[Vision2020] I thought you might be interested in this article

Andreas Schou ophite at gmail.com
Fri Sep 1 09:45:41 PDT 2006

On 8/31/06, Jeff Harkins <jeffh at moscow.com> wrote:
> I am removing the items that I think have run their course - leaving
> issues that remain contentious:
> >>Social mobility studies suggest that the friction that restricts
> >>movement of low income levels to higher income classes is highly
> >>correlated to education (quality and level achieved) and a set of
> >>transferable/marketable skills (ability to provide value added
> >>services). If one wants to enhance the opportunity for moving from
> >>one social class to another, improve access to quality education
> >>systems. Other significant factors appear to be indifference (don't
> >>care), place bound (not able or unwilling to relocate) or believe the
> >>shift would require too much effort on their part.
> >
> >This is true but insufficient.
> >
> >First, there is, at least for the forseeable future, the labor market
> >-- especially for intangibles, where there literally no disadvantage
> >to offshoring  -- is deeply imbalanced in favor of large employers.
> >National borders are permeable for large purchasers of labor, but
> >impermeable for individuals wishing to sell their labor. I cannot
> >follow my job to India, nor could an equally qualified Mexican worker
> >take my job.
> Why couldn't you follow your job to India and why couldn't a Mexican
> worker take your job?  We hire many international faculty here at UI?
> >Second, the employer gains bargaining power by being able to subject
> >low-wage employees to unacceptable levels of risk. I'm not talking
> >just about insurance, though the ability of an employer to extend or
> >remove an employee's access to potentially life-saving treatment is
> >certainly part of it. A person making $7.00/hr has no real capacity to
> >buffer themself against the potential of a lost job: even assuming
> >that they have the capacity to save, fixed costs -- like energy and
> >rent -- occupy a proportionately larger portion of their income. This
> >makes the consequences of a drop in income, and the potential anxiety
> >accompanying the threat of a drop in income, much more severe.
> I wasn't aware that the Workers Compensation programs and
> Unemployment Insurance programs had been eliminated.
> >If I suddenly get poorer, I drop my cable Internet. If I stay poorer,
> >I miss a credit card payment, or several. If I suddenly drop to zero
> >income, it will likely be some time before my  landlord decides that I
> >am no longer welcome, or Avista decides that I'd be better off without
> >power. Even if I suddenly become grossly incapable of meeting any of
> >my financial commitments, I go live in my mother's basment and likely,
> >Mr. Harkins, harangue you from there, though I suspect with much less
> >credibility.
> Well, I won't get into the issue of credibility of your arguments
> based on your social status.  I think my record is clear - I focus on
> the issues and not your wealth status.  Now then, if you suddenly
> become poorer, what additional safety nets would you require in order
> to be on both feet and secure so that you can put the pieces back
> together and rebuild your life.
> >Third, you might note that higher social mobility correlates with
> >functional, well-administrated social welfare systems. This may have
> >to do with the fact that education  is a relatively high-order need;
> >one you are unlikely to be concerned with if you are worried about
> >what or whether you are going to be eating tomorrow morning.
> Gosh Andreas - I don't quite know how to respond to this.  The record
> on social welfare systems is mixed, but the majority of studies that
> I have seen seem to conclude that welfare systems are a single and
> enormous element that exacerbates a static or no movement state for
> the folks in the welfare system.  There is apparently a problem with
> the fact that most welfare systems don't provide an incentive to move
> to the next level.

I'll respond to the rest of your post later, but this is actually one
question to which I actually know the answer.

The biggest issue with studies of welfare is the metric used to
determine success. If you're opposed to welfare to begin with, it's
quite easy to produce any study that produces results describing very
low social mobility. Here's how you do it:

Select a quarter. Find the number of people receiving TANF in that
quarter. Pull statistics from one, two, and five years. How many of
those people are still receiving welfare? Chances are, quite a few of
them are.

Why is this?

Because if this is the data you're looking at, the people who receive
the most quarters of TANF appear in the largest number of quarterly
TANF stats. People who stay on welfare are drastically overrepresented
in that sort of data. Using that sort of data, something like 60-75%
of people currently on welfare have been on welfare for over two
years. That's bad, and it supports the conclusion that welfare doesn't
do anything but hand out money.

This is, of course, the way TANF's performance metrics are calculated.
So, as performance improves, and more people are moved from welfare to
work more quickly, TANF's statutory performance metrics go *down*.
This is, of course, what you get when operating a welfare program
designed by people opposed to welfare on principle.

If you look at a longer period, and count the number of people who
received welfare during that period, rather than using a methodology
that overcounts long-term welfare recipients, you will also find that
the United States' welfare program is not particularly great, but that
that the majority of welfare recipients are not long-term malingerers.

I am, at this point, talking about TANF and not AFDC. TANF is a bad
program for several reasons (which I won't get into), but AFDC was
worse, as it provided no support, no incentive to work, and much less
money to boot.

Welfare programs are a pain in the ass to administrate and have a
definite element of moral hazard (as you correctly point out), but
arguing that they have no effect is simply incorrect. From 1964 to
1968, while Johnson's "War on Poverty" programs were being
implemented, the poverty rate fell from 19.0% to 12.8%. In 1981, after
Reagan implemented cuts in AFDC benefits, the poverty rate rose from
11.7% to 14.0%.

You find exactly the same effects in other countries: both the poverty
rate, and the average number of years spent in poverty, correlate with
the percentage of GDP dedicated to wealth distribution. Sweden, which
redistributes 21% of its GDP, has a 1.6% child poverty rate and a 6.6%
adult poverty rate. In contrast, the United States, which
redistributes 11.5% of its GDP (including Social Security, which is
not explicitly redistributive), has a 20.4% child poverty rate and a
10.5% adult poverty rate.

This is probably more response than your aside deserved, but the
objection that welfare is just pissing into the wind is simply wrong.
If you object to it on principle, object to it on principle, not
distorted facts.

-- ACS

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