The Laffer Curve and Farm Labor

The New York Times has discovered the Laffer Curve! Has the esteemed liberal newspaper of record been bought by Rupert Murdoch? Has hell frozen over as a result of global warming?

Not quite. Though the Times has implicitly recognized the logic of the Laffer Curve, it took more than the plight of hedge fund managers and dot com billionaires to merit their notice. The disincentive of a mere 15% tax was not news fit to print. When a Colorado farmer was unable to find local laborers willing to pick onions, despite high unemployment rates, however, the New York Times took notice.

Unemployment and labor shortage at the same time. Something seriously stupid is going on. This prompted an in depth debate. Tom Lutz gave a pretty good answer:

First let’s do some easier math: the Colorado farmer is offering 10 bucks an hour. Say you’re a 50-year-old agricultural manager earning in the 75th percentile, or making $90,000 a year, and you are one of the 6,000 such managers to lose their jobs this year (as predicted for that job category by the Bureau of Labor Statistics for the next decade). You are eligible for a maximum of $13,000 in unemployment benefits. Even though it is not much, it would pay a year’s major medical coverage for your family as you try to get back on your feet. You might not want to screw up those payments in order to earn $400 a week for a seven-week harvesting season. Unless of course, you got paid under the table. Does making such a calculation mean you have a bad work ethic? Obviously not.

Unemployment insurance is not free money. You have to stay unemployed to collect. If you are unemployed anyway, this is a sunk cost. But as the Times noted, there are jobs out there: they just don’t pay enough to risk losing government benefits. The effective marginal “tax” rate is way higher than 15% or even 35%. It can be greater than 100% for those down on their luck.

Make the government benefits unconditional, however, and seasonal work becomes worth doing. Environmentalists take note: if you want your local foods and free range meats, you need cheap farm labor. Demand a high wage and/or job security for farm workers and the masses will opt for factory-farmed badness or food grown in poorer countries — food grown on what used to be rain forest.

Free money for all gives us affordable farm labor with a better life for those who pick our tomatoes. Harvest work is brutal work, suitable for short bursts only. Using migrants to follow the harvest is inhumane. Far better to hire locals who don’t have steady jobs. But to make that happen, we need to replace our sticky safety net with a safety trampoline.

Freedom as in Free Beer

Rare Japanese Busch bush
Rare Japanese Busch bush
The rare Japanese Busch bush.

For many many years I pitched the idea of more freedom. Friends, family members, coworkers and complete strangers heard my spiels. I worked fair booths; I put up yard signs; I bought radio spots; I knocked on doors.

I failed.

OK, I failed in part because I was pitching a radical amount of freedom. Our electoral system is inherently conservative (in the sense of slow to change). Older now, I realize this is a good thing. Some of the ideas I pitched seem a bit iffy today.

But that was not the real reason I failed. Marx was radical and his ideas were worse than iffy, yet his followers took over close to half the planet. Maybe people hate freedom.

Or maybe, many people don’t associate smaller government with more freedom. As Bob Black pointed out in The Abolition of Work, the average person gets more direct orders from their boss than from any agent of the government. For those of us with some money — or at least the means to earn it — high taxes equals less freedom because it equals less money.

For someone on public assistance the story is rather different. More taxes = more money = more freedom.

But the government ties a lot of strings to that public assistance. It is not free money. And nowadays, the government is tying strings to the money it allows taxpayers to keep as well. Here is a call for more freedom that might appeal to poor and well off at the same time: keep the wealth transfers but get rid of the strings.

I realize that this does mean a lot of money running through the government’s ledgers. And some will fear that this will create a giant class of hippies or worse. Fear not! Free money for everybody will give the poor more incentive to work than the current system. I’ll explain in greater detail in the future.

Other people worry that giving straight cash to today’s welfare recipients will allow them to misspend. I have news for you: the current system encourages bad behavior. Spend some time at a public housing project if you dare. Yes, a few mentally ill alcoholics will drink the benefits instead of drinking the rewards from a day’s begging. This is a valid concern, but surely we can find a better special solution for these outliers than crushing the economy with red tape, breaking up marriages, discouraging work and thrift and creating a permanent underclass.

Free beer!