http://www.allocationuniverselle.com/
and especially this spreadsheet:
http://www.allocationuniverselle.com/doc/microsimulation_AU_Marc_de_Basquiat_2012-10-21.xlsx
Saturday, November 10, 2012
Tuesday, May 22, 2012
Tuesday, May 01, 2012
Pensioners
How many do still work?
http://www.iwkoeln.de/de/infodienste/iwd/archiv/beitrag/30701
About 6% regularly, about 4% sometimes. Salary and work times are very low.
http://www.iwkoeln.de/de/infodienste/iwd/archiv/beitrag/30701
About 6% regularly, about 4% sometimes. Salary and work times are very low.
Monday, April 30, 2012
Swiss widows without children
http://www.news.admin.ch/NSBSubscriber/message/attachments/26521.pdf
Watched a report on the basic income on youtube the other day and they presented a widow of working age without children as an example. So, I thought let's dig whether I can find some data, and for Switzerland I did:
Result: Women of working age who receive a pension reduce their working effort by nearly the amount they receive in widow's allowance. Their income from work goes down by 60%.
Note, they do not stop working generally. The workforce participation rate only goes down by about 10%..
Overall, the results of the negative income tax studies in the US in the seventies, of Belgian income for life lottery winners and of surveys asking whether people would continue working, if they won the lottery or got a basic income, are very consistent.
Without a change in tax rates, women reduce their working effort euro for euro when getting a basic income, and men by about 0.5 euro per euro.
Of course, it gets worse for a high basic income. Here we need other comparisons, like with the work incentives created by current withdrawal rates for social assistance.
My conclusion for the model currently discussed by the pirate party in Germany: work volume would go down by 50%, which would make the scheme unviable.
Watched a report on the basic income on youtube the other day and they presented a widow of working age without children as an example. So, I thought let's dig whether I can find some data, and for Switzerland I did:
Result: Women of working age who receive a pension reduce their working effort by nearly the amount they receive in widow's allowance. Their income from work goes down by 60%.
Note, they do not stop working generally. The workforce participation rate only goes down by about 10%..
Overall, the results of the negative income tax studies in the US in the seventies, of Belgian income for life lottery winners and of surveys asking whether people would continue working, if they won the lottery or got a basic income, are very consistent.
Without a change in tax rates, women reduce their working effort euro for euro when getting a basic income, and men by about 0.5 euro per euro.
Of course, it gets worse for a high basic income. Here we need other comparisons, like with the work incentives created by current withdrawal rates for social assistance.
My conclusion for the model currently discussed by the pirate party in Germany: work volume would go down by 50%, which would make the scheme unviable.
Wednesday, April 25, 2012
Two older posts on economics
http://heikoheiko.blogspot.de/2006/07/economic-benefits-of-minimum-wage-laws.html
http://heikoheiko.blogspot.de/2006/09/little-bit-on-economics.html
My opinion on work incentives seems to have shifted surprisingly little over the last six years.
http://heikoheiko.blogspot.de/2006/09/little-bit-on-economics.html
My opinion on work incentives seems to have shifted surprisingly little over the last six years.
A comparison with the Middle Ages, work incentives and tax rates
Did we have a work incentive problem in the Middle Ages? Well, for nobility yes, but for poor people, no. If you did not work, you starved to death, if you did work, with a bit of luck, you could hope to live a wretched life. Nobility contributed little, if anything, through their labour. Their net contribution to the economy was negative.
What's all this got to do with the situation today? I am worried about similar tendencies today. Keeping up work incentives for the poor through coercion and the threat of starvation, while some people at the top contribute nothing useful, or even contribute negatively, while simultaneously having a hold of resource rents and thereby a large income.
Do sports stars contribute something useful? Or would the televised sports activities not be equally attractive, if no pay, and only glory, was involved for the winner?
Do CEO's that get 15 million Euros create a lot of value commensurate with the pay, or have they merely angled themselves a position of power where they can effectively tax other people's pay?
