Business roundtable; 26 Of 26

The following program is made possible through a grant from nation's business. Is Business Roundtable a program of current comment from leading members of America's business community. Today Daniel Krueger professor of labor and industrial relations at Michigan State University and Charles Killingsworth University professor of labor and industrial relations at MSU. Well explore the topic. A guaranteed annual income with series host Alfred L. C. Lee Dean of the Graduate School of Business Administration at Michigan State University. We have had considerable discussion in the United States and all roughly the past year although the origins of talking about the guaranteed annual income go back much before that. I have some method of taking care of the

poverty syndrome. That percentage the people that we have in this country that are below the minimal levels doctor going is worth what kind of groups and where is the discussion coming from with regard to some form of the guaranteed annual income for these types of people. I think the discussion probably originated with academic economists but as spread well beyond that rote Now a couple of years ago the National automation Commission brought a recommendation or some form of guaranteed annual income just quite recently a so-called riot Commission has endorsed this idea. This was the presidential commission wasn't it a presidential. Riot Commission and a few weeks ago Mr. R.J. Miller president of Ford Motor Company surprised a conference a businessman in New York and or saying

what Dr. Krueger what types of guaranteed annual income plans are they talking about. Only several cups being discussed one is a guaranteed minimum income for all their fall below the poverty level a poverty level. Another is family allowances and the third if you mention negative income the negative income tax but aren't they all being lumped together and go one general heading. A minimum guaranteed income for all. Well there are no other words there are different technical differences but the basic idea of all of them is to pay cash money to people below a certain income. Just the basic idea of most of these and I wouldn't say that is the idea of the guaranteed income. And what's called a negative income tax that doesn't quite fit the family allowance proposal. But let's let's look at these stories and if we might fair here for a minute let's take these three.

A guaranteed income I distinguish the guaranteed income from these other proposals in that it places a strong emphasis on. Guaranteeing to everybody in the country and income sufficient to permit them to live with dignity as defined by one of the proponents as an income of at least $3000 per year. A negative income tax on the other and undertakes to provide a maximum of fifteen hundred dollars per year in other words about half the poverty level income. A fundamental reason for that is to provide incentive to people the rich to the recipients to go out and scratch up the rest of the money for themselves through a job through a job. Presumably a family allowance is different in that it would pay to everyone regardless of their income regardless of their need. I don't allow its per child. In other words the millionaires as well as people that are flat

broke would elect a family allowance. Another recent report from their presidential riot commission that you mention brought out the need for some form of a guaranteed income because primarily of the conditions in some of our large urban cities. Saying that the poverty syndrome was one of the things that you could get at in this manner. Now we also don't we have poverty pockets in rural areas Dr. Gruber. Yes a large number of people do live in rural America or in the pockets of poverty and the one of the disadvantages of one of the the problems of the guaranteed income for all is to take into account these differences that the people who live in rural Louisiana and even northern Michigan have one set of income problems as compared to those who live in our large metropolitan areas. Well what what in terms of numbers are we talking about here. Approximately what percentage of our population would fall below the figure Dr

Killingsworth used I believe was three thousand dollars for a family of four. That's right it's somewhat obsolete figured and refigured with cost of living increases and so on it's up around 33 or 34 hundred dollars for the family of four in the urban center and here in the urban areas. Lower than this I assume than in some of the rural areas. Lauren I think it would be higher in some of the urban areas because you know the cost of living varies from all approximately how many people are in this category or another as far as the magnitude of the problem. Roughly both 30 million Americans 30 million fall below the poverty level. Well what are the what are the advantages of this kind of an attack on the problem compared with what we have been doing. Taking a so-called negative income tax first. There are a number of advantages that are argued for it and I emphasize that these are arguments that are presented by the proponents I don't necessarily agree with all of them.

