the top and the vast majority at the bottom in thrall to them) by giving the majority the ability to say "hang on, *we* have the power to say that we're not going to work for a pittance any more whilst you cream off most of the profits".

Hopefully this time around (where we seem to again have a relative few of the thieving, lying, aggrandising bastards at the top and the vast majority at the bottom in thrall to them) we can find a better solution to the problem.

[Stuart 18]

Re: I'll be damned...

Can I pleare throw in the OBVIOUS third option?

3. Idiot capitalism...Oh wait a minute these are the corrupt thieving ones of number 1 !!

Methinks I have spotted a trend :-) Maybe we could write an article about how economics is all about minimizing stoopidity!?

Corruption is (capitalist) idiocy m'kay? Socialist idiocy doesn't have an easy descriptor but usually involves corrupt moves of some sort.

.

[Tim Worstal]

Re: I'll be damned...

"Methinks I have spotted a trend :-) Maybe we could write an article about how economics is all about minimizing stoopidity!?"

Ben Bernanke said that in a speech once. 90% of economics is telling politicians not to do stupid things.

[kventin]

Re: I'll be damned...

"""

So, what's worse for an economy?

1) Corruption on truly Herculean scale?

2) Idiot* socialism?

"""

as anyone here in CEE (that's central and eastern europe, thank you. we consider anything west of iron curtain, well, "west") will tell you, this isn't either-or question. more like "how much of each" and i'm afraid those two options are related with positive feedback: idiot socialism breeds corruption (when you can't get what you need by official channels, you'll find less official ones) and the best way for corrupted to stay in office is populism which pretty much overlaps with idiot socialism here (ymmv, i think there is a cultural difference here: you might have different socialist and different idiots than we do.)

[9Rune5]

Re: I'll be damned...

"and i'm afraid those two options are related with positive feedback: idiot socialism breeds corruption (when you can't get what you need by official channels, you'll find less official ones) and the best way for corrupted to stay in office is populism which pretty much overlaps with idiot socialism here "

It seems kventin's excellent response got buried a bit.

My wife is from Georgia (the one next to the Black Sea, stuck between Turkey and Russia) and we just returned from a 14-day "vacation" there.

Corruption, or tendancies towards corruption are very easy to spot. Even in restaurants it is obvious they have no concept of providing the customer with proper service. Our 10-month old had a little diaper incident, and my wife asked "where can I change his diaper?". The waitress' reply was simply "nowhere". I asked to put a few pieces of chicken on the pepperoni pizza I wanted. "No can do, the sauces don't mix" (said the waiter who turned out to be the good one of the bunch).

And I get it. If everybody gets paid the same with no incentives to go the extra mile, then very few will go the extra mile. What remains is passing around envelopes stuffed with cash to award those who have higher aspirations. "Animal farm" anyone?

[Tim Worstal]

Re: I'll be damned...

I work quite a bit in hte Czech Republic and you do describe Milos Zeman rather well.....

[DaveDaveDave]

Re: I'll be damned...

"" Venezuela is a shithole", yes, but is that just because of their economic policy or also because of the massive levels of corruption which are endemic in that part of the world?"

It's the economic policies, overwhelmingly. It ought to be doing better than its neighbours like Trinidad and Guyana, but it's doing far worse.

[J.G.Harston]

"people have to pay for higher incomes for the poor... we don't think that their willingness is all that great"

Yeah, the shop staff in Aldi should be paid more! What, you mean I'll have to pay more for my milk? Bugger that!

Universal Income has a problem getting past the Daily Mail purple retired Colonels.

"it's going to take rather more than that 2lbs of bread to get me out the door of a winter's morning"

What, how **DARE** the workers not actually work???? Don't they realise that's their entire purpose in life?????

A universal income?? Giving slackers money for nothing??? How ***DARE*** people have enough money to be able to not work???? We must force everybody to work, make it illegal to have enough money to not work, make it illegal to pay anybody more than enough to keep them alive just for that day's work, make it illegal to have savings and pensionsl!!! (brain explodes)

I can't quite live on £130 a week. I could if I got rid of all the expenses I have that I incure by attempting to get paid employment, but that's sort-of the point, isn't it. It's enough to let you just tick over and not starve, and if you have any aspirations to more than that you can choose to seek somebody willing to pay you for something.

Commenting on the post upthread about a single person easily living on £15k/£6.5k/whatever, but not somebody with extra mouths to feed, I thought the whole point of a universal income was that it would be universal - so those extra mouths would have their own universal income to pay to feed them.

