10 April 2013

Perverse incentives

It’s commonly believed by right-wingers that US public radio has a left-wing bias. If you want to hear an example of a program that disproves the assertion, I suggest This American Life episode 490: Trends With Benefits. It has turned out to be somewhat controversial, though TAL are standing by the facts they reported, unlike with the Mike Daisey piece.

As most people know, the US economy has a deficit problem. Part of the reason for the problem is crazy defense spending, yes; but there are two other chunks of the federal government’s budget that are about the same size as the military budget: Social Security and Medicare.

The This American Life show gives some insight into why the Social Security budget is so huge, starting from one simple statistic: That in Hale County Alabama, a quarter of the working-age adults are receiving disability payments, because they have been declared permanently unable to work.

What counts as a permanent disability? Well, the list includes:

  • High blood pressure
  • Diabetes
  • Chronic back pain
  • Sleep apnea

Now, I’ve known people with diabetes who inject themselves with insulin and go to work every day. I have chronic back pain, but I’ve only missed a couple of days of work in the last few years. My father-in-law had high blood pressure for the last couple of decades of his working life. None of these things should be permanent disabilities that render you unable to work.

At this point, the traditional right-wing media narrative is “Look at all these scrounging parasites”. But as is generally the case, it’s a bit more complicated than that.

If you live in Hale County Alabama, and you aren’t highly qualified — which is the case for the disability recipients — then there really aren’t any jobs you can do. Even if you had the time and money to get the necessary education, there aren’t any white collar jobs in rural Alabama. The only jobs on offer involve lifting heavy objects, standing up all day, or other physical tasks. So if you have high blood pressure, well, you probably really aren’t fit to work any of those jobs. Or at least, no company will employ you, in case you drop dead.

So the problem is bad. But then things get farcical. It turns out that when someone applies for disability and is turned down, they can file for a hearing. At that hearing, they can get a lawyer to present the case for why they can’t work. On the other side, the government has … Nobody. There’s nobody whose job it is to explain why the petitioner is actually able to work, or point out jobs they could be doing. So most of the time, the lawyer will get them approved for disability. At that point, the petitioner is liable for back-payment of disability from the time they first applied. The lawyer gets a portion of that back-payment. In fact, the federal government pays the lawyer directly. So if you do a Google search for (say) ‘disability’, you’ll find lots of lawyers ready and eager to take even a pretty marginal case, on a contingency benefit.

But that’s not the worst part. See, once you get disability payments, you no longer qualify for unemployment benefit. And whereas unemployment benefits are paid by the individual states, the Social Security disability system is a Federal program. So get this: States actively hire companies to go through their lists of the unemployed, spot any who might be persuaded to qualify for disability, and encourage and assist them with the process.

But even that’s not the craziest part. It turns out that children can qualify for disability payments too, for things like learning disabilities. Dyslexic? You might be able to get your parents a nice Social Security check each month. Of course, in time your parents will come to rely on that check, and they’ll only get the check as long as you continue to do badly in school. Once you reach adulthood, well, you can either stay on disability — or you can try and get a job which might not work out, and in the mean time lose your steady disability benefits.

Because the disabled don’t get unemployment benefits, government excludes them from the unemployment figures. Which might seem reasonable enough, but unfortunately right now there are more people being added to the disability benefits list each month than there are new jobs being created. So the actual percentage of people who could be doing some sort of job, but are not doing so, could be way bigger than the official unemployment figure of 7.7%. And we’re still sliding backwards.

So, what’s the solution? Well, there’s one radical theory that has been proposed for decades, under titles like “Universal Living Wage”, “Subsistence Allowance” or “Basic Income Guarantee”. It’s pretty simple to understand: You put together a minimal subsistence payment, enough to cover basic food, shelter and other bare essentials — and you give it to absolutely everyone. You filed a tax return? Here’s your subsistence payment.

This immediately eliminates a ton of bureaucracy. No application process, no means testing, no medical tests, no appeals process, no judges needed, very little chance of fraud. It also eliminates the problem of potentially losing the steady income you need to live by risking taking a job. Hence, hopefully nobody will ever feel like it isn’t worth taking on a job. Even a part-time, temporary or seasonal job will boost your income without the risk of reducing your subsistence payment.

Obviously, there are naysayers. The most common objection is that if nobody is absolutely forced to work in order to afford a roof over their heads and food to eat, why, surely nobody will work at all? Personally, I find that argument incredibly patronizing and offensive. Nobody who has earned more than a couple of million dollars needs to work, but there are plenty of millionaires who do carry on working. And we’re not talking about a luxury subsistence here; if you want a mobile phone, TV, PlayStation or car then you’re going to have to go out and get a job to pay for it, like the rest of us. If you want your own space, rather than a run-down government-run shared apartment space, you’re going to have to work hard.

Still, many doubt that such a scheme could ever work. Except it turns out that one country tried it. From 1974 to 1979, Dauphin Manitoba ran an experimental basic income program known as “Mincome”.

Mysteriously, the Canadian government locked away all the data that was collected, and prevented it from being analyzed. The astute reader can probably guess why. When academics finally managed to get access to the documents in 2009 and analyze the results, it turned out that the whole scheme worked pretty well. Rather than everyone sitting around idle on welfare, the only people who worked less were mothers and teenagers. Graduation rates for teenagers, not surprisingly, went up. Hospital visits dropped. There were fewer work-related injuries.

So, how about it, America? The current system is clearly a disaster, and an inefficient one at that.

© mathew 2017