To me, this is the single biggest problem with welfare.
The woman wants to work, yet cannot because she can’t guarantee how fast she will move past the “no welfare and very little money” transition until she gets promoted to full time work.
Her only recourse is to stay on welfare. Now the real issue comes to her children. If she managed to really instill in them the need to never be on welfare themselves, great, they’ll join the workforce. But what if she didn’t? Maybe only tried a bit, but the years of being on welfare made her lose touch with the working world. Children now only see welfare and thus generational poverty starts.
That's how you breed shadow employment. People on welfare who can work often will find jobs that pay some, or all of the salary, under the table. The attitude this instills in children is that of having to work hard, while scheming against the taxman, to improve your life. Some people then do that way past the point they need to, and end up at risk of being caught for tax evasion.
>Some people then do that way past the point they need to, and end up at risk of being caught for tax evasion.
Only because we tax people's income. Instead, tax only the income of corporations and other shareholder based limited liability entities. Income tax should be the insurance premium business pays to limit the legal liability to the owners and shareholders of the business.
I also shudder to think what types of employers would be complicit with such a scenario.
You're right to fear employers who want to avoid claiming employees so that they don't have to comply with, for example, safety laws. But shadow work also includes situations with "casual" business relationships, like a couple who hires a nanny to watch their kids 40 hours a week. Both parties may feel that complying with tax and labor laws is too much of a burden.
> Both parties may feel that complying with tax and labor laws is too much of a burden.
That's - a way - to phrase:
- facilitate an effective 7.5% pay cut (employer paid Social Security / Medicare / Medicaid tax)
- avoid being properly compensated for overtime (assuming non exempt salary),
- and make claiming unemployment, disability benefits more difficult
When you refer to both, can you emphasize a specific burden the employee is subject to other than reduce tax benefits on disability / social security?
> facilitate an effective 7.5% pay cut (employer paid Social Security / Medicare / Medicaid tax)
The employer skipping out on taxes is not a "pay cut".
And the employee also gets to skip out on taxes.
The employee, under current laws, does not get to skip out on taxes; they have to pay the self employment tax rate of 15%; We're talking about 40 hour weeks, that kind of regular pay doesn't go un noticed by revenue offices.
Yes, the employee must file and pay taxes, even if they've reported their employer to the IRS for mis-classification.
Then they're not a shadow worker at that point. The comment was about shadow workers.
You may have been downvoted because you seem be ignoring the point gp post. By working under the table, the nanny or gardener or handyman can (often fraudulently) qualify for government healthcare and welfare programs as well as other low income assistance. In my opinion those programs are of a greater benefit than the ones you listed.
Not only that, it doesn't specify the compensation.
Suppose the employer avoids paying Medicare tax and unemployment insurance, but gives some of this money to the employee, who also avoids paying Medicare tax. This is, of course, illegal, but it isn't inherently the case that the employee is getting the worse of it outside of the risk of being prosecuted for tax evasion.
Unemployment insurance in particular generally screws anyone who maintains stable employment because the net beneficiaries are the people who collect benefits every other year, not the people who pay premiums their whole lives and only collect benefits once if at all. The latter would come out ahead to receive even half the premiums as money they could save and collect interest on and then have in reserve in the event they become unemployed. (In general mandatory insurance of this kind is a net economic loss and a source of benefits fraud that only gets passed by alleging it gets paid for by employers rather than employees, but who pays for something on paper and who is affected by the economic effects of the cost are different things.)
>> The attitude this instills is that of having to work hard, while scheming against the taxman, to improve your life.
Sounds like a lot of politicians I know. Really, how is this not being "Smart" and gaming the system? If we're all upset about being "fair" then we would have changed the system.
This isn’t a problem really with welfare, but a problem with implementing welfare in the dumbest way possible.
In general, no policy, like none at all, should be designed to suddenly come into effect when you hit a constant. All functions should be smooth.
> All functions should be smooth.
I like to believe--or at least fantasize--that bipartisan alliances can be built around a shared commitment to Good Equations in Public Policy, even if they disagree on what those policies are.
"Look Bob, I think your tax cut proposal is pure pork and regulatory capture, but that one one goddamn sexy curve."
When you really peel back the layers, you'll find that voters' instincts are that any means-tested program should come with a hefty punishment for using it. While they aren't exactly against helping, they definitely think the priorities are 1) Spending as little taxpayer dollars as possible, 2) Punishing any recipient of help enough to be a warning to others, and then, distantly, 3) Helping.
This is not exactly voters. What really happens is more like this: There is some call for helping people, voters want it, but voters (possibly some of the same voters, possibly different ones) also want lower taxes.
So the plan that passes is the one that claims to help people (appeasing the first group) while also costing the minimum amount of money (appeasing the second group). The proposal with evolutionary fitness in politics is then to create a system that helps people on paper but actually limits eligibility for the system to a minimum number of people or otherwise makes use of it more arduous to deter usage so it costs less. Extra points for making it so complicated that people don't realize what's really happening so they don't object if it doesn't really do what they wanted.
But there is also a level of incompetence/inefficiency here, because the complex and overlapping systems that pass as a result often have high overhead that waste tax dollars, or create bad incentives because nobody thought them through and those incentives create deadweight economic losses adverse to the interests of even the people who want to minimize taxes. As the obvious example, if you create a system with welfare cliffs and then people have the incentive to stay on welfare instead of taking a job, you now have more government expense and lower tax revenue than a system that doesn't do this.
At which point there is a Pareto-optimal improvement on the table if you can get the bill passed.
Try that argument on a bean-counter, i.e. like everyone holding an elected or decisive office these days. The will think you are crazy, from Mars, an interloper, freerider, or, worse, a communist. At any rate, they will not understanhd you, but, whether they understand you or not they will ignore or silence you. THERE MUST BE LIMITS AFTER ALL!!1!
My elected representatives seem to understand this pretty well. The problem is that people keep electing other people who view anyone not working as leeches. Often the difference between keeping those elected officials and electing someone that represents you is a few hundred or a few thousand people deciding that their vote does matter after all and going and casting it. It's about the population of a rural village or small town. I don't know how we're going to get back to our golden age, but I know that we need to find the motivation somehow.