Every so often, I have a stunning flash of brilliance. An idea that is so simple, seems so obvious, that I’m sure there’s something that I’m missing. An idea that, if implemented, seems to solve not one, but several large social problems at once, making me a huge hero to the entire country, or possibly the world.
But then I take a step back, and really think about how that would work. How could I, a normal mid-twenties guy, come up with a solution that’s alluded our policy makers and government leaders? (On second thought, don’t tell; I’m pessimistic enough about the government already.)
In the spirit of sharing my money insights (one of the goals of this blog, after all), here’s the idea I recently had to fix unemployment and government spending, all in one swoop. If I’m missing something, or being too optimistic about how some of these changes would actually affect things, be sure to let me know; I can’t present my new proposals to President Obama and the Congress if it’s filled with obvious bugs. Here we go:
1) End the minimum wage: There are plenty of companies out there that would gladly employ more people if it didn’t cost them so much. It’s Econ 101: the higher the cost, the lower the demand, and it works for employees as well as other goods and services. If you’re forced to pay $7 an hour per employee, you as a business owner are going to want fewer employees than if you can only pay $4 an hour, which in turn is fewer than you would have if you could pay $1 an hour. (Don’t worry, minimum wage workers, we’ll get you more money in just a bit.)
2) End current federal welfare programs: There’s currently a morass of federal programs that provide aid to the poor and those in the lower middle class. (Although, there’s some argument about that point.) Eliminate all those disparate programs (with the possible exception of Social Security, which is based on how much money you put into the system, at least in theory), to clear the way for something much simpler. (For that matter, if you can eliminate most or all of the state and local welfare spending, we can really attempt to streamline the process.)
3) Change the poverty line: As mentioned yesterday, there’s much disagreement about the current poverty lines, which are just the inflation adjusted poverty lines first calculated back in the 1960’s. Society and our spending habits have greatly changed in the mean time, and the previous poverty line levels don’t seem to be accurate (to say nothing of the fact that they don’t provide much in the way of adjusting for the different costs of living in different parts of the country). The likely result will be to increase the poverty threshold, also increasing the number of people considered to be living in poverty.
4) Create a new benefits system: Now, if we want to make a simpler, easier system for public benefits, the easiest thing to do is to set up a single welfare program that will give out weekly (or biweekly, or monthly) checks to everyone who is unemployed or unable to work. These checks will add up to the new poverty line for each person, which should (if we set a more realistic poverty line) be enough to allow them a decent chance to make a place for themselves.
5) Encourage work: Too many programs currently in existence suffer because they promote less work from recipients; if you work and bring home money, you end up getting less in government benefits. To combat this, our new welfare program should encourage work, allowing people to increase their total income by working.
As the number of hours worked increases, the total amount the person earns (in wages plus benefits) should rise as well. If someone is working twenty hours or less, the benefits they get should bring their total income to an amount higher than the poverty line, say 110% of the poverty line. Working twenty-one to thirty-nine hours a week, and you’re guaranteed total compensation of 130% of the poverty line, while working forty or more hours a week (that is, full time) ensures that you’ll get 150% of the poverty line. (Note: this would be total work time; if someone found two twenty hour a week part time jobs, they’d be able to collect the full-time benefits.) No more worrying that working will decrease your government benefits; any job you take, no matter what the pay, will increase the money you take home.
6) Change who pays for welfare: You might have noticed one fly in the ointment up to this point: with the government covering the slack for businesses who pay their employments a wage less than the poverty line and no minimum wage, there’s not much incentive for companies to increase their wages. They can pay $1 an hour, and their workers won’t complain (well, more than workers normally complain) because the government (that is, taxpayers) will pick up the tab. Great news for businesses, not so great for tax payers.
To make this whole thing work without sticking it to the taxpayers, we need to change who is paying for this whole thing. Our new welfare program will be paid for with taxes on corporate profits, for all corporations. If discount stores and other currently minimum wage employers drive down wages for their employees, the tax that they, and all other corporations, pay will have to rise as a result. Between the tax burden on their own bottom line, the tax advantages of paying out more money as wages (since they’d be company expenses and above the line deductions) and pressure from other companies who want to lower their taxes, there should (hopefully) be a fairly small drop in what companies actually pay their emplyees, even those on the bottom rungs of the corporate ladder.
Altogether, this plan should increase the number of people who are employed, simplify government spending, and encourage work, all while minimizing the tax implications for individuals. Not bad for a sudden flash I had late last night, eh?