[Alien8n]

This in so many ways. A Universal Basic Income should not be seen as a replacement for the Welfare State, instead it should be seen as a basic universal right allowing all to maintain at least a basic living standard, i.e. a home and food on the table. The problem with the current government is their sustained belief that the way to get people into work is to use a stick and beat them into submission. That somehow by starving someone by removing their only source of welfare it will magically make them employable and create jobs for them where they don't exist. The Daily Mail crowd have somehow convinced the country that anyone on benefits is richer than those working and so they must be punished in order to force them to work. The fact is most people want to work, the simple truth is there aren't the jobs available for them. But instead of admitting that fact and allowing that 1 in 4 who just wants to sit on their arse all day to do so we instead try to force them into taking the jobs that the people who genuinely want to work should be doing. Even if 3 in 4 want to be lazy buggers there are still not enough jobs for all of them. We also need to look at what jobs are available and the skills of the people who wish to do those jobs. Here on El Reg we almost all work within the IT sector in some manner. What do you do when the jobs available just aren't suitable for the unemployed? In certain sectors we hear about skills shortages. As an IT person I've been fortunate to not be out of work for more than a few months at any one time, however even here I do sometimes see cycles. At this moment there's a very high demand for .net programmers. If I was to be unemployed tomorrow I could genuinely be in trouble as my specialisation is in systems support (there are jobs out there, but there are also a lot of systems support people), which means the majority of the jobs available are not suitable for me. Under the current government what would happen is I would then be forced to apply for jobs I'm not qualified to do and jobs I'm too qualified to do. This is a complete waste of my time, employers time, and government time, but due to government rules I must do this in order to avoid the "stick". With UBI I'm freed from this scenario and able to concentrate on looking for suitable work, or even to look at training myself in the skills needed for alternative work. Using any funds saved while employed in systems support I can now, safe in the knowledge that I have enough money coming in to keep me fed and housed, look into those .net training courses I've been unable to indulge in due to working. Alternatively I could also look at setting myself up in a creative industry, at various points in the past I've run a t-shirt design business, a computer building business and a jewellery business. None of these has made much money and were simply a means to earn a bit extra, but with UBI these do become viable options.

[Matt Bryant]

Re: Alien8n

".....With UBI I'm freed from this scenario and able to concentrate on looking for suitable work, or even to look at training myself in the skills needed for alternative work...." Yes, I can believe you have a work record with only a few, short gaps, as you seem to not know anything about the massive amounts of cash thrown at retraining schemes and developing areas of "economic depression" (such as Wales) that have been in place since at least the Eighties (IIRC). Yes, there is the "stick", but there is also a lot of help to get unemployed people to work. As you are a system admin I would suggest you do look at retraining and soon - the push to virtualise and control-by-software everything means less and less sysadmins, storage admins, network admins, and even less admins higher up the tree like DBAs. Best you stop wasting your time blaming Daily Mail readers.

[Alien8n]

Re: Alien8n

Firstly I don't live in Wales, in fact I live in a rather nice part of the country where no cash is ever splashed out for development, something to do with the below average rate of unemployment in this area. Secondly in order to qualify for retraining schemes you need to be out of work for a significantly longer period of time then I've been fortunate to be. So no, I've never qualified for all the retraining schemes you say I can do (and nearly all retraining schemes I've seen for IT skills are at the level of a GCSE in IT or how to use MS Office). And I never said I was a sys admin, I said I do systems support, my speciality is supporting bespoke systems and it has been very lucrative for the past 15 years or so. As for helping the unemployed back into work, I think you'll find the government's policy right now is to force people to take any and all jobs by removing their access to benefits. And that I am speaking of from experience. Lastly, I was using my experience of IT as an example. Your assumption that I lack knowledge of virtualisation and control software shows your usual level of arrogance, prior to moving into IT I was a production engineer in the semiconductor industry. My job was virtualisation and control software.

[Quip]

The first thing to do is to eliminate the poverty trap: Combine IT&NI and set the threshold well above minimum wage & benefits. There needs to be a band of income, a significant band, between being on benefits of any kind and starting to pay tax on income. Keeping a 100% of income if you are poor seems a pretty good incentive to work.

[James Micallef]

Basic Income for kids

"...I thought the whole point of a universal income was that it would be universal - so those extra mouths would have their own universal income to pay to feed them..."

I'm not sure whether proposals do include a BI for kids as well, if this is the case there is a major possibility of unintended consequences for scumbags to breed like rabbits, spend even less than the BI on each kid and pocket the difference.

I agree with the idea (also mentioned by TW in some other articles) that it's better to give poor people cash than vouchers for food, clothing etc, but if the person for whom the money is intended cannot have a say in how the money is spent, that might not be ideal. Maybe it could be set up in a way that for example, for minors, half the BI is paid to their legal guardian, half paid into a trust in that person's name (maybe with some limits to avoid teenagers spending it all on booze and strippers as soon as they turn 18).

[Rol]

The problem with being poor, is that your buying power is poor. It means you are in no position to argue favourable rates or get the best value.

Paying retail prices for individual tins of baked beans when a case of 24 would work out far cheaper per tin is just one of a billion examples of why poverty stinks.

Being unable to compete in a market dominated by big money means you will always get the most unfavourable deals in everything, from energy and food to accommodation, as your choices are very limited or completely impractical.

Giving more money to the poor, will just be reflected in higher prices and thus have little impact on quality of life.

No, if the government are sincere about lifting people out of poverty, there is a much more sensible and cost effective means of doing so, the government becomes a co-op, using its muscle in the market to secure very favourable deals for electricity, gas and housing, and then redistributes those deals to the poor.

