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pktechgirlbackupSo the first step of getting off public assistance is the hardest. First, there's the morally reprehensible implicit marginal tax rate, which I hope we're all on board with ending. But there's also the fact that jobs available aren't very good. We can argue that people should suck it up and do them anyway, and maybe that's true, but in the mean time I'd like to work on a plan that doesn't require suspending human nature.
I'm going to use that "respecting human nature" constraint as a reason to ignore improving the entry level jobs entirely. I have a few ideas for marginal improvements, but nothing amazing. But I think we could do amazing things with entrepreneurship. Starting your own business solves a lot of the problems inherit in entry level jobs: you control your own hours, you're not being bossed around by an idiot, corporate isn't making rules to destroy your life with no pay off. It replaces these with different problems, but for some reason people mind them less from customers.
The poor, at least the urban poor, are already fantastically entrepreneurial, according to Off the Books: the Underground Economy of the Urban Poor. There's a lot of informal restaurants, beauty salons, and taxi companies. The problem is that while it's much easier to start and run a business in the legal gray zone, there's a fairly low ceiling on how much money you can make there. To grow, you need to be legal. But there arehuge transition costs to making your business formal. Specifically:
If we reduced these barriers, people could more easily start businesses in or transition their businesses to the legal white zone. That means more money for them, and potentially more jobs for other people. So how do we do that?
I was already in favor of getting rid of the corporate income tax. The long form of the argument can be found here, but the short version is: you can't tax corporations because they don't exist. You can only tax the owners, employees, customers, or suppliers, and if we want to do that, we might as well do it directly. But this is an additional good reason to do so: it lowers the barrier to starting a new business , and lessens the advantage currently given to big corporations with lots of lawyers.
There's a lot of paperwork we could just eliminate outright. For example, Pittsburgh charges you $100/2 years for the right to have a business, regardless of whether you are actually making any money. That's clearly counterproductive. Some things are more gray area, but I bet there's a lot of low hanging fruit here.
The legal entanglement is hard to fix. Legalizing drugs would help, in the sense that it would put the current dealers out of business, but may not fix the entire problem. I'd love a less antagonistic police force, but I promised to work within the bounds of human nature. So mostly I'm hoping to fix the others enough that this will no longer be a substantial barrier.
Licensing: the government needs to stop allowing itself to be used as enforcers for cartels of existing business owners. They claim the business associations are there for consumer protection, but they are clearly lying.
Banking: This one is tricky. Part of the problem will be fixed by making it cheaper to declare your income, thus proving to banks that your business actually exists. I'd be in favor of making banking more straightforward to make it more accessible, but I have no faith in the ability of the government to do that via regulation, or in its ability to run a banking service. Seems like this is an area where a non-profit could do a lot of good.
I'm going to use that "respecting human nature" constraint as a reason to ignore improving the entry level jobs entirely. I have a few ideas for marginal improvements, but nothing amazing. But I think we could do amazing things with entrepreneurship. Starting your own business solves a lot of the problems inherit in entry level jobs: you control your own hours, you're not being bossed around by an idiot, corporate isn't making rules to destroy your life with no pay off. It replaces these with different problems, but for some reason people mind them less from customers.
The poor, at least the urban poor, are already fantastically entrepreneurial, according to Off the Books: the Underground Economy of the Urban Poor. There's a lot of informal restaurants, beauty salons, and taxi companies. The problem is that while it's much easier to start and run a business in the legal gray zone, there's a fairly low ceiling on how much money you can make there. To grow, you need to be legal. But there arehuge transition costs to making your business formal. Specifically:
- Taxes. Transitioning from unlegal to legal requires paying taxes on all (or at least most) of the income you're currently earning. It may be a while until you earn enough additional income to make up for that. Bonus unfairness: the more sophisticated you are, and the better legal advice you can afford, the lower your taxes.
- Paperwork. There is a ton of paperwork that has huge consequences if you screw it up and no guidance as to how to avoid doing so.
