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June 02, 2005

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EU Serf

Its an interesting idea, but how do you stop laziness. Is there not a section of society that will then not bother to work?

Based on the idea that the devil will find work for idle hands to do, this could be a problem.

On the flip side anything that reduces the demand for employment legislation has to be good.

Angry_Economist

Most evidence shows that many people want to work given the right information, incentives, type of work, rewards etc.

Policies like tax credits are a good idea but poorly implemented.

The other side of the equation is the demand side of course. In recent years we have witnessed a tightening up of the labour market - high labour demand against a narrowing domestic supply of labour.

An ideal time to pursue active labour market policies and 'work-first' welfare.

The opportunity is there to improve the nation's stock of human capital and to increase the potential supply of labour via active labour market policies. This has benefits in terms of helping keep a lid on wage inflation.

The rules around benefits and willingness to work have been much tightened in the past 20 years. The main problems are around those who are on sickness and invalidity benefit and how to get them back into work.

If you analyse the labour market experiences of long term unemployed and over 50s unemployed in the UK - many went back into work 1998-2002 - largely due to there being some jobs for them, and a good chance of them getting these jobs.

Also - most of the skill shortages in the UK are in low skilled jobs - and many of the skills relating to soft/core skills etc. Basic core skills training (or in employability/access to work) is a key for employers and low skill jobseekers, rather than better academic qualifications.

In my experience the labour market can be complex, and the dynamics within it are often evident, but myth and misconception tend to rule the day in the newspapers and even in politician's minds.

Jarndyce

Spot on with this analysis, once again. What I also like about the CBI is that despite its egalitarian nature (everyone gets the same, which may seem unfair in a country used to rising tax and falling benefit scales), it in fact works progressively: the set amount will be worth more to anyone hoping to earn £10k than to one negotiating for £100k. It has a powerful marginal/proportional effect at lower levels of income, and so protects those at the bottom from entering into contracts with exploitative employers to a greater degree. All without the complexity of the benefit system, excessive regulation, self-serving bureaucracy, and the like.

As to the 'wouldn't everyone just sit around and live off the income' argument: obviously it would be set at a level of decent survival rather than luxury. On top of that, every penny (less tax) earned on top would be straight in the pocket. No tax credits to calculate, no worry that benefit X will be lost, no major disincentives to work. For me, the effect on incentives would be positive. At the very least, no worse than the current system, where you can similarly survive but (despite what the Daily Mail thinks) not thrive if you can game the system.

jamie

One point about the laziness issue. Lazy people like money as much as everybody else and are therefore likely to apply for jobs, with the "principal agent" criteria Chris outlines meaning also that they are quite likely to get them. When they do, this means that you or I are doing their work for them. Better to have them out of the workplace.

Also: "For me, the effect on incentives would be positive"
Yes, especially as Ctizens Basic Fuck You Money at an adequate rate would help keep wage costs down and thereby help generate employment. Conversely, it may well also see an actual improvement in working conditions if wage rates bvecame less important in competition for employees. It's a winner all round.

Ashish Hanwadikar

"Workers’ freedom to leave bad employers is curtailed in countless ways: a need to earn a living; loyalty to friends and neighbours; sunk costs."

Isn't this similar to any other investment? Capital owner's freedom to not serve bad customers is curtailed in the same ways: a need to earn a profit/living; sunk costs, and so on. In fact, that is the reason consumers/customers have upper hand in a free-market compared to the producers. In case of workers, employers are their customers; workers are selling their labor.

"I’d add some other imperfections: wage inequalities are partly due to factors which bear only a weak (if that) link to productivity: height, beauty, weight, as well as race, gender and parental class. The difficulty of signaling ability means that good workers can stay out of work or in low-paid jobs. Insider power means bad workers can stay in well-paid jobs."

The same applies to businesses. Sometimes, prices fetched by goods in a market have nothing to do with their objective utility: such as packaging, color, and so on. Because newer firms have difficulty in signalling customers about availability of their products their products don't sell as well. Some well-established products are difficult to be displaced even if they are inferior to the new products.

The problem here seems to be lack of information especially about new things. That is a known devil is better than an unknown saint. It is thus a feature of reality and ability to know about it and nothing to do market vs non-market economies.

Rob

http://www.havenscenter.org/VSP/readings2sort/pdf/widerquist.PDF

this is a mate of mine's piece on funding a basic income/capital grant. As I remember, it's quite good, but I'm not an economist.

Decnavda

Excellent post. I wrote an article published online by The Free Liberal on the same topic:

http://www.freeliberal.com/archives/000988.html

In response to the commentor above who argues that employers have the same constraints as labor, what I argue in my article is that while labor has to work to live, capital can walk away from the exchange and therefor has a better bargaining position. The reason is that capital, being wealth used to produce more wealth, is by definition not needed by its owner. If it was needed, it would be consumed. As far as the statement that consumers have greater power than sellers, that depends on whether or not the product is a necissity. I really want an iPod, but I have not bought one because of other things I want to do more with the money. But as the parent of a 7 month old, I am at the mercy of companies that manufacture diapers.

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