So, the poor would lose, let's say, £10 a week in benefit, the government takes all these £10's and negotiates energy deals to give the poor £15 a week in free power. The poor are now getting energy at about the same cost as their richer, high using neighbours, and it has cost nothing more than a little effort from central government.

Or, taken a bit further, the government could take £10 off everyone, and everyone is entitled to £15 of free energy per week. Obviously the power companies would now be loading costs onto those who use more, but hey, they have a choice in how big their footprint is, the poor never have.

[J.G.Harston]

"the government becomes a co-op, using its muscle in the market to secure very favourable deals for electricity, gas and housing,"

Before 1948 most local councils ran electricity, gas and water companies, able to keep consumer costs down and roll out some of the fastest and deepest service provision in history. Then what happened? The most socialist government in history stole them all without recompense. 40 years later another government learned from this and stole municipal transport and housing.

[graeme leggett]

Perhaps - since energy costs are a significant part of a household bills - we could replace part of a universal benefit with a Universal Energy Allowance. So many BTU a month, or its equivalent, per person (plus one for the pot)

This could be adjusted in lines with inflation/oil costs etc/season(?)/building efficiency. And by isolating from calculating other benefits/income support/credits there would be less "I can't afford to [vital activity] and heat my home, cook meals" and the issues around credit and pre-payment meters. Though "excess" usage over would still need to be accounted for, a growing understanding of the energy needs per person by population as a whole can't be a bad thing.

[DaveDaveDave]

"And by isolating from calculating other benefits/income support/credits there would be less "I can't afford to [vital activity] and heat my home, cook meals""

But that's people showing their preference for using what money they have a different way. You're implying those people are incapable of deciding for themselves how it'll best benefit them. In fact, though, it's clearly (empirically) established that people prefer agency. They value the ability to allocate resources as they see fit more than a slightly greater total allocation of resources.

[graeme leggett]

The intention is elements of the buying power pooling as given by another commentator above, absence of fuel poverty, parallels with housing benefit etc

Shades of 'food stamps' and or 'free school meals' I agree and the recipient's agency would be reduced, but it would be a minimum baseline to preserve life/health with efficiency both in the delivery (and in reduced associated health costs?)

I'm sure there are many problems with delivering benefits in form of discrete allowances (energy, food, water..?) but we do in some forms already - free TV licence, bus travel.

[Rol]

@DaveDaveDave

While the figure of £15 was pulled straight out of a dark place, it isn't too far away from the amount each and everyone of us needs to maintain a bog standard life.

To get that £15 of power for a loss of only £10 is a bonus and one that should outweigh the opportunity to spend that £10 on something else.

I would offer my opinion, that choice for the poorest in society is nothing other than an illusion, or worse, a quick, decisive road to financial oblivion for the more feckless of us.

Then again, you now have £5 you didn't have before, so is it one and a half pints down the pub, a large kebab or halvsies on a £10 bag of weed? Lose a little choice, that isn't really a choice and gain more choice than you had before.

Obviously the last paragraph is total bollocks, as the poorest in society would have £15 taken from their benefits by DWP so saving the taxpayer £5 x the number of people clinging to this rock by their fingertips.

[John 62]

"The problem with being poor, is that your buying power is poor. It means you are in no position to argue favourable rates or get the best value.

Paying retail prices for individual tins of baked beans when a case of 24 would work out far cheaper per tin is just one of a billion examples of why poverty stinks."

And you have to buy from the cornershop you can walk to because you can't afford the bus to get to Aldi. And you can't buy in bulk even if you wanted to because you have no space in your appartment.

It's a nasty circle.

[Curly4]

Vacation time!

Why should I work my a** of to earn more money to have MY money taken away from by force and given to another? So when they do this it will be VACATION TIME!!!.

I have another suggestion to increase the income for the POOR. For any person who is physically and or mentally fit for that person to receive any unearned entitlements (welfare) that person would have to spend 8 hours a day at some assigned task. That would be based on what that person can do even if that is only sitting in a chair in some autormum without their e-gadgets. There will always be trash to be picked up on public property, or some other menial job that don't take much thought power. Now if a person is truly disabled such as needing 24/7 care then as as long as they are under that 24/7 care they would be exempted from the work requirement. If the person needs child care that would be provided, in fact that could the job for some of the ones getting the unearned entitlements. If nothing else can be found the person would have set in a chair with no entertainment for the time required with only the breaks that people working in the private industry is required to get. Fore some who want to learn to earn they could be taking classes and as long as they passed the classes they could get paid for that instead of the made work. However after the training they would then have to get a job or be given one of the menial jobs.

If this was adopted I would bet that there would be a sudden drop in those who applied for the income and get out and find a job where they can earn more money.

[Corinne]

Re: Vacation time!

You've just put all the street cleaners, park attendants, all other "menial" workers, nursery workers etc onto that unemployed list by replacing them with unpaid benefits claimants.

