The Wage Subsidy: an Idea Whose Time Has Come?

     "It seems to have been picked up again from some major intellectual organs on the Right as Lars Christensen tells us:

    "In a recent blog post my friend Sam Bowman who is Research Director at the Adam Smith Institute in London makes the case for a Basic Income and explains the basic idea. This is Sam:"

The British government spends more on welfare than it does on anything else apart from healthcare. The benefits system is arcane and unwieldy, a mish-mash of disparate attempts to address different social problems in a piecemeal fashion. It creates perverse incentives for those on it, such as people stuck in a ‘benefits trap’ where they lose almost as much money in benefits by working as they are earning, and distorts entire markets by inflating prices, as housing benefit does to the housing market.

…The ideal welfare system is a basic income, replacing the existing anti-poverty programmes the government carries out (tax credits and most of what the Department for Work and Pensions does besides pensions and child benefit). This would guarantee a certain income to people who have no earnings from work at all, and would gradually be tapered out according to earnings for people who do have an income until the tax-free allowance point, at which point they would begin to be taxed.

For example, we could set a basic income of £10,000/year by using a cut-off point of £20,000/year, and withdrawal rate of 50%. The basic income supplement would be equal to 50% of the difference between someone’s earnings from work and the £20,000 cut-off point. A person with no earnings would get a basic income of £10,000/year; a person who earned £10,000/year would get a supplementary income of £5,000; a person on £15,000/year would get a supplementary income of £2,500; and a person on £20,000 would get nothing (and begin paying tax on the next pound they earned).

These numbers are representative: no need to tell me that £10,000 is too low or too high. What matters is the mechanism.

     "What Sam here suggests is basically a system similar to the Negative Income Tax, which Friedman suggested in Capitalism and Freedom and Free to Choose."

     Matt Zwolinski’s libertarian case for redistribution

     "Sam is not the only libertarian to recently having made the case a Basic Income Guarantee. Hence, in a recent post on libertarianism.org Matt Zwolinski spells out The Libertarian Case for a Basic Income."

     http://marketmonetarist.com/2013/12/08/there-is-a-pragmatic-but-not-a-libertarian-case-for-a-basic-income-guarantee/#comments

     Lars concludes that there isn't a libertarian case for the wage subsidy of NIT but there is a pragmatic argument-a pragmatic libertarian argument, basically. 

      David Friedman has this to say against the WS or NIT:

      "That is probably true (that the Basic Income would be an improvement compared to the present welfare system), especially if you imagine it replacing not only welfare but all policies, such as the farm program, that are defended as helping poor people. The problem, as Matt appears to realize, is that if a guaranteed minimum income is introduced it will almost certainly be an addition to, not a substitute for, current programs."

     On that, I think Milton Jr. is correct. I mean as liberal I have no interest in giving up on the welfare state in exchange for the NIT or giving up the MW or much of anything else. I think that politics still favors the liberal position-it may take anther 10 or 20 years but the GOP will finally get flushed out and the majority will of the country will finally carry the day. Yet, Noah Smith who likes to claim he's a liberal says this:

     "As for us technocratic-minded liberals, of course we should not let the better be the enemy of the good - we should still keep campaigning for a minimum wage hike, if for no other reason than to force Republicans to offer wage subsidies as an alternative. But if Republicans ever do get behind wage subsidies, we should join them, instead of sticking to the minimum wage out of pure traditionalism."

     http://noahpinionblog.blogspot.com/2013/12/wage-subsidies.html?showComment=1386635397353#c4390771570073005460

     The trouble is I don't see why we should want to give up the MW. I want a MW and a NIT preferably. Conservatives want it as a carrot to give up the MW or the welfare state (WS). What I don't get is why conservatives find the MMT idea of the Job Guarantee unpalatable. Is the more conservative choice to give people 'handouts' rather than encourage them to work more by raising their pay? 

     However, liberals and conservatives basically want different things here. For either side the NTS is something of a means rather than an end. It's an interesting idea that has been tried in at least one notable 'natural experiment.'

     http://www.amazon.com/Work-Incentives-Income-Guarantees-Experiment/dp/081576975X/ref=sr_1_cc_3?s=aps&ie=UTF8&qid=1386638681&sr=1-3-catcorr&keywords=new+jersey+negative+income+tax