- Legal entanglement: the line between unlicensed but otherwise legal businesses and the strictly illegal is not particularly bold. Shopkeepers rent out space to gangs for illegal poker gangs, lots of people store drugs or guns in their apartment for a few days. This makes it harder to invoke legal protection should something bad happen to you.
- Licensing: in order to legally charge for braiding black hair in Washington state, you must complete 1000 course hours (or maybe 1600, if it comes under cosmetology) in techniques and chemicals developed 50 years ago for use on European hair. For some reason people seem to view this as a waste of their time.
- Banking: if your business is informal, it's hard to prove to a bank that they should loan you money to expand your business, since from their point of view your current business doesn't exist. This is made worse by the fact that poor people tend towards check cashers and payday loans rather than banks and credit cards.
If we reduced these barriers, people could more easily start businesses in or transition their businesses to the legal white zone. That means more money for them, and potentially more jobs for other people. So how do we do that?
I was already in favor of getting rid of the corporate income tax. The long form of the argument can be found here, but the short version is: you can't tax corporations because they don't exist. You can only tax the owners, employees, customers, or suppliers, and if we want to do that, we might as well do it directly. But this is an additional good reason to do so: it lowers the barrier to starting a new business , and lessens the advantage currently given to big corporations with lots of lawyers.
There's a lot of paperwork we could just eliminate outright. For example, Pittsburgh charges you $100/2 years for the right to have a business, regardless of whether you are actually making any money. That's clearly counterproductive. Some things are more gray area, but I bet there's a lot of low hanging fruit here.
The legal entanglement is hard to fix. Legalizing drugs would help, in the sense that it would put the current dealers out of business, but may not fix the entire problem. I'd love a less antagonistic police force, but I promised to work within the bounds of human nature. So mostly I'm hoping to fix the others enough that this will no longer be a substantial barrier.
Licensing: the government needs to stop allowing itself to be used as enforcers for cartels of existing business owners. They claim the business associations are there for consumer protection, but they are clearly lying.
Banking: This one is tricky. Part of the problem will be fixed by making it cheaper to declare your income, thus proving to banks that your business actually exists. I'd be in favor of making banking more straightforward to make it more accessible, but I have no faith in the ability of the government to do that via regulation, or in its ability to run a banking service. Seems like this is an area where a non-profit could do a lot of good.
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no subject
Date: 2011-01-09 10:48 pm (UTC)I think there actually is a decent reason to tax corporate income, which is that it limits the power of corporations, by restricting their funding and forcing them to devote resources (and create bureaucracy) to avoiding paying the corporate income tax. There may well be a better way to accomplish this limitation of power, and I'll even accept that the limitation might not be a good thing in the first place. But it's there, and has an effect, and it should probably be taken into account in any plan to remove the corporate income tax...
no subject
Date: 2011-01-10 12:25 am (UTC)My first worry is that limiting power through bureaucracy will back fire: there's a pretty big correlation between a corporation being worryingly powerful and having good lawyers to manipulate laws to their advantages,* so the burden will fall disproportionately on the smaller companies, hindering their ability to limit the bigger companies through competition.
If we decide that benefit outweighs that cost, there might be other ways ease the burden of moving into being an official business, like exempting the first N thousand dollars from taxes. I don't know enough about corporate tax to know if there's a reasonable way to do this without letting Microsoft make 400 billion tiny corporations. Or let people form sole proprietorships and incentivize reporting income through the negative income tax I want so much.
*My favorite example: remember the lead toy scare from a couple of years ago? Congress passed a law mandating independent testing for all toys. This was an expensive burden on a lot of small toy companies. But Mattel, the company that imported the leaded toys in the first place, bought an exception for themselves allowing them to use their own labs.
no subject
Date: 2011-01-18 05:10 am (UTC)And yeah, I'd bet that it's not the best way to limit corporate power, nor even a particularly good one (aside from having the advantage that almost no one realizes that that's what it's doing).
And I completely agree about unintended consequences, too, and share your feeling about that example. :(
no subject
Date: 2011-01-22 05:11 am (UTC)no subject
Date: 2011-01-26 05:49 am (UTC)