One argument is that this would be a way of establishing a minimum floor throughout the nation. At the present time we have very great variations in grants and in the adequacy of income supplements that are provided. New York is very much on the high side state like Mississippi or Louisiana. Arkansas would be very much on the low side and we talking terms of welfare payments now in terms of welfare payments. Another advantage that is claimed for the negative income tax would be universal coverage only about half the people who are technically eligible on the grounds of income are actually receiving welfare payments now. And it's also argued that the negative income tax would do away with a needs test that is rather humiliating investigation of current income savings and any thing else that man might

contribute. But there would be a need to test it wouldn't there in the sense that determination that the person's income was below a certain. You're getting a little ahead of the story. I think there are some weaknesses in most of these arguments for in the negative income tax. Finally the strongest argument that is made at least one is most attractive I think to people like RJ Miller is the argument that negative income tax could be constructed in such a way as to preserve the incentive to work. Why it does that is by providing only about half of a poverty level income to start with. And then deducting from the grant only about half the earnings. Plus there are variations in these figures depending on who's formulating the plan. It is argued that this is a much better approach than under the present welfare system under which 100 percent earnings are deducted from the grant

which many people argue with some justification really amounts to a 100 percent tax on earnings. The argument is if your earnings are taxed 100 percent you're not going to be very enthusiastic about going out and working. In other words and this would supposedly encourage people to even take some part time jobs and employment and so yes there is. Under the present system there's not much encouragement to do that does that. That is the argument that's right that is the AGI because as you well know many people do get out and look for work even though they're on they are on welfare or even Social Security benefits. Was it a valid assumption as some make up that a lot of these people don't want to work anyway. Well I've heard that but from my experience many people if given the opportunity and we're talking about the disadvantage of those at the poverty level giving meaningful jobs that lead somewhere they are anxious to work we've had all kinds of experimental and demonstration projects around the country

which show rather conclusively that many people do want a job of course there are those who who don't want to work in a population of 200 million you you have some slackers just like at the University we have some students who don't put their shoulder to the wheel and make the most out of their academic experiences. But I'm not impressed with the I'm going to I don't want to work. They do want to work if the job leads somewhere and if it pay is reasonable. Amount of money to them on our current We should recognize that there are a great many people now on welfare who are simply incapable of parroting the old apple if you have an aged couple 75 years old both half blind. These are not people who should be in the labor market. And this in my judgment is one of the fallacies of the negative income tax. It's been estimated that probably a majority of those now are receiving welfare payments of one kind or another are able to

work they're too young they're too old. There's another name is that more than half more than half more than half. Now for these people it is pointless and in some ways rather cruel to provide them with an incentive the incentive is the inadequacy of the allowance. And if they're incapable of making up the inadequacy of the allowance You're being pretty hard on these people it just can't work. Do you have any other comments about this negative income tax featured actor. Now I would agree with Dr Killingsworth that with the advantages the alleged advantages. I think there are some real difficulties in administering this kind of a program as it would be true for all of the proposals relative doing a guaranteed income for all Dr Killingsworth I want to go back to the to the notion it is people wanting to work in the fact that so many of the welfare recipients are just or incapable because of

disability because of age or because a family responsibility to get into the labor market to supplement their income. It would seem to me that one of the ways to attack the problem that we're discussing is to improve existing machinery to to provide dignity to the aged through social security payments. To provide for the disabled through more meaningful. Workman compensation payments on the disability provisions of the Social Security Act. Another way to get at the problem is to improve unemployment compensation. There are roughly about 76 77 million people in the labor force and I'm always astonished and only about 50 million of the workers in the labor force are covered by unemployment insurance and the average

weekly benefit under this program. These are much to be desired. What are there what are the disadvantages of this of this type of plan in addition to some what Dr. Krueger has mentioned here of the negative income tax. I suppose the item that you raised is worth that. Well for some of these people that just are not employed at all they're too old or they're injured or permanently injured. Other factors of this particular type this would not be a very satisfactory plan for them. Oh no it would be rather drastic for many of them a level of allowance that's proposed that is about half the poverty level income would be substantially below the average payment that is now being made under existing welfare schemes and a large number of states. I would guess that something close to a majority of recipients are getting more than they would be eligible to receive under

the negative income tax proposal. Some of those would be able to make up the difference by work by responding to the incentive. A great many of them would not be able to therefore you would have either a very substantial reduction in benefit payments to these people or you would have to figure out some way of mashing together a negative income tax and the existing programs and the difficulties involved in that kind of meshing together are really quite substantial. I don't think anybody has really given very very much thought to this part of the problem. But it would it would pose exceedingly difficult administrated and also conceptual problems. Let's turn to another form of this guaranteed annual income. What was that second one that you mention. I mentioned this guaranteed income idea which has been put forth mainly by Robert Ball with some others

