Feel Free to Talk Back

I am very happy to have people comment on these entries and you don't need to write an essay, happy to get "liked it" or "don't agree with this one" although if you hate it some hint as to why would be helpful.

Tuesday, June 14, 2011

Welfare

In common with a lot of other countries NZ spends a significant chunk of government money on direct hand outs to some of its citizens. I refer of course to Welfare payments in the broadest sense from Unemployment benefits to Superannuation Payments. Most Superannuation recipients don’t see this as welfare as if you ask them most will tell you they “earned it” through paying their taxes while they were working, but for the purpose of this I will ignore those issues for now and the wisdom of other benefits that people worry about, for example “dole bludgers” and “professional DPB recipients”.

What I do know for an undisputable fact is it costs a lot, specifically $22.9 bn or 31% of total government expenditure with the next two biggest being health at $14.4 bn and education at $12.3 bn making it not too far off the size of those two combined.

What do we get for this huge spend, well by and large we get people trapped in poverty and dependency because despite the large sums spent as a general rule living on a benefit is hardly the life of luxury.

And it is a lot of people specifically this many

Benefit Numbers
Unemployment 60,000
Sickness 60,000
Invalids 85,000
Domestic Purposes Benefit 113,000

Then there are approx 500,000 people over the age of 65 who are entitled to and therefore the majority of whom will be drawing superannuation. It is much harder to generalise about their economic circumstances as for quite a number the superannuation they receive is a top up for other savings etc that they may have. The value of paying people who don’t need it is a much debated topic and refers us back to the “earned it” argument again.

So what’s your point I hear you ask, well for one thing 22.9bn divided by 600,000 people is about $40,000 a person and that is a long way from what they actually get which I would suggest is much closer to about $15,000 but that’s not my point either. My point is being on a benefit is generally a bad idea and has all sorts of negative outcomes. I don’t propose to back that statement up I am just going to ask you to believe me on this one but a small amount of research on your own will undoubtedly confirm this fact.

So here is what I think is the most elegant solution a single universal benefit for every working age person in the country. Yup everyone, working, not working, rich or poor, sick or healthy, with or without children.

So first off we eliminate the majority of benefit fraud as other than pretending you are two people there are no other wrinkles in the system.

No more admin costs, well very minor ones to add people to the list at age 18 and delete them when dead but a relatively small task compared to the current system.

But the key idea is it provides a strong incentive to get work as nothing gets taken off you, every dollar you earn is yours to keep, whereas at the moment you end up with a benefit reduction when you work, giving you a low effective earning rate. This will provide the right signals and incentives to get people out of that benefit trap.

How do you pay for this I hear you ask. Well assume that we pay everyone $15k per annum then at about 3 million people to pay it will cost $45 bn. First of all we can use the money we are all ready paying the $22.9 bn which is half and then we need to increase taxes, yep sorry that is the only place money comes from, but hey if you are working then you will be happy to pay $15k more in tax as effectively nothing will change for you anything less than that would be a bonus and I think the cost would be lower but don’t have the data to work it out.

Get out and promote this idea with you local politician etc, it is contained within the working parties ideas and is the best of their proposals in my opinion.

Wednesday, June 8, 2011

The lowest common denominator

Not my usual posting style but how could you put this any better.

What's with all the silly news.

http://bigthink.com/ideas/38776