Beta

Slashdot: News for Nerds

×

Welcome to the Slashdot Beta site -- learn more here. Use the link in the footer or click here to return to the Classic version of Slashdot.

Thank you!

Before you choose to head back to the Classic look of the site, we'd appreciate it if you share your thoughts on the Beta; your feedback is what drives our ongoing development.

Beta is different and we value you taking the time to try it out. Please take a look at the changes we've made in Beta and  learn more about it. Thanks for reading, and for making the site better!

Negative income tax

JOrgePeixoto (853808) writes | about 2 years ago

User Journal 9

I don't understand the minimum wage legislation. By forcefully mandating the minimum wage to be M, the government ensures that people whose productivity is lower than M will be unemployed. This is specially true for youth and unskilled people. And unemployment among youth can create a vicious circle: he is unskilled because he never worked, and he cannot find a job because he is unskilled.

I don't understand the minimum wage legislation. By forcefully mandating the minimum wage to be M, the government ensures that people whose productivity is lower than M will be unemployed. This is specially true for youth and unskilled people. And unemployment among youth can create a vicious circle: he is unskilled because he never worked, and he cannot find a job because he is unskilled.

If the government allowed a young man to work for less than M, then he could gain the experience needed for getting a better job.

So it seems that the minimum-wage legislation only achieves unemployment and dependency.

Would it not be better to let a poor person work for less than M, and help that person with a negative income tax? That is, the government would give the person r * (M - W), where M is the minimum wage, M is his actual wage, and r is a positive real number smaller than 1.

This way we would encourage people to work, and gain the experience to get a better job.

cancel ×

9 comments

the theory (1)

Spazmania (174582) | about 2 years ago | (#40968465)

The theory is that if you aren't paying enough money to live on then either:

1. The work is of so little value that you don't need it done at all or,
2. The work is necessary to your business and you're abusing your employees because supply and demand allows it.

Group 1 work (makework) provides illusory benefit to the economy.

Group 2 work is just abusing employees because you can. Worse, if your competitor does it at scale then you have to do it in order to remain competitive. So, it's a job killer.

Re:the theory (1)

Bill Dog (726542) | about 2 years ago | (#40969679)

It seems like protectionism would be a better way to keep wages from dropping too low due to supply and demand.

Re:the theory (1)

Spazmania (174582) | about 2 years ago | (#40977105)

Did you know that in Japan, they actually *lose money* on every child that takes a factory job? They actually spend more educating the child than the adult will ever contribute to the economy. To stay ahead, the factory jobs have to go to foreign workers while the Japanese citizens do *something more productive.*

Re:the theory (1)

Bill Dog (726542) | about a year ago | (#40981387)

They? Who loses money? I don't see human beings' lives in terms of a cost/benefit analysis for the society, so I'm not forward-thinking enough to understand your point I guess.

Re:the theory (1)

JOrgePeixoto (853808) | about a year ago | (#40987227)

2. The work is necessary to your business and you're abusing your employees because supply and demand allows it.

That would cause the profit margin to be excessively high; and this, in the long term, would cause additional companies to enter this market, so as to benefit from the huge profits. Those companies would compete for the workers, and so the wages would go up until the profit margin becomes normal.

Is there any logical hole in my analysis?

Re:the theory (1)

Spazmania (174582) | about 2 years ago | (#40997109)

More than one error, but if you're trying to point out an error in my analysis you'll need to be more direct about it.

The minimum wage supports the unskilled worker. There are more unskilled workers than there is work for them. Most of the work which used to be done by unskilled workers is, if they're paid a wage they can actually live on, cheaper to do with automation overseen by much smaller numbers of skilled workers.

This poses a dilemma. If you allow supply and demand to fix it, the value of unskilled labor drops until the automation is more expensive. But automation isn't getting more expensive. It's getting steadily cheaper. So you place the entire unskilled workforce in a situation where if they work just a little harder and just a little longer each month they can still eat and keep stay close enough to current on the lodging bill not to be evicted. And they for sure can support the healthy growth of children that biological reality will thrust upon them. In other words, you allow a permanent underclass to form, from which escape is unthinkable let alone impossible.

On the other hand a portion of the market for unskilled work doesn't readily automate. So, if you compel a minimum wage there will still be some work. A portion of the unskilled workforce will have jobs that they can live on and raise children on. A classic lower class but a mobile one. The rest will have nothing.

Nothing is actually good. Having no prospects, not even bad ones, forces a choice. You either gain the skills of a trade (moving you out of the unskilled workforce where the minimum wage was necessary) or you relocate somewhere that has more unskilled jobs (i.e. leave the city and suburbs) or you hit the street homeless where you get sick and die early.

This is harsh. But it drains the oversupply of unskilled workers without either discouraging automation or creating a permanent underclass. And it leaves you with a residual supply of unskilled workers that isn't downtrodden.

In theory. Mistakes in welfare, food stamps and the like which tend to prop up an underclass work against this process. But as they say, two wrongs don't make a right.

helping the poor should be left to the church (1)

Bill Dog (726542) | about a year ago | (#40981535)

Would it not be better to let a poor person work for less than M, and help that person with a negative income tax?

I don't think so, because then employers would just lower their wages to practically nothing and only hire people who didn't care anyways because someone else was making up the shortfall. So the govt. would have to raise taxes on business to pay for the businesses that sloughed off most of their wage-paying onto the govt. And then the rest of the businesses would have to do the same to be able to afford to pay the higher taxes and stay in business and compete with the ones who only adapted to the business environment the govt. was making.

Re:helping the poor should be left to the church (1)

JOrgePeixoto (853808) | about a year ago | (#40987277)

I don't think so, because then employers would just lower their wages to practically nothing

But employers have to compete for the workers. So the wages tend to be close to the worker's productivity.

Re:helping the poor should be left to the church (1)

Bill Dog (726542) | about 2 years ago | (#41005957)

"But employers have to compete for the workers."

Not in this new economy. The U.S.'s U-6 unemployment rate is 15%. Spain is at 25%. From now on it's a labor surplus and work shortage.

Check for New Comments
Slashdot Account

Need an Account?

Forgot your password?

Don't worry, we never post anything without your permission.

Submission Text Formatting Tips

We support a small subset of HTML, namely these tags:

  • b
  • i
  • p
  • br
  • a
  • ol
  • ul
  • li
  • dl
  • dt
  • dd
  • em
  • strong
  • tt
  • blockquote
  • div
  • quote
  • ecode

"ecode" can be used for code snippets, for example:

<ecode>    while(1) { do_something(); } </ecode>
Create a Slashdot Account

Loading...