I wish redistribution to the very bottom was a bigger part of the political debate. Our politics is currently focused on redistribution from the very top to the middle class. (Stuff like free college or universal healthcare would primarily benefit the top half, because those folks are the ones who are in a position to be accepted to and attend college, and aren’t already covered by Medicaid.) The math of that is tough, because 70% of all income is earned by households in the 50-99% income range (between $40,000 and $480,000 household income).
But the bottom 50% earns just 11% of all income, a little over $1 trillion. You could really improve their standard of living with even modest redistribution of the $9 trillion earned by the top 50% to the bottom 50%. But unfortunately middle class taxation is a complete non-starter in the US, even though that is how almost all European countries pay for their welfare states.
Because all politically profitable strategies at increases taxes for the rich are always about giving a benefit to the most politically powerful group: the middle class.
A society where the top 90% pitches in to help the 10% in distress is very different to the one where the middle 50% takes from the top 25%, and leaves some scraps to the bottom 25%.
- Milton Friedman
Maybe, just maybe, the feds and the states (in the US) should pass laws like this: Employers are liable to the government for four times the cost of providing SNAP (f/k/a food stamps), public housing, and other welfare benefits to their employees.
1/3 of any fines collected in this way would be payable to citizens who report the problems.
It's totally unfair for the taxpayers to subsidize businesses by feeding and housing their underpaid employees.
The point of the draconian 4x charge is to make it less expensive for companies to do the right thing and quit with the starvation wages already.
But legislatures work for their donors, not their citizens, so it won't happen.
That’s interesting. I’ve always seen the promotion of free college and universal healthcare as one of promoting equal opportunity to all.
While the lowest income groups have historically had low college participation, I saw it as a reflection of a class of people not even daring to dream an impossible dream, as it would cost too much. Making it free would of course change the idea around it.
> Making it free would of course change the idea around it.
For every good private college I know of (and almost every good public school) prices are free or enormously close to so for people in the bottom quarter of incomes. Making it free for everyone might change the psychology, but not the reality for lower-income people today.
Part of the problem with the free college issue is that the extra time spent in full-time education is not free. It's another 3 or more years of not earning a proper full time wage. It's also (in my country) a time when you are explicitly not eligible for those benefits available to the unemployed.
When you reach school leaving age, you have a choice, start full time paid work now (with the social safety net if you can't find work), or spend at least 3 more years of full time education without that safety net, doing part time work when you can, possibly taking loans, all in the hope that you'll get a much better paid job at the end of it (which, nowadays, is not a given).
It also isn't just a case of poor kids with good potential not having the money to pay for higher education, but also of poor kids with good potential not having the grades to get into higher education.
Home factors (sleep, nutrition, reading at home, stress, extracurricular activities, peer pressure from the wrong crowd) make a significant difference to education outcomes in children.
Universal healthcare, on the other hand, is truly about equal opportunity for all. Illness is neither an indulgence for which people have to pay, nor an offence for which they should be penalised, but a misfortune, the cost of which should be shared by the community. No society can legitimately call itself civilized if a sick person is denied medical aid because of lack of means.
The poor are eligible for Pell Grants, which covers 60% of the tuition of the average public college, and historically covered even more. Nonetheless, college completion rates for the bottom quantile are 1/4 that of the top quintile. There are many other barriers to college attendance for the poor. There is a large opportunity cost—if you are attending college, you can’t work to support your family. To the contrary, your family still has to support you. The social fabric in poor neighborhoods often are frayed, with gangs and drugs and crime distracting kids from school. As a result, children from poor areas often aren’t motivated to apply to college, wouldn’t be accepted even if they applied nor would they be prepared for college coursework if they were admitted. The end result is that most people benefitting from free college would be middle class people who don’t have those other barriers.
If you look at countries that have free college, most have college completion rates similar to or lower than the US: https://www.in.gov/che/files/DMatthews.pdf. The vast majority of the EU population lives in the U.K., Germany, Italy, France, and Spain. All of those countries have lower college completion rates among people 25-34 than the US, even with tuition being cheap or free in those other countries. While tuition is not a barrier to college attendance in say Germany, college is still primarily something for the middle and upper middle class.
Programs that theoretically offer “equal opportunity to all,” but where the middle class gain the lion’s share of benefits, is not an efficient way to better the lives of the poor.
(The same thing with Medicare for All versus the ACA. In Europe, the middle class pay for their own health care, and also subsidize the poor. In Germany, public health insurance premiums are 15% of income, with folks making above $70,000 being exempt from the public system. The ACA is similar—premiums are capped at 0-10% of income for folks making less than $50,000. That’s even more generous than the German system for folks making low incomes. The folks who feel the pinch are middle class people, for whom a 10% premium is a lot when they’re used to having a much lower tax burden than what they would have in Germany. Consequently, replacing ACA with Medicare for All would primarily benefit middle class people, especially if funded through a progressive tax.)
The plight of the poor (who are worse off in the US than the poor in the big EU countries), is unfortunately being used as a fig leaf. The American middle class (who are better off than the middle class in the big EU countries) wants the safety and security of a European style welfare system, but doesn’t want to pay a 40% tax as they would in Europe, a 20% VAT, etc. Even though you could dramatically improve the lives of the bottom 50% through targeted programs, progress on that front gets held hostage to a broader push to have the rich pay for middle class welfare.
It's also crazy to me that the whole framing is around providing money for investment when any stimulus to the end consumer is going to inevitably end up at the top (it's not like money flows many other directions in the long run in our current system).
But the bottom 50% earns just 11% of all income, a little over $1 trillion. You could really improve their standard of living with even modest redistribution of the $9 trillion earned by the top 50% to the bottom 50%. But unfortunately middle class taxation is a complete non-starter in the US, even though that is how almost all European countries pay for their welfare states.