The problem with the citizen’s wage

This NPR report on disability has been making the rounds.

It’s a good piece, and I recommend it.  Over on Hacker News, some of the discussion turned to various radical welfare reform proposals in the general vein of negative income tax or the citizen’s wage.  For the uninitiated, these are variations on the idea that you basically just give everyone a guaranteed wage of some low-but-significant amount of money.  Say, somewhere between $10k and $20k yearly.  There are plenty of variations on exactly how this works, but from a high level, they’re similar enough.

The basic idea here is great, and it goes something like this:  We waste a lot of money creating all kinds of special programs with very specific goals (food stamps, disability, unemployment insurance, social security, section eight housing, and dozens if not hundreds of others).  Each program has to be administered (which wastes some of the money put into it).  Each program creates incentives, many of them perverse, for its recipients (such as the children who can’t do well in school lest they lose disability discussed in the NPR piece).  Each program attracts fraud (again, read the NPR piece).  Each program does not necessarily actually fit the needs of its recipients very well (you might be on food stamps, but be reasonably well-fed, but really, really need transportation to your far-off workplace).

Better, say the proponents of the citizen’s wage, to just take the money and give it to people. The administration costs are much lower, since there are either very simple or no eligibility requirements (either it’s just your income level, already handled by the IRS, or the program is totally universal), and distribution of the benefits is simply the disbursement of monies.  Each person who receives the benefit can put the monies to whatever they actually need, rather than being restricted to a one-size-fits-all program.  The perverse incentives problem is pretty mild.  Pretty great, right?

Yeah, it’s pretty great.

But the problem is:  if we do this, somebody is going to take their money and blow it.  Maybe on drugs or alcohol, maybe on gambling, maybe on, who knows, shoes.  People will go into debt, perhaps to criminals, and not just be low on money today, but in the hole for when their next check comes in.  Most people won’t do this, but some will.

And I have to ask, are we okay with letting people starve, even when they stupidly blew the check that could have fed them, that they were guaranteed to get?  Are we okay with letting people freeze because they blew their rent money?  Some of them will have children.  Are we okay with children starving because mommy decided to gamble instead of buy groceries?

I don’t think we are.

And so now food stamps come back, because we can’t let people starve.  And we provide at least some kind of housing assistance, because we can’t let people freeze.  And, to bring this back around to the NPR program, what do you say to the guy who genuinely is seriously disabled, who says, “I should get more than the basic amount that everyone gets.  I really can not work.  I’m not lazy, I’m not like that guy over there who could get a job, he just chooses not to”?  I think disability comes back, too.

Those programs don’t exist because they’re the most effective means of redistributing wealth to the poor — they obviously aren’t.  They exist because we feel it’s unconscionable to let people starve, to let people freeze, to let the elderly or disabled live in the squalor of extreme poverty.  The citizen’s wage is clearly an economically superior program — but it doesn’t address the problems that the existing welfare programs are meant to address.  And it never will.


3 thoughts on “The problem with the citizen’s wage

  1. Pingback: Tyler Cowen: Ripping Me Off? | Sandor at the Zoo

  2. Pingback: Krugman on Libertarianism | Sandor at the Zoo

  3. Pingback: Guaranteed Income vs. Guaranteed Jobs | Sandor at the Zoo

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