Increase The Payoff & Ensure More Of It

Monty Pelerin / EconomicNoise.com

Why work? We have finally reached the point where you can be richer by not working. When that condition prevails, it becomes economically irrational to work.

Well, perhaps that is not true for all people, but look at this chart:

According to this chart, welfare spending per hour for welfare recipients exceeds the median income per hour for working people. Yes, re-read that sentence!The Senate Budget Committee apparently investigated this subject. The minority (Republicans) issued this statement:

“Based on data from the Congressional Research Service, cumulative spending on means-tested federal welfare programs, if converted into cash, would equal $167.65 per day per household living below the poverty level,” writes the minority side of the Senate Budget Committee. “By comparison, the median household income in 2011 of $50,054 equals $137.13 per day. Additionally, spending on federal welfare benefits, if converted into cash payments, equals enough to provide $30.60 per hour, 40 hours per week, to each household living below poverty. The median household hourly wage is $25.03. After accounting for federal taxes, the median hourly wage drops to between $21.50 and $23.45, depending on a household’s deductions and filing status. State and local taxes further reduce the median household’s hourly earnings. By contrast, welfare benefits are not taxed.”

Actually the matter is worse, much worse, than their statement conveys. Additional reductions t0 the median income per hour should reflect out-of-pocket expenses required to work such as wardrobe, transportation, food away from home, etc. Then there is the fact that more than forty hours away from home/family is required to earn forty hours of income. Commute time, lunch hours, etc. further diminish the effective pay per hour required. If it takes fifty hours to work forty, the effective return on the hours required to work is reduced by another 20%.

Then there is the opportunity cost of working. Instead of watching soap operas, playing video games, hanging out or doing whatever you would choose to do with your time. Unless there is nothing else you would prefer doing with your time, there is an opportunity cost to working. It is called work and not play for a reason. Most people would prefer to be doing something else. These opportunity costs are real economic (although not accounting) costs.

Given the trade-offs, one wonders why anyone would work. There are reasons why people still work. Some learn slower than others and are still unaware of the higher payoffs to a life of leisure. Others still suffer from the old-fashioned work ethic and are too proud to accept unearned payments. There are a host of other reasons as well. Regardless, all of these reasons are under attack and will eventually fail over time. Ethics and morality are diminishing as the “right” to not work becomes more acceptable. Rewards for not working continue to go up. When you subsidize something, you always get more of it. Likewise, the disincentives to work are also being increased. When you penalize something, you always get less of it.

Wanting to be kind to the less fortunate has made them more fortunate than others. Soon it will make them more numerous as well.

As the Weekly Standard (from where the chart came from) concludes:

History teaches us — or at least, the intelligent among us, which rules out Democrats — that collectivism spreads misery.

We are headed for fiscal collapse — and the welfare state keeps growing like a cancer, incentivizing sloth, formalizing a culture of dependency, and killing self-sufficiency.

Liberty, I am sad to say, is on the wane.

http://www.economicnoise.com/2012/12/09/increase-the-payoff-and-ensure-more-of-it/