The Government has actually started doing as you suggest, making certain groups of unemployed people work for their benefit payments. Places like supermarkets are queuing up to employ people for virtually nothing rather than having to pay a legal wage, so any vacancies are being filled by the people on this scheme rather than taking them off the unemployment list. It actually costs slightly more to work than to not work - not just in any consumables but stuff like clothes having to be clean and presentable every day, hair (for those who have it) always looking clean and not greasy, wear and tear on outer clothing etc, without considering fares. Meanwhile these people are working full time, so can't take time to go to job interviews.

Also, once anyone has been claiming Jobseekers benefit for a while (think it's a couple of years) they have to attend the jobcentre for 8 hours a day anyway sitting there getting bored "job hunting".

[MrXavia]

Re: Vacation time!

I agree with both of you... People should not get benefits for nothing, but you have to be careful to not put anyone out of work...

If you have people working full time only for unemployment benefits, then you are getting almost slave labour (unemployment benefit is very low), but having them provide a community service in their community for maybe 1 day a week, would be a good compromise..

Have tasks such as picking litter, sweeping the streets, shovelling snow of the pavements, cutting the grass... these are things that councils rarely can afford to pay for, yet could be done by anyone..

These are also things that locals often volunteer to do anyway..

EDIT:

Oh and I think the 8 hours a day at the job centre is a stupid idea, I've been on unemployment benefit.. the Job Centre was useless and if I had to sit there for 8 hours a day, I think I would go postal... and would never find a job.. No job I ever have taken was advertised at the Job Centre

[jonathanb]

What about Housing Benefit?

For most people on benefits, Job Seeker's Allowance or Tax Credits are not a large part of what they receive from the government. By far the largest proportion of their benefits is Housing Benefit. In my area, the Local Housing Allowance rate for a single person is £150 per week, it is more if you have children. Job Seeker's Allowance is £73.10 per week. Tax credits if you are in work will be less than that, depending on how much you earn. Add to that Council Tax support and healthcare benefits.

[Anonymous Coward]

Contradictions

Talking about redistribution of money to the poor:

"One huge advantage of this is that we can actually give money only to the poor. Instead of paying higher wages to people who aren't actually part of poor households"

A side problem is how do we define poor: based on income, or on assets, or some combination of the two? What if the assets are not income-bearing, such as the house you live in? What about the huge variations in cost of living across the country?

The article then ends on UBI, which gives the same money to everyone. This neatly sidesteps the problem, whilst negating the previously stated advantage of giving money only to the poor.

Of course, for high-income people the *proportion* of their income from UBI becomes vanishingly small, and they would pay far more in tax than they receive in UBI, but it still could be a difficult political sell.

I see two other major problem with UBI:

1. What marginal level of taxation do we need to make the figures add up? If you eliminate the tax-free allowance and charge people (say) 65% income tax on everything they earn, what effect does that have on economic activity? How many people will opt out of work entirely if given £130 per week to do nothing?

2. It only works if you replace *all* income-related benefits with this. As soon as you re-introduce (say) housing benefit for the unemployed, then you are back to a benefits system with huge marginal rates for people who take work, and hence a disincentive to work.

But if you have a uniform UBI, then you get the situation where unemployed people who live in Westminster for historical reasons will be kicked out, and forced either to starve or to move potentially hundreds of miles away where the UBI is sufficient to pay the rent.

That sort of outcome is something which the current system already could produce if we wanted, but politicians have chosen not to. (There was a hugely watered-down version due to the "benefits cap" at something like £26,000 per household; for a two-adult household that equates to a £250 per week UBI)

Similarly, a couple earning £260 per week UBI will be much better off than a single person earning £130 per week. Is that considered acceptable? That could easily be the difference between luxury and penury, and many people are single through no choice of their own. Should they be forced to share?

What about disability benefits? There is a sliding scale between those with special care and medical needs, down to "disability" which is only really another term for "unemployed or unemployable"

Much as I would like UBI to work, the political willpower required not to meddle and not to re-introduce income-related benefits would be too high, methinks.

[Henry Wertz 1]

I don't have any suggestions...

I don't have any suggestions, this is a complex topic.

I do think it's actually good for the economy to "raise up" people that are just scraping by, however it's done. Quite simply, someone who has money "left over" at the end of the month has money to spend (which increases economic activity) or save (which should help later, either when they by a big ticket item later, or when they retire and actually have something saved up to retire on.) Someone who works hard, but ends up with enough to pay rent, utilities (electricity, heat, water, trash) and food but then has nothing left over, has nothing to spend.

So, the problem with doing everything via "the dole", well, I saw this in person. A friend of mine years back was making like $8 an hour, and the boss offered him a dollar an hour raise. He pointed out, he was receiving low income benefits, and the way they were structured he would have had to recieve a raise to $12 an hour to make up for the loss of benefits! It's a problem when one can make the same income doing nothing versus long, hard hours at a crappy, low-paying job, people don't have an incentive to work.

