Friday, November 13, 2009
The poverty trap
Greg Mankiw, economics professor at Harvard, has a chart showing that earning more money doesn't mean that you actually have more money. The specifics depend on things like how many kids you have and whether Section 8 housing is interchangable with housing you'd choose otherwise and so forth, but...it looks like making $19K per year plus benefits is better than earning $39k per year. Anything seem wrong with that?
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2 comments:
Well, I'd be interested to see what data they have about having a tax structure that is opposite - that is, if you're making only a little and have a family and the kids are deprived of all sorts of stuff, what impact does that have on their long term options and income potential? It might just be that the case you cite makes economic sense on the larger scale.
I've always felt, without any data, that we should always as a society spend money on our kids to educate them and give them options. That seems like the best overall plan for societal success, but there's undoubtedly more steps required that this simplifies away.
And benefits are a dubious thing. I've worked in jobs with them, making $10-20K a year less than I'd make without them, and I've filed a sum total of maybe $400 worth of claims (health club memberships, sports equipment, no dental or medical, maybe one set of eyeglasses) in the whole time I was covered. Without a spouse or kids, benefits are just a huge suction on your possible income.
So, I think tax codes are challenging to setup, given that what a family needs is so different than what single people need and our economy needs families for new taxpayers and single people to work 60+ hours a week to grind projects to completion. It's tough to cover all the bases in any sensible way.
Of course, if the government spent less money stupidly and taxed less, we'd all be better off as far as I can tell.
I've got no problem with making sure people (including kids) have what they need--while pointing out that "what they need" does not include, say, TV. I do object to giving people an incentive to be less productive and less self-sufficient.
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