Stereotype of the Lazy Welfare Recipient: Evidence from Cash Programs Worldwide
vox.com
vox.com
After the second time they dropped the ball, I didn't bother to go back. My income is gradually going up. I would get less help than I used to. I do freelance work, so my income is erratic, which doesn't play nicely with their forms. Etc.
I began looking for other solutions.
I am sometimes upset that I am not getting the food stamps. My situation is still dicey and it is still a scramble every month to get enough resources to eat every day. But I am not going to go spend all kinds of time trying to chase the few dollars they would give me, getting sick over it, and worrying about the possibility that they will feel I am committing fraud or something because my income is erratic and some months I have enough and some months I don't (or whatever the hell problem they might have with me).
So I do sometimes talk about it. But not a whole lot, for various reasons.
Public assistance in this country is given up so grudgingly, and often so incompetently, as to be actively counterproductive.
The Vox article mentions other studies in the US and Canada, particularly negative tax and earned income tax credit. I'm not sure those actually act as welfare or a one time economic stimulus. As a former recipient of earned income tax credit, 1. I definitely didn't plan for that income 2. It didn't change my work incentive (I was already working and low income) 3. I probably spent that refund almost immediately either on paying down a credit card, a car down payment, appliance, etc.
Earned income tax Had no effect on my desire to work or to increase my income; the fact that I worked full time and had a low income was incentive enough. The earned income tax was kind of like a bonus on an otherwise hard existence.
I suppose what is important here though is the question, do the program's incentivize people to move out of poverty and remove the need for future subsidization? If my hypothesis on upward mobility is correct then government welfare programs don't really do much to move people out of poverty, they are really economic stimulus and you know, keeping people from starving and freezing to death. If we wanted to address the question of deterring work, I'd suspect a lack of upward mobility is enough to deter work toward the bottom.
I could honestly say when I was getting a bigger tax refund than what I paid in taxes, I really didn't know what it was or understand why I was getting it and when it would go away. As a once a year thing that I didn't understand, it had little influence on my thinking about work and I certainly didn't think about it as welfare.
As a more frequent payout I'm certain I would have gave it more thought and it would have an influence on thinking and behaviors. As a working person I'd likely have considered it welfare and would have given it consideration as my pride and ego would have to grapple with that.
V. CONCLUSION In recent years, there has been a large growth in safety net programs across the developing world. If anything, we might expect this trend to increase as countries become richer: Chetty and Looney (2006) show that social insurance as a fraction of GDP rises as countries get richer, suggesting an that safety nets may be increasingly important as countries grow. 18 As safety nets have increased, so has the debate about whether they simply discourage work, enabling a “lazy poor.” Aggregating evidence from randomized evaluations of seven cash transfer programs, we find no effects of transfers on work behavior, either for men or women. Moreover, a 2014 review of transfer programs worldwide by Evans and Popova also show no evidence—despite claims in the policy debate—that the transfers induce increases in spending on temptation goods, such alcohol and tobacco. Thus, on net, the available evidence implies cash transfer programs do not induce the “bad” behaviors that are often attributed to them in the policy space.
[0]: http://www.givewell.org/international/technical/programs/cas...
[1]: http://www.givewell.org/international/technical/programs/cas...
I feel curious about what conclusions would obtain from a similar study in European countries, which are well-known by their welfare programs.
And of course the money comes from taxes which come predominantly from upper income people, so even though the government is writing a check to Donald Trump, it's not half as big as the one he's writing to Uncle Sam, whereas the reverse is true for lower income people.
If the basic income was set somewhere near the Federal Poverty Level (FPL) for an individual, it would be ~ $1000 / month [1]. (This is just for a rough sense of scale. I don't actually think it's a good idea to specifically aim to match that number, but I suspect we shouldn't go much above it. That's a longer discussion, though.) That wouldn't completely cover Social Security for everyone—the average monthly retirement benefit is ~ $1300 [2]—but it would cover a large chunk. Further, the minimum eligibility level for Medicaid is 133 % of the FPL [3], so if we'd like to maintain our current standards, provision of a roughly FPL basic income won't obviate Medicaid for everyone. (Medicare's qualification criteria are primarily age based, so the number of eligible beneficiaries would be unchanged by the existence of the basic income.)
