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Comment by lpsz | Hacker News Reader

I'm happy if my tax money can help someone in need. However, I'm unhappy if it leads to creation of permanent poverty traps. Have any countries (perhaps in Europe or elsewhere) successfully implemented support systems that are fair both to the needy and to the taxpayers?

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In Europe, Denmark's "Flexicurity"[0] model is often touted as an exemplary system. I don't know the details of the implementation though.

[0] https://en.wikipedia.org/wiki/Flexicurity

As long as a raise of income of $N docks you at most N - (whatever you consider minimum wage) dollars in welfare, you won't be outright disincentivized from working.

Upon some more research, it looks like Earned Income Tax Credit [1] attempts to provide some minimal incentives along these lines.

Simplified analysis, goal is situation C. Let's say my monthly welfare income is $1000.

A. I start earning $200. My welfare decreases by $200. Why don't I just stay on welfare?

B. I start earning $200. My welfare decreases by $300. I've lost $100, a penalty for working.

C. I start earning $200. My welfare decreases by $100. I now have an incentive to work. Over time, this leads to a future situation where I gradually earn much more than I could ever with welfare.

Also consider: What if I find $1000 sufficient to live on? What about $1100?

[1] http://en.wikipedia.org/wiki/Earned_income_tax_credit

It's actually more likely that your A and B scenarios are the same. I'd consider a more realistic A scenario to be:

I start earning $200. My welfare decreases by $200. My expenses increase by $100 (transportation to/from work, childcare while at work, clothes specifically for work, etc).

Once you realize that work usually has more costs than just time A and B become the same.

It is even worse than that. Now you are spending X hours per day being told what to do, instead of spending X hours doing whatever you want.

There are some scenarios, usually at income thresholds for various benefits, that the B scenario is manifestly true even without expenses - earn another dollar, and you'll lose money.

I suspect that angst about "permanent poverty traps" is something we're going to have to get over.

For now, we're talking about unskilled and low-skilled jobs going away permanently, and there is an element of moral panic about uneducated, supposedly low-value-producing people getting leisure and government support.

Just wait until it happens to a middle-class or upper-middle-class group. THEN is will be all kinds of innovative to offer lifelong government assistance in the form of mincome or other such program.

And if you are worried about government spending and efficiency, wouldn't you rather see the TSA payroll supporting twice or three times as many people in a mincome program? It's better to be honest about a lack of productive jobs.

> Just wait until it happens to a middle-class or upper-middle-class group.

These things don't happen overnight--there will be many years as the class of jobs that you're talking about becomes slowly less well-regarded, until when they disappear no one will care.

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