Putting in very high tax rates on people on people who work 60 hours per week, and who spent twenty years on no or little earnings to get the education for their present job, that I am wary of. Calculated over a working life, a doctor on 120000 a year, does not earn nearly as well as one might think. Not if that salary is earned for 20 years, with 20 years of average income of 10000 Euros per year and for all the 40 years, it is 3000 hours per year. Over those 40 years he gets a little over 20 Euros gross per hour, but these are backloaded and highly taxed. Meaning somebody who lives a similar lifestyle and works similar hours, but gets the money spread out evenly, gets a lower tax rate and gets to save during the initial 20 years. Depending on assumptions about tax rates and investment returns, 10 Euros per hour may be enough to get the same lifetime earnings, with the same lifetime expenditure pattern, and same lifetime working hours. So, putting in rates of 70 or 80% here, I would worry about incentives.
On the other hand, putting in a rate of 99% on earnings above 30000 Euros per year for football players? No problem with me.
Simply disallowing salaries above 400000 Euros per year for CEO's? Again, I am rather favourable.
In both cases, the issue will be how to handle countries being played against each other. For football players, the best would be tempted to go abroad. Let them go I say, if they wish to come back, hand them a tax bill at immigration.
What's all this got to do with the situation today? I am worried about similar tendencies today. Keeping up work incentives for the poor through coercion and the threat of starvation, while some people at the top contribute nothing useful, or even contribute negatively, while simultaneously having a hold of resource rents and thereby a large income.
Do sports stars contribute something useful? Or would the televised sports activities not be equally attractive, if no pay, and only glory, was involved for the winner?
Do CEO's that get 15 million Euros create a lot of value commensurate with the pay, or have they merely angled themselves a position of power where they can effectively tax other people's pay?
Putting in very high tax rates on people on people who work 60 hours per week, and who spent twenty years on no or little earnings to get the education for their present job, that I am wary of. Calculated over a working life, a doctor on 120000 a year, does not earn nearly as well as one might think. Not if that salary is earned for 20 years, with 20 years of average income of 10000 Euros per year and for all the 40 years, it is 3000 hours per year. Over those 40 years he gets a little over 20 Euros gross per hour, but these are backloaded and highly taxed. Meaning somebody who lives a similar lifestyle and works similar hours, but gets the money spread out evenly, gets a lower tax rate and gets to save during the initial 20 years. Depending on assumptions about tax rates and investment returns, 10 Euros per hour may be enough to get the same lifetime earnings, with the same lifetime expenditure pattern, and same lifetime working hours. So, putting in rates of 70 or 80% here, I would worry about incentives.
On the other hand, putting in a rate of 99% on earnings above 30000 Euros per year for football players? No problem with me.
Simply disallowing salaries above 400000 Euros per year for CEO's? Again, I am rather favourable.
In both cases, the issue will be how to handle countries being played against each other. For football players, the best would be tempted to go abroad. Let them go I say, if they wish to come back, hand them a tax bill at immigration.
Thursday, April 19, 2012
Would you continue to work, if you won the lottery?
Let us assume a male earner of 40 on 3000 Euros gross.
Now assume they win a million Euros. Could he expect to maintain his living standarf for life from that? If he bought a (wage) index adjusted pension I think the answer is yes, but barely.
If he actually wanted to substantially improve his living standard, he'd continue to work, with sufficiently reasonable tax rates this will double his income
So, a lottery win of a million either means a short term boost in wealth with zero work followed by bankruptcy, truely continuing as before without any little extra luxuries but no work, or continuing to work and allowing yourself luxuries you could not have before.
This changes somewhat when applied to a conditional basic income, because of the high marginal tax rates.
I also changes of course, when the lottey win is much bigger, 10 million and above and you can stop working and allow yourself some luxury. The number of such winners is quite low though and if the money is not taken as a pension, there is still a pretty substantial risk of wasting the winnings.
Now assume they win a million Euros. Could he expect to maintain his living standarf for life from that? If he bought a (wage) index adjusted pension I think the answer is yes, but barely.
If he actually wanted to substantially improve his living standard, he'd continue to work, with sufficiently reasonable tax rates this will double his income
So, a lottery win of a million either means a short term boost in wealth with zero work followed by bankruptcy, truely continuing as before without any little extra luxuries but no work, or continuing to work and allowing yourself luxuries you could not have before.
