Sunday, March 17, 2013

Morgan Warstler's Attemp at Making a Workable Hourly Wage Subsidy

Moragan Warstler has attempted to create an hourly wage subsidy without needing to verify hours.

I realy like the idea of an hourly wage subsidy to replace or at least reduce many of the welfare programs that we currently have.  It seems like it is a far more efficient way to support low earners.   

The problem with implimenting and hourly wage subsidy is that if we had to check and see if a person is working number of hours that they claim it would too difficult to even consider. 

Morgan has come up with a method that might alight incentives in such a way that this problem could be reduced.
An hourly wage subsidy is better than a base income guaranty and an income subsidy like the EITC in that it does less to reduce the  incentive to work than other subsidies. It also is superior to unemployment insurance, food stamps and AFDC and could be much cheaper for the taxpayers.

His basic plan is described at The Money Illusion and below.

The Basic PlanUsing the Paypal and Ebay platforms, the US govt. should establish a Guaranteed Income of $240 per week. Anyone who wants to work registers, receives a Paypal Debit Card, and each Friday at 5PM has their GI deposited.
All GI recipients have their labor weeks auctioned online.
Job offers begin at $40 per week ($1 per hour).  Offers increase by .50 cents per hour ($20 increments).
At $40 per week, there’s no able bodied / able minded person that some rational returns bidder won’t find use for.  The 70 yr old woman in a wheelchair who wants to work to keep busy?  Plenty of teleservice operators have work for her to do from home for $1 per hour.
Note: I solve for the criminally lazy.  Identifying and fixing them is one of my plan’s advantages. I’ll get to it a bit later in the What Abouts plan.So minimum take home cash under GI is $7 per hour or $280.  $240 is the social commitment paid out of taxes and $40 is the winning job offer.
To perfectly align incentives, for each $20 per week offer increase over $40, the govt. gets back $10 of our $240 social commitment, and the auctioned employed keeps $10.
So, on a offer of $100, the govt. is paying $210 and the auctioned receives $310.  A offer of $200, hits the govt. for $160 and auctioned receives $360.
The system ends at $10 per hour.  The maximum offer allowed in the GI Auction is $280 and the govt. is still kicking $120 netting the auctioned $400 per week.
Here is the actual schedule I’m suggesting:
Winning BID        GI paid by govt.              Payday: GI + BID
$40                      $240                               $280
$60                      $230                               $290
$80                      $220                               $300
$100                    $210                               $310
$120                    $200                               $320
$140                    $190                               $330
$160                    $180                               $340
$180                    $170                               $350
$200                    $160                               $360
$220                    $150                               $370
$240                    $140                               $380
$260                    $130                               $390
$280                    $120                               $400
At this point people tend to have lots of questions.  Since I’m writing this to woo progressives let’s starts here.  Companies like WalMart will now  need to pay more than $400 a week, to keep workers from choosing GI.Here are the basic rules:Recipients can choose to take lower paying jobs.
Recipients cannot be made to work outside a radius of 5 miles.  This is a guesstimate.
Bidders must also establish their real identity and deposit money into system before they bid.  No more craigslist roofing scams paying after the fact.
Bidders and auctioned cannot be related or cohabitating.
Bidders must accurately describe the job (check boxes) and cannot add to it after winning bid or require work not checked.
Feedback will be given both ways. If you are familiar with Ebay buyer / seller feedback, you understand what this accomplishes.  It makes it the whole thing work.   If you are not familiar with Ebay, get familiar with it before you state your opinion on this plan.
There are no taxes paid by employer or employee.  There are basic workplace protection requirements. Umbrella insurance is sold on Ebay for folks bringing labor into their home.
Upon meeting some fair criteria, the criminally lazy can be suspended from GI program. Perhaps 6 weeks as first suspension.
Only individuals and incorporated SMBs earning less than $3M per year can bid.   This is not subsidized labor for Fortune 1000.  Under this plan, their labor costs go up.  I am proposing Internet based  Distributism.

After a few days pondering I have begun to doubt weather this plan is better than a basic minimum guarantied income. A person would be able to collude with an employer to get the $240 without working, so why not just write a $200.00 check each week to each citizen and eliminate the minimum wage. 

Often when we talk about people not working they really are working, they are just not working in the taxed economy. They may be working illegally for cash, or they may be working for in-family consumption which is the case for house wives and these people often work quite hard. There is no reason that production for in family consumption should be disadvantaged.  So the advantage over minimum income guarantee may not be big enough to overcome the expense and complication.  

Having now ready the more complete  plan I think the enforcement against employer  employee collusion would be too difficult to enforce and the idea of making the punishment harsher (you propose making hiring people to not work a felony) is not a good approach because of difficulty of enforcement is a bad idea. In fact I think it is might be more effective to make he punish light like maybe a $1,000 fine might make people more likely to turn someone in. We do not want more felons than we already have. 

Another advantage of a guaranteed minimum income is that it could replace Social Security along with AFDC, food stamps, subsidized housing and unemployment insurance.

I like the plan but I am still bouncing it around in my head. All plans to help the poor have downsides, the question in my mind is does the fact that it nudges people to work more overcome the advantages of a income subsidy or the much simpler minimum income guarantee. 

BTW in either case recent immigrants would need to be ineligible for the program.  

I still find the idea is very interesting, perhaps so tweaks can overcome my objection. Anyway thanks for the effort. 

1 comment:

Morgan Warstler said...


But, I cover this AT LENGTH at my website... I answer it IN DEPTH, please quote from it.

I really do have this covered. Please read thru it, and noodle it some more.