As for raising the minimum wage... first off, I must address inflation. The US CPI (consumer price index) is useless as an estimate of inflation; since social security, and a bunch of other gov't spending, is indexed to increase at the rate of CPI increase, since 1980 the feds have been gaming the system to keep CPI-measured inflation artificially low. A primary technique is "hedonomics". This follows the theory "when items get more expensive, consumers will by less expensive substitutes"... and they have, they replaced steak with hamburger, some electronics items with cheaper equivalents, they play games like put a top-of-the-line ipod on there so that it's price can decrease 90% over a number of years, masking increases in other products... and so on. Using current CPI charts, the claim is there was DEFLATION in 2009 and inflation has been like 1-3% a year otherwise. Using 1980 CPI charts, inflation has averaged around 7.5% recently (quite low around 2009, and higher after that.)

Given the 1980-method CPI... so the minimum wage set in 2009 was $7.25. Getting $7.25/hour now is equivalent to $4.80 an hour then. Given the high inflation rate, it'd be tough at best to actually get by on $7.25 an hour, it could well be time for another minimum wage increase. But, I also don't see any jobs locally actually PAYING minimum wage, the lowest I see locally is like $9 an hour.

The odd thing is, I've read more and more recently about businesses who have not upped their pay in years complaining "there are no qualified applicants out there". Even Amazon said to expect "1 day shipping" to take at least 4 days to ship as the holidays approach, because they can't find people to pack shipping boxes for them. So someone asked the Amazon rep, "have you tried offering more pay? Your pay is very low". The answer? "No, and we don't intend to." WHAT DO YOU DO ABOUT THAT? It seems to be a SERIOUS economic breakdown, a breakdown of the natural laws of economic equilibrium, when jobs pay so low that nobody will fill the positions, but the employers will just leave the positions unfilled rather than pay a reasonable wage. I'm curious if, longer term, these businesses will suck it up and start to pay better, or just keep on whining and let their service degrade from being understaffed?

[Matt Bryant]

Re: I don't have any suggestions...

"......Even Amazon said to expect "1 day shipping" to take at least 4 days to ship as the holidays approach, because they can't find people to pack shipping boxes for them. So someone asked the Amazon rep, "have you tried offering more pay? Your pay is very low". The answer? "No, and we don't intend to." WHAT DO YOU DO ABOUT THAT? It seems to be a SERIOUS economic breakdown, a breakdown of the natural laws of economic equilibrium, when jobs pay so low that nobody will fill the positions, but the employers will just leave the positions unfilled rather than pay a reasonable wage. I'm curious if, longer term, these businesses will suck it up and start to pay better, or just keep on whining and let their service degrade from being understaffed?" What the Amazon rep meant was their business model probably could not sustain paying more, otherwise they would become uncompetitive - more pay means having to increase the cost of shipping whcih could lead to lower sales. But, Amazon have already implemented a solution with Amazon Prime - you pay the extra each year as an up-front fee and get Prime delivery service, whilst everyone else is quietly shifted to four-day delivery.

[Tonyel]

As always, an interesting and persuasive article.

I'm interested that you seem more in favour of the basic income idea than when you said in January: 'I'm in favour myself, but real world experiments have shown problems', which slightly dampened my enthusiasm.

Have you been persuaded that the real world problems are outweighed by the benefits?

I'm also pleased to see that the Finns are thinking of trying out the idea:

http://www.bbc.co.uk/news/world-europe-33977636

PS If one's sincere opinion is that the poor and disadvantaged are better served by a free market economy, with less state interference, than by a big state decreeing 'the poor shall be rich', then one is generally (in East Oxford at least) deemed a selfish right wing bastard, which is not how I describe myself. So there.

[Tim Worstal]

"I'm interested that you seem more in favour of the basic income idea than when you said in January: 'I'm in favour myself, but real world experiments have shown problems', which slightly dampened my enthusiasm."

Ever the problem of both politics and economics. If you start from the real world experiments you might end up with a different colouring to the solution than if you start from first principles. And there's no real solution to it either. I'm firmly in favour in principle and slightly less so in reality.

I do think that much of the problem with reality goes away if a UBI really is *basic*. If it gets hijacked into being a *living* wage (ie, that £9 an hour sort of thing) then I think the practical problems overwhelm it.

[MrXavia]

Why can't benefit claimants work for the government?

If the government is handing out cash to people who are not in work, why can't it get something in return?

I mean if you are not working, but are able to, why can't you do some work in your community?

There are many manual jobs that need doing that are not done in my village because the council doesn't have the budget, yet we have quite a lot of people on benefits...

If your working and have work related benefits, that is fine, you are contributing to society

If your not working but could work, then your a drain on society!

Picking up litter, cutting the grass, cleaning signs, sweeping the pavements, even running a club of some kind (i.e. a tennis club, football, rugby, cricket, etc...) So many ways to give back to the community if it was managed and most importantly seen as a good thing!

[J.G.Harston]

Re: Why can't benefit claimants work for the government?

"If your not working but could work, then your a drain on society!"

Yeah, my dad can work, steal his pension off him and force him to cut grass for the council.