This changes somewhat when applied to a conditional basic income, because of the high marginal tax rates.
I also changes of course, when the lottey win is much bigger, 10 million and above and you can stop working and allow yourself some luxury. The number of such winners is quite low though and if the money is not taken as a pension, there is still a pretty substantial risk of wasting the winnings.
Wednesday, April 18, 2012
Some statistics
https://www.destatis.de/DE/Publikationen/Thematisch/Arbeitsmarkt/Erwerbstaetige/StandEntwicklungErwerbstaetigkeit2010411107004.pdf?__blob=publicationFile
There are a number of things that strike me in the above statistics.
Firstly, only a little over one million people have net earnings above 4500 Euros per month in Germany. Of those, nearly all get most of their income from paid work, 107000 from pensions and 23000 from investment income.
Also, while over 40 million people out of 80 million have a job, many of those are part time or very poorly paid. The number of people with full time jobs and net earnings above 1100 Euros is only half of the employed, that is 20 million.
There are about 25 million people with full time jobs, 17 million men and 8 million women. Half the women work part time (less than 31 hours per week).
So, I have some conclusions from that for work incentives and the unconditional basic income.
1500 Euros per capita, regardless of age, well that would give 9000 Euros for a family with four children, or 4500 Euros for a single mother with two children. So, without any work or education, an income level can be reached by an 18 year old single mother of two children that at present only 1 in 80 people have from work, a mere 23000 have from investment income and a mere 107000 have as a pension.
As I am a member of the pirate party I have taken a particular keen interest in what is being developed there:
http://computerdemokratie.de/michael/calc2/Project2.html
(you can put numbers in there, Erwachsene = adults in household, Kinder und Jugendliche = children, Arbeitnehmerentgelte = gross income from labour, the net income then gets thrown out under Haushaltseinkommen)
So, let us take 2 adults and 4 children:
we get 3426 Euros net income with 0 income from labour. About 1 in 40 people gets that much as a net income from labour now.
And now notice the taxes. When you put in 4000 Euros of gross income, net income only goes up by 1200 Euros (from 3426 to 4626). That is a 70% effective tax rate, or of 1000 Euros gross income you are only allowed to keep 300 Euros.
Married couples with a single earner and 4 children would only pay taxes, if that single earner was among the top million.
Looking through these numbers, I am starting to be skeptical that even my own proposal of 375 Euros for adults and 300 for children might be too high, and that the truely unconditional part has to be lower still, more like 300 for adults, and 250 for children.
Anything above that has to be rationed out for the scheme not to collapse I fear, be it through the current system of means testing (firstly all your savings have to be used up, people in your household have to pay rather than the state, income has to be very low) + degrading goading into a job or through offering low paid work directly, or through doing it a bit more indirectly in the form of workfare schemes, where benefits are only paid at all, if you are working at least 16 hours per week.
People are quite imaginative about where all the money to pay the basic income is supposed to come from. One idea is to tax sales rather than value added, because apparently all sales, including sales to businesses, are 5 trillion Euros in Germany, and a mere 20% tax rate would then do to finance 1000 Euros per month for everybody. I am amazed how something like that gets proposed.
People are also quite imaginative at downplaying the costs or the likelihood of tax evasion. For downplaying costs, I fear the above mentioned pirate party model can be cited as an example.
I fear what they have done is assumed that they can have a top up payment of on average 250 Euros per person and month for covering rents that would only be taken up by 10 million people. That average is one of different rent levels for different regions, and it is to be higher for single member households than for larger households. They figure it should be 350 Euros for a single person on average, and even higher than that for pricy areas.
Why have they come up with this scheme? To keep costs down of course, without the appearance of conditionality. They want to show that nobody on housing benefit now would be worse off.
But when I look at the income statistics cited above I see their calculations are illusory even assuming no incentive effects. And I fear there would be a very strong incentive for the formation of single person households.
At present, the number of people getting housing benefit is limited by much more than just income. Many 18 to 25 year olds live with their parents, and if they do not, are supported financially by them or by student grants, for example. With no conditionality attached, they suddenly become recipients not only of the unconditional basic income, but also of the housing benefit dreamt up by the German pirates.