[1] http://aspe.hhs.gov/2015-poverty-guidelines
[2] https://www.ssa.gov/policy/docs/quickfact/stat_snapshot/
[3] http://www.medicaid.gov/medicaid-chip-program-information/by...
Regardless, though, it seems like there should be relatively elegant options for achieving both objectives with one system if we want to. Perhaps just increase the basic income after some age. (That sets off some warning bells in my head, though—it could be a step toward complexity and means testing.)
(I don't think it would make sense to actually start that high—I would experiment with lower levels, and on more local scales, to try to understand the economic effects. Even so, I wouldn't be surprised if the maximum benefit to the full economy and to general well being occurs for a Federal component of a basic income near the FPL, though.)
I envision a system like this:
Person A has just graduated from high school and has never worked right when the UBI program goes into effect. He never pays into SS and receives only UBI for life and will never be eligible to collect SS.
Person B has worked under the existing system for n years and has paid into SS a significant amount. He stops paying into SS now and begins receiving UBI as well. When he reaches retirement age, he collects either SS or UBI, whichever is greater, based on the points he earned from paying payroll taxes.
Person C is a current typical retiree. He continues to collect SS, as it pays better than UBI since he paid so much into it from his payroll taxes.
This UBI system would pay out less benefits than someone with maxed out SS benefits gets today, but we wouldn't have the payroll tax anymore. Instead, the UBI program would be funded through income tax.
This would cost significantly more than today's wealth redistribution programs even added together (setting aside Medicare/Medicaid which are kind of a separate issue), so it would certainly require higher taxes to support it.
Lefty liberals would not agree with the decrease of the payout for such transition, so there is no transition.
But of course encouraging work is not really the ultimate goal, so this is unrelated to whether basic income is a good idea or not.
I wouldn't say that discouraging work is totally irrelevant either. The reason that first-world standards of living are high is that lots of people are performing (often unpleasant) tasks for complete strangers, in exchange for similar favors from other strangers (i.e., working for money). Decreasing the number of people willing to do that is (all else equal) a bad thing.
But because budgets have to balance, the current system has the advantage that it can have lower marginal tax rates on higher income earners.
Whether it makes sense to impose an especially high marginal tax rate on poorer people (and a lower marginal tax rate on richer people) is a complex question. But to claim that basic income solves the problem of incentives is wrong. Basic income just moves the disincentive effect to a different segment of workers.
Also, there are some taxes where the disincentive effect is beneficial. Basic income funded by a carbon tax seems like a good combination.
At any income level you can make arguments why their work output would be more/less sensitive to taxation. We are talking about a difference in a difference (how much one group changes their work in response to tax, vs another) and not absolutes, which complicates matters. E.g. poor people need the money more, so maybe they are less responsive to marginal tax rates.
Also, there are some taxes where the disincentive effect is beneficial. Basic income funded by a carbon tax seems like a good combination.
Pollution taxes are a good idea for their own sake, but they will only cover a tiny percentage of basic income or welfare.
That isn't a very strong argument. Assuming the basic income and associated taxation is calculated to approximate the same level of redistribution of wealth as the existing welfare system, the amount a person making a given level of income would have to have their taxes increased by in order to balance the budget is only equal to the amount they themselves would receive from the basic income but would not have qualified for in a means tested welfare system. For high income earners that amount is negligible because the basic income constitutes such a small proportion of their total income, and even then it has no effect on their effective tax rate (i.e. net transfers with the government; taxes paid less basic income), only that small change to the marginal rate needed to keep the effective rate the same.
And in particular what is really happening is that the disincentive (which is created by any taxation for any purpose) is being spread more evenly throughout the population, which all else equal can be expected to have less effect on behaviour than concentrating the effect on a subgroup which will then be much more compelled to react to it.
Moreover, how the taxes are collected is separate from the basic income. If we find that it is for some strange reason better to charge a higher marginal rate to lower income people than higher income people then we can have a basic income and yet still do that.
Agreed, which is why I object to your statement that: We already know how to design a program that won't discourage work. It's not that basic income discourages work more or less, but that it evens out the marginal tax rate. This might be a good or a bad thing, but your original post contains no argument either way. You run a very strong risk of the reader misinterpreting what you are saying, and believing that there will be a uniform improvement in incentives across the whole population.
which all else equal can be expected to have less effect on behaviour than concentrating the effect on a subgroup which will then be much more compelled to react to it.