[timblackwell]

UBI - not a silver bullet, not a golden ticket

For all its myriad faults, the benefits system in the UK has historically attempted to focus expenditure on those most in need. UBI schemes deliberately blurr this focus - because entitlements are unconditional. This means that schemes either reduce support for the worst off, or are extremely expensive.

When designing social security benefits, people like to talk about the effective marginal tax rate (EMTR) resulting from the combined effects of income tax, national insurance and withdrawal of benefits. This rate is occasionally over 100% in the current system and can be as high as 80-90% for some claimants under universal credit. High EMTRs are an obvious deterrent to taking up work. UBI is touted as getting round this - UBI is only (in effect) means-tested via the tax system, rather than being withdrawn explicitly as income increases. You earn more, you keep more.

But consider what happens under UBI when earnings are lost. UBI recipients are likely to have costs and contractual obligations based on their employed income + UBI, but now there is no safety net to support them - the UBI doesn't rise as their other income falls. Of course we could demand that people take out some sort of insurance scheme against this eventuality - but recent experience in the UK is not encouraging.

UBI schemes also tend to founder when it comes to housing costs. Some UK enthusiasts suggest that we keep the existing housing benefit scheme alongside UBI. They generally don't recognise that this destroys the work incentives - unless housing benefit too becomes a (really rather expensive) non-means tested scheme.

I'm not actually against some elements of UBI, but the whole field is suffused with wishful thinking.

[nijam]

Re: UBI - not a silver bullet, not a golden ticket

> benefits system in the UK has historically attempted to focus expenditure on those most in need

It has done so - not particularly well - at the cost of Byzantine complexity, poverty-traps, a fortune in otherwise-unproductive bureacracy, and so on. So, replace all that guff with a simple UBI, which will also simplify income tax by scrapping allowances (and potentially some of the rate banding - base rate may well rise to the same level as the next band, or more) and generally simplifying things so that people can actually see WTF is going on.

And how is the situation when people lose their job different under UBI than otherwise? If I lost my job with UBI, at least I'd know exactly how much I'd still have available (and it would already be in place); if I lose my job today I'd have months trying to figure out what I'm entitled to, quibbling with bureaucrats about it, and waiting for them to get round to actually starting to make the payments.

[timblackwell]

Re: UBI - not a silver bullet, not a golden ticket

Fully agree about the Byzantine complexity. Administration is expensive, but a lot of that is to do with housing and disablement benefits, which would have to continue if the people in greatest need are not to be clobbered by UBI). Scrapping income tax allowances would bring huge numbers of people into the tax system, also resulting in administrative expense.

How is the situation different between losing job now and under UBI? A lot

depends on whether you have a housing element in your UBI, and, if so, whether that element is means tested and how it relates to my actual housing costs. But apart from the very affluent, people's expenditure in UBI land is likely to settle nearer UBI + other income rather than just other income, unless there is a strong incentive for them to save against a rainy day.

I actually think a UBI is something we should be working towards in the long term (in large part because I don't like the abusive sanctions regimes currently applying), but it's not a panacea.

There's quite a good discussion of how a UBI might work in practice at https://www.jrf.org.uk/report/could-citizens-income-work

[Alien8n]

National Insurance and "Reallocation"

I see a few people complaining about reallocating money to the poor who are on benefits. Reading some of the comments here I'm led to believe you're all for a system where no one who is unemployed should receive a penny in benefits as they're clearly all scroungers on the take. As I've already stated this is not the truth, nearly everyone I know who is unemployed (I say nearly, there are scroungers who need a good kick up the arse) wants to work. Most of them have worked at some point and this is where the following becomes important.

One thing that seems to have been missed is that for many of us they aren't taking our tax money and giving it to the poor, the whole benefit system is based on your National Insurance contributions. The key word here is Insurance. Whilst in practise the government does effectively take our tax money and redistribute it what is actually being distributed is your insurance payments. These are the payments you make while working so that when you aren't working they can provide you with a basic income, be that unemployment benefit or pension once you retire. When I'm unemployed I'm not taking your tax money, I'm getting money back from my Insurance payments. My point here is that it shouldn't be a privilege that can be taken away. It's a right that should be payable to me when I require it. You expect your insurance company to pay out in the event of a car accident, and in the same manner you should expect the government to pay out in the event of unemployment. The reality is the government will do everything it can to not payout and tarnishes the unlucky person who has worked their entire life to be suddenly unemployed a couple of months away from retirement with the same brush as the long term unemployed who cannot find a job because they live in the once thriving coal mining valleys of Wales and the real scrounger who has played every trick in the book to stay on the dole and spend as much time in the pub as possible.

Where tax money is reallocated is the tax credit system, which is a system based around working. And again the arguments I've read don't add up. They aren't taking your tax money and giving it to someone sat watching Jeremy Kyle all day. They're giving it to someone who is working, doing the low paid jobs that us, in the IT industry, would never think twice of applying for (although in reality the truth is you have to be quite high up in the IT industry before you no longer qualify, you can still claim some tax credits even if your combined family income is around £30,000).