My fear is that their estimate of 30 billion Euro cost for that housing benefit is massively wrong, I fear it would cost over 100 billion Euros with no incentive effects, and this would quickly balloon towards 200 billion as the formation of single person households explodes, and as rents rapidly rise.
There are a number of things that strike me in the above statistics.
Firstly, only a little over one million people have net earnings above 4500 Euros per month in Germany. Of those, nearly all get most of their income from paid work, 107000 from pensions and 23000 from investment income.
Also, while over 40 million people out of 80 million have a job, many of those are part time or very poorly paid. The number of people with full time jobs and net earnings above 1100 Euros is only half of the employed, that is 20 million.
There are about 25 million people with full time jobs, 17 million men and 8 million women. Half the women work part time (less than 31 hours per week).
So, I have some conclusions from that for work incentives and the unconditional basic income.
1500 Euros per capita, regardless of age, well that would give 9000 Euros for a family with four children, or 4500 Euros for a single mother with two children. So, without any work or education, an income level can be reached by an 18 year old single mother of two children that at present only 1 in 80 people have from work, a mere 23000 have from investment income and a mere 107000 have as a pension.
As I am a member of the pirate party I have taken a particular keen interest in what is being developed there:
http://computerdemokratie.de/michael/calc2/Project2.html
(you can put numbers in there, Erwachsene = adults in household, Kinder und Jugendliche = children, Arbeitnehmerentgelte = gross income from labour, the net income then gets thrown out under Haushaltseinkommen)
So, let us take 2 adults and 4 children:
we get 3426 Euros net income with 0 income from labour. About 1 in 40 people gets that much as a net income from labour now.
And now notice the taxes. When you put in 4000 Euros of gross income, net income only goes up by 1200 Euros (from 3426 to 4626). That is a 70% effective tax rate, or of 1000 Euros gross income you are only allowed to keep 300 Euros.
Married couples with a single earner and 4 children would only pay taxes, if that single earner was among the top million.
Looking through these numbers, I am starting to be skeptical that even my own proposal of 375 Euros for adults and 300 for children might be too high, and that the truely unconditional part has to be lower still, more like 300 for adults, and 250 for children.
Anything above that has to be rationed out for the scheme not to collapse I fear, be it through the current system of means testing (firstly all your savings have to be used up, people in your household have to pay rather than the state, income has to be very low) + degrading goading into a job or through offering low paid work directly, or through doing it a bit more indirectly in the form of workfare schemes, where benefits are only paid at all, if you are working at least 16 hours per week.
People are quite imaginative about where all the money to pay the basic income is supposed to come from. One idea is to tax sales rather than value added, because apparently all sales, including sales to businesses, are 5 trillion Euros in Germany, and a mere 20% tax rate would then do to finance 1000 Euros per month for everybody. I am amazed how something like that gets proposed.
People are also quite imaginative at downplaying the costs or the likelihood of tax evasion. For downplaying costs, I fear the above mentioned pirate party model can be cited as an example.
I fear what they have done is assumed that they can have a top up payment of on average 250 Euros per person and month for covering rents that would only be taken up by 10 million people. That average is one of different rent levels for different regions, and it is to be higher for single member households than for larger households. They figure it should be 350 Euros for a single person on average, and even higher than that for pricy areas.
Why have they come up with this scheme? To keep costs down of course, without the appearance of conditionality. They want to show that nobody on housing benefit now would be worse off.
But when I look at the income statistics cited above I see their calculations are illusory even assuming no incentive effects. And I fear there would be a very strong incentive for the formation of single person households.
At present, the number of people getting housing benefit is limited by much more than just income. Many 18 to 25 year olds live with their parents, and if they do not, are supported financially by them or by student grants, for example. With no conditionality attached, they suddenly become recipients not only of the unconditional basic income, but also of the housing benefit dreamt up by the German pirates.
My fear is that their estimate of 30 billion Euro cost for that housing benefit is massively wrong, I fear it would cost over 100 billion Euros with no incentive effects, and this would quickly balloon towards 200 billion as the formation of single person households explodes, and as rents rapidly rise.
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