Saturday, March 7, 2015

No Minimum Wage - We Need Minimum Income

One can judge the quality of a society by the way it treats its poor, the government has a role in extending care to those who are unfortunate – “what you do to the least of my brethren you do to me” someone once said – I love the quote because it personalizes the issue. The challenge, of course, is striking a balance between extending help to the unfortunate and spending.

Whether you're poor because you're unemployed, under employed, retired absent income or disabled – you're poor, you require resources. Presently we have several government departments dispensing funds to the people in need of help, CPP, Employment Insurance, Social Services … the list goes on. Every department has its own administration, set of criteria for helping and complex operations – all of which represent OVERHEAD or add to the transaction cost that is government.

Much of the thrust of the administration of the programs is to ensure that people are only getting what they are entitled to – in large measure these departments assess people against a set criteria and dispense funds accordingly. This is, at its core, a policing function, the challenge that arises from this process is administrative cost, dollars spent running a department instead of helping people. If we are going to spend money helping the poor, we need to ensure that the money we allocate for help – helps.

The simplest way to ensure a base living is to provide everyone a base income. The government would simply distribute cheque to everyone, every two weeks, those who had income exceeding the base amount would have the “base income” “clawed back” (taken back) at tax time.  This is a very elegant solution, we can be more generous, the stigma associated with social service use is gone and a base living is established.

This also is a de facto floor on living generally; minimum wage, for example, would be rendered redundant, given that the marginal advantage of employment would force wages to a living wage. The other advantage here with respect to minimum wage, is that absent the need for a minimum wage for adults, the market could accommodate youth – as it is often the complaint with minimum wages that the youth are affected due to the axis of experience and cost working against them. By way of example, if a $1000 / month minimum income was provided, the marginal benefit of employment would exceed the minimum wage in British Columbia now – at $8.50 / hour the monthly income is $1360 – there would be no advantage of working given the cost of attending work – cloths, transportation etc. This illustrates the “floor” that is formed on human existence with a “minimum income”. 

A minimum income fulfils state obligations to Liberty in Section 7 of the Charter, Life, Liberty and Security of Person. The most coercive element that exists in society is a growling stomach; it is the absence of any secure income that drives people into exploitive circumstance. We can afford to do this, in fact, studies done by the CATO institute in the United States indicate that overall, minimum income is the most efficient way to deliver resources due to a reduction in administrative costs.

The amount and the “Clawback” regime would need to account for marginal tax considerations, marginal employment benefit and the like. I like this solution – it is simple, efficient and generous – it seems a quintessentially Canadian way to go.

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