With UBI all they are doing is combining both pots, your NI and your tax, and rolling the benefits and the tax credits together to provide what is your basic income. And it's a much better system in theory than both the NI scheme or the Tax Credit scheme or even the new Universal Credit system. The reason is quite simple, with NI, Tax Credits and UC the money you receive is means tested. As a result there are diminishing returns on every pound you earn. With Tax Credits this can be very expensive as an increase is salary over the threshold can result in a rather large (potentially) demand for money to be returned. So unless you're able to make a considerable jump in income there is little incentive to move up the pay scale. Why chase that extra 50p an hour down the road if you won't actually see any of the money at the end of the week? So with UBI there is no disincentive to work, every extra pound (after tax) becomes yours so the incentive is there to go for the higher paid jobs and to demand the higher wages if you merit them. The disincentive is there for the people who simply want to sit at home or in the pub all day, they will never see an increase in their standard of living. You have now built into the system the ethic that if you want that holiday, or that new car you can have it. You just have to work for it.

[J.G.Harston]

Re: National Insurance and "Reallocation"

"When I'm unemployed I'm not taking your tax money, I'm getting money back from my Insurance payments"

Semantically, that's correct, and your entitlement is based on the NI contributions you've paid, but in reality, the tax and NI you pay today pays today's claimants, your claims are paid by the people paying tax and NI when you're claiming. There's no pot that your NI goes into where it sits for years'n'years until you draw it out. It's all a pyramid scheme. If the government could be held to account like any other financial services provider, they'd have been smashed to pieces for fraudulant accounting practices decades ago.

[Alien8n]

Re: National Insurance and "Reallocation"

No different from any insurance scheme. If you have an accident in your car they don't compensate you from what you've paid in, they compensate you from the pool of money paid in by everyone else who has an insurance policy.The only difference is with NI your "premiums" don't double when renewed if you're claiming benefits. My point though is that you've paid into NI as a safeguard against redundancy. Those benefits when unemployed are a right bought by those NI contributions. But we cannot pick and choose who gets those benefits and the reality is we shouldn't. Yes it means accepting that part of my NI money goes to people who have never worked, but the alternative is to go back 100 years to a time before the welfare state when people starved to death when unemployed.

[Anonymous Coward]

Nice article but...

... you include the main problem why this isn't going to work: "To start from the beginning, let's abandon any Randian ideas that there's not going to be any form of governmental interference in the income distribution.".

Yet I dare wonder if the modern governments don't form a big (if not huge) part of the whole problem themselves. Because in many countries (at least I know of Britain as well as Holland) have governments started to shift some of their previous responsibilities into private operations (companies, organizations, etc.) who should do the work for them.

Unfortunately the effective result so far is that the population kept paying the same amount of taxes (if not more) while the government as a whole started to do much less for them in return.

Have we already forgotten the prime requirements of said governments? Because one of its key essence, the one which (should) even validate its existence, is to concentrate the means of the population and perform any tasks which are meant to be for the common good. It's not only about making laws or upholding them, it also used to be about making sure that we'd all be able to enjoy the basic needs of life. Primary requirements. Yet all the governments seem to have been doing as of late is turn their back on these responsibilities.

So while tax and redistribution should work, your main obstacle is the government itself. Which, in multiple countries, seems to have grown into some kind of overhead moloch which requires the people to pay it on one hand, but on the other tries to evade its responsibilities best as it can.

I don't have the solution for this, other than reeling them in, but as long as they're included in the plan then I don't see this working anytime soon.

[Stephen Booth]

Does the market apply to all wages

Though I'm sure the market applies to low paid jobs I'm not sure it always applies at the top.

Sure there are some talented individuals who build their own companies from scratch and have a huge responsibility for the value of the company. However in many companies the size of the company is so great that a small number of unjustified large payouts at the top have no impact on the market price of the shares. On the other hand any attempt to oust the current management would impact the share price so the shareholders and the market as a whole turns a blind eye. As long as only the small number of people at the top have their hand in the till the market does not care. These people are not being paid for the value they add to the business but are taking a "commission" out of the value of business that crosses their desk.

Interesting question for a future article, are commission based rewards good for the health of a market or do they encourage volatility for its own sake? Compare and contrast a Tobin tax and a traders commission.

[ntevanza]

Accuracy v precision

A measurement can only be accurate with respect to a precision. If your GDP figures keep changing, but within a known and acceptable precision, then they're accurate.

This distinction is easiest to grasp in geographic applications. No-one complains that their road is 100m too far to the left on a map of the whole country.

+1 for universal welfare payments. Less (albeit non-zero) room for cock-ups and fraud, and meaningful for those who need them. Insert here a well crafted point about governments' ability to target benefits precisely.

[PapaD]

Forcing jobseekers to work for their welfare

There have been a few people here that have suggested that anyone receiving welfare payments (like jobseekers) should have to work to earn those payments.

Having spent 4.5yrs either out of work, or on short/fixed term contracts after being made redundant in 2009 I can honestly say that I'd have happily done that work, as long as it was paid at the minimum wage (so, assuming the minimum wage at the time was £6.25, my £72 would equate to roughly 11.5hrs

That would be fine.