I think the main argument behind the current system is that low income people need the money, and therefore are less affected by the marginal tax rate.
Moreover, how the taxes are collected is separate from the basic income. If we find that it is for some strange reason better to charge a higher marginal rate to lower income people than higher income people then we can have a basic income and yet still do that.
Either "basic income" should be used to denote a flat tax plus basic income, or a varying marginal tax plus basic income. Your first post implies the former to the exclusion of the latter. I think you are changing the definition because it's important to you that basic income "win", but really there are two separate issues, which are negative taxation vs welfare, and fixed vs varying effective marginal tax rates. Each of these issues should be decided independently on their own merits.
Because the marginal tax rate is a separate thing. You can raise the money however you like. Tax the rich, tax the poor, tax securities derivatives, print lots of money, it's a separate consideration. What a basic income does is dramatically simplify the welfare system so that when you balance the other side of the ledger you can better see what you're looking at.
It may then also make sense to simplify the tax system and impose a uniform rate on everyone (because the level of redistribution of wealth can now be trivially set by adjusting the amount of the basic income), but there is no inherent reason why any other method of raising the money could not be used instead. Even in that case a basic income is preferable to the existing system of ad hoc means tested welfare programs.
> I think the main argument behind the current system is that low income people need the money, and therefore are less affected by the marginal tax rate.
There are three points here.
First, if these people need the money so badly, is it really good policy to be imposing high marginal tax rates on them, regardless of whether they'll bear it because they have to?
Second, the people we currently take benefits away from are not the lowest income people (who do qualify for the programs), they're the low-middle income people who only just barely don't. If the true consideration is to collect from people who will most be forced to work anyway then shouldn't we be sticking it to the even poorer people who have even less choice? (Of course this runs right back into the first point.)
And finally, if these people need the money so badly then preventing them from earning as much by working legitimate jobs that report their income will cause more to turn to off-the-books income like dealing drugs and stealing in order to make ends meat. Presumably that isn't the work we want to maintain an incentive for.
See my other post for answers to the rest.
Of course it does, because it's in the context of receiving the benefit. Since receiving the benefit is unconditional, it doesn't cost you money/benefits to take a job or work more hours, unlike with means tested programs which do exactly that.
How the government comes up with the money to pay out the benefit is a separate question because you can do it in any number of ways. Imagine the government pays for the basic income by conquering foreign lands and seizing their resources. Unambiguously no disincentive to work for all the citizens.
Obviously in the real world the money is going to come from taxes. But taxes are separate. All transfer programs require taxes, on top of the effects created by the program itself. Because the method of taxation that has zero effect on the incentive to work is the mirror image of the basic income: Everyone pays the same fixed dollar amount in taxes regardless of income. Using that method of taxation to fund a basic income converts it from a transfer payment to a no-op.
So if your point is that you cannot have a transfer payment without creating a disincentive to work for someone, that is correct, because that is what a transfer payment is: In order to take from those with more and give to those with less, you have to condition at least one of the taking or the giving on the existence of some threshold level of wealth.
But the difference between the program and the tax that pays for it is still quote important, because the people they affect are not necessarily the same people. For example, suppose you want to fund some transfer program using a tax exclusively paid by the top 1% of income earners. Everyone in the bottom 99% therefore does not pay the tax at all and is not directly affected by it. But now the separate choice comes between whether the program is a traditional means tested welfare program or a basic income. The means tested program will provide a disincentive for the 99% to work because the government will claw back some significant portion of the money they earn; the basic income will not, even inclusive of its funding source, because it is not funded by them.
Unless the basic income isn't enough to live on, which would mean more welfare would be needed for those who can't work or can't find a job.
So if anything maybe some people who now work full time, would work part time. And those who currently work but can barely scrape by would actually be able to live decently which IMO would have a tremendous effect on people's productivity.
Or if you've saved almost enough, otherwise.
1. Better income for adults means lower crime rates. A minimum wage job qt $7.25 plus $1,000/month grosses $27,080.
2. A Basic Income improves the outcome of children in poor families. Two minimum wage-earning parents plus $1,000/month per adult yields $54,160: Reduces divorce rate, reduces domestic violence, enables residence in a better neighborhood and attendance to better schools.