associated with him. His idea is to start with a minimum guarantee of something like $3000. In other words he places great emphasis on adequacy of the guarantee. The amount that is paid to the recipient should be enough to enable him to live with dignity and his family. When you emphasize adequacy then you get into a problem with incentive. He recognizes that he would offset something like 90 percent of earnings above the guarantee against the guarantee. Other words if you go out and get a job you can keep 10 percent of what you earn on a net basis which most economists would argue is fairly weak and Santa. He also is not alarmed about making payments to those who

technically fall above the poverty line. If you put your minimum right at the poverty line and you also. The recipient to keep part of what he may earn and outside income. Then you're going to be making payments to those above the poverty line. There's just the simple arithmetic of it to Theobald's plan payments would be Can would be made to those getting up to thirty six hundred dollars a year and under some variations of the negative income tax. People getting up as much as $6000 a year would be getting supplementary payments under these plans but the principal difference between the guaranteed income and target of all supply and in the negative income tax lies in the size of the initial allowance which in turn of course determines a so-called tax write percentage of additional

income that the recipient is able to keep the family allowance is almost the same because he would go to everybody regardless of number the big family allowances as usually proposed. Here again there are variations but the usual proposal one that's gotten most attention is one made by Pat Moynihan. His proposal as I recall it is $8 per month per child under six. And $12 per month for children of that age. But for all I have. And yes me everybody actions or the proposal is everybody with a child and the eligible age group would get the payment automatically regardless of other income regardless of meat. Just as an aside the United States has I think the only country western country that does not have a family allowance program.

What's the what's the idea of giving a family allowance of money for each child to income families argument for that is that you would thereby eliminate any kind of stigma. My personal opinion is it's a terribly expensive way to do away with whatever stigma there might be. It's expensive and several respects it would cost eight or nine billion dollars a year for one thing or another thing about three quarters of the payments would go to families that are not poor. In other words more or more payments would go to families that are not poor that would go to poor families just want your Dr Killingsworth raised an interesting point what all these programs are going to cost the family allowance program has been estimated between 6 and 8 billion dollars. The proposals which have been receiving the attention involve sums of money from 6 billion to 20 25 billion. In one instance at least

when you write a thank you. You can even devise a program or otherly easily that would go up to 50 billion I don't talk to you. Fifty billion dollars well of course this would depend upon where you're putting these cutoff points. That's right in terms of whether you're saying you're going to try to guarantee some kind of an income of three thousand for a family of four whether it's thirty five hundred two thousand fifteen hundred. But the point is that we talk about a lot of money. I guess there is no significant amounts of technical point way out tech count here. Economists make the argument that a transfer payment within the economy is not really a burden on the economy. The words we take 50 million dollars away from the affluent people of our society and handed over to the poor the total income coming is not really affected by what actually you might have a slightly larger income so there's no cost in the viewpoint of some of these economists. But it's affected the distribution of income as really not rational just like my answer to

that is that the affluent person who pays the taxes to support the 50 billion dollar program is going to think that it's costing him a great deal to support this 50 billion dollar program particularly for what about the argument that has been made. The These plans we're discussing would eliminate the social welfare machinery that we have in the United States. I think that this is one of the appeals of these plans. Milton Friedman well-known economist who is one of the walls was one of the earliest proponents of the negative income tax has said this is the best way to get rid of the whole ragbag of welfare programs as I have indicated. If if we recognize that there are some people who are simply incapable of working then we either have to make some kind of

exception for them and maintain the existing programs or we have to face a very great reduction in their already inadequate standard of living. In other words I don't see how you can really do away with the existing programs and. Functions that are performed the investigation of need would really also have to be performed under the negative income tax. In other words you're saying that if we had some form of a guaranteed annual income we would still need the en tire paraphernalia an apparatus the number of people that are now involved in the various kinds and types of programs working with the underprivileged people. Not necessarily. I think that we might have a decrease in the so-called social welfare agencies but we might very well have a very large increase in the Internal Revenue bureau.

It's contemplated under most of these plans that the Internal Revenue Service would be the agency to do the administrative tasks. And if there's