Yet I so often see people suggesting that those out of work for long periods should work a full working week for their £72, roughly £2 per hour if we assume a 35hr working week. This is what I would very much be opposed to - If there is enough work to represent 35hrs a week for someone, then hire them to do the job - if there isn't, don't bloody well expect people to be willing to work at the role at a pay level that is illegal if it was an actual job.

(I didn't receive housing benefit either, or in fact, much of any other benefits beyond that £72 other than a council tax rebate)

[twilkins]

WTF

Has the register turned into "The Spectator"?

Better to focus on quality tech news than political opinion.

[Joe Gurman]

The laughable Laffer curve

Can you actually cite any widespread, quantitative evidence for the Laffer curve's validity? Or is it just what it started out as, a sketch on a cocktail napkin?

The wealthy did quite well in the US when their marginal federal income tax rate was 90%. One can argue whether that limited economic activity, but the government was spending that money, not hoarding it up in Fort Knox. Saying taxes reduce the money available for economic activity is hogwash at least in the US, where nearly all of it is spent on procurement with (ta da) the private sector, rather than a a large (for the size of the population, or even historically within the US) bureaucracy.... and bureaucrats buy cars and washing machines, too, for that matter.

[Tim Worstal]

Re: The laughable Laffer curve

http://eml.berkeley.edu//~saez/diamond-saezJEP11opttax.pdf

Peter Diamond (Nobel Laureate) and Emmanuel Saez (will get Nobel if he lives long enough) on the calculation of where the peak of the Laffer Curve is for the US.

As I say in the piece, about 54% for a system with allowances. That any Brit can leave the country and thus the tax system is such an allowance. And 54% is all taxes on income, so including NI. Giving a top income tax rate of some 45% or so......

[Uffish]

Whatever you do - don't touch 'The Market'

And why the hell shouldn't we touch the market?

The market is a human construction, there used to be slavery in Europe (and lots of other places, natch), then there was feudalism, then there was a fairly slow change towards today's 24hour rolling stock-market reports on all TV channels. I fail to see why the changes should now stop - and I fail to see any evidence that economic changes have stopped.

[codejunky]

Hmm

Normally I end up agreeing with most of Tims articles because they do seem to be on the ball and sensible (to me at least). While I agree with some of this one I have found some things which dont quite sit right.

First I have been reasonably impressed with what little I have heard of the Randian approach. Particularly Paul Rands ideas of burning the excessively thousands of pages of taxation laws which help no one. Tax is a chore. It is the theft of your earnings that you make the effort for but then get taken to be spent by the gov. We obviously agree to it for social good items (as you mentioned about the cost/benefits of) but the more difficult and more exceptions we make creates loopholes (the latest witch hunt against business) and reduces the desire to just do it. The alternative is what we rally against now.

As for Sweden I would be interested in your opinion of- "Scandinavian Unexceptionalism: Culture, Markets and the Failure of Third-Way Socialism".

I am not convinced by the idea of the universal basic income because the slippery slope will punish the 'rich' for earning and give increasing amounts to support non-work. The biggest concern being that people travel through various safe zones to break into this country for money. Universal basic income may start as a good idea but more and more restrictions will be applied for who is deserving. Also we could have Germanys problem of enticing an immigration stampede which is only funny to those not affected by the problem.

A follow on problem would be the govs interference and tracking because they must put this money somewhere and they are more adept at taking money than giving. To cut down on fraud they are bound to insist on easily identifiable methods of interfering with your life (which will be easily subverted) and cause the same headaches as trying to talk to the HMRC (who would likely get this task). This is the picnic in a sandwich shop problem with all the bureaucracy and additional gov cost (duck houses, porn) that it en tales.

Finally wouldnt a universal basic income just shift prices up to compensate for the additional spending power (greater demand) but the same level of supply. For example housing prices shoot up if you increase the amount of allowed debt or the gov interferes by pushing money into buying/renting of property. No value is created but the additional spaffed money increases prices for no actual value. I would expect the basic goods (necessities) to increase in cost. However it might work if we can get rid of all the other benefits for working/not working or for buying a house in an area you cannot actually afford.

Of course I do agree we should stop taxing people earning minimum wage but I would go further than NI and income tax. The idea of taking with one hand to give back with another (with the processing fees in the middle) is daft and only good for creating jobs of little purpose. Less gov spending all the money and less interfering with everyones little lives would save a lot but also make it harder to run up such a huge deficit/debt. By selling gold, taxing to excess and spending every penny plus a whole lot more we had a lot of people wanting more and a recession leaving us with less. So many people looking to the gov to give them what they wanted and unhappy when they are told the money isnt there. And as we know that leaves us with people who think unbridled socialism, massive spending and Corbyn is the answer.

[Anonymous Coward]

Re: Hmm

I think it was a reference to Ayn Rand, rather than Paul Rand.

Could be wrong

[Tim Worstal]

Re: Hmm

Quite so. And the politician is called Rand Paul, not Paul Rand.....

[codejunky]

Re: Hmm

I really should have waited to post until morning. My bad