3. An improved outcome for children also means lower crime rates.
4. Lower crime rates improve real estate values. Anecdotally, from 1998 to 2006, East Palo Alto median home prices increased from $190,000 to $650,000 (342%). Over the same time period, the total crimes reported dropped from 550 to 350 (was over 900 in 1988) [0]. (note that the median home price has not further increased since 2006).
5. There are about 3,600 detached single housing units. [1]. With a little arithmetic, the total increase in the value of the real estate owned by those owners was $1,656,000,000.
6. A basic income of $1,000 per month for East Palo Alto over those 8 years would have cost $1,824,000,000.[1]
7. Property tax receipts increased somewhat. The county gets 1% annually, but due to prop 13, that will take a long while to fully materialize.
8. Sales tax receipts would likely increase as the population would have $228,000,000 more to spend each year.
So, if it is true that a basic income would reduce crime and lower crime rates improve real estate prices, then part of the economic analysis of a basic income needs to factor that in.
[0] https://www.law.berkeley.edu/files/EPA_Main_Report_Final.pdf
[1] http://www.bayareacensus.ca.gov/cities/EastPaloAlto.htm
Mods, please add 'anecdotally' to the spell check dictionary
Lack of negative behavioural effect from conditional handouts as low as $4 per household per month really doesn't tell you much about the effect of subsidies designed to permit an at least borderline-adequate Western standard of living.
They're trying to fix different issues with different sized budgets.
So? You performed what Daniel Kahneman has called "question substitution": replacing a difficult to answer question - "do welfare plans encourage exploitation" - with a simpler one: "are there people who exploit welfare systems".
> sounds like it's throwing any objectivity out of the window right at the beginning
Says the person who draws conclusions based on anecdotal evidence. My money is on the study with data, not the random internet person who actively looks for arguments supporting their existing beliefs.
It seems unlikely, and career suicide in any case.
My conclusion was that the welfare abuser stereotype absolutely does exist in reality and there are people who do become lazy because of welfare benefits on "1st world" countries.
Additionally, it was more of a huge scepticism than a "conclusion" and even that was supported by two additional arguments, not just that anecdotal evidence.
Almost half of the people who would be entitled to some benefits do not apply for them, due to various reasons such as social stigma, lack of knowledge or because they consider all the paperwork too much work. As a result, many people end up with more serious problems (debt, evictions, medical issues, social exclusion) that the state ultimately ends up paying for.
They found that abuse of the benefits exists, but is not very widespread.
[1]: http://yle.fi/uutiset/sosiaaliturvan_alikaytto_tulee_meille_...
Edit: fixed typo edit2: really fixed typo
If only there was a context within which I was using these words that made it blatantly obvious which of these uses applied here, like a link to a paper/article discussing if welfare programs made people lazy.
Also, you don't quite grasp what "anecdotal evidence" means in a scientific context.
Really? Please explain.
And what I meant was that the two questions are very, very close. Does alcohol encourage alcoholism?
I've seen people buy bottled water with food stamps, but it's crass to assume they don't have a good reason when we know nothing about their situation.
Until you explain, I think it's fair to give your acquaintances the benefit of the doubt.
I am also less likely to read an original paper over a web article unless I'm particularly interested in the topic.
I understand the policy for linking to original rather than commentary but there is sometimes value in a 'dumbed-down' summary.
HN generally prefers the best popular article on a specialized paper, with a link to the paper in the comments. An exception is papers on specialized topics the audience here is largely comfortable with, such as computing.
I can't remember why we changed this one. It may be that we felt the Vox article was too baity, or perhaps that the HN discussion would be of higher quality if it were fed with vegetables rather than fruit. In any case it was more of an exception than the rule.
As far as I'm concerned, even if these programs were free from abuse, they are payments for votes and programs like SNAP should be abolished -- that's what charities are for. The /only/ difference is that charities permit the liberty of donors whom may manage the fruits of their own labor.
Open your eyes and look around.
Edit: FR balance sheet[0] currently records ~$4.45 trillion in made up, outstanding, welfare payments. Most of that was directly passed through the FR's dependent organizations, commercial and investment banks, and was initiated to save their system from complete implosion.
[0] http://www.federalreserve.gov/releases/h41/current/h41.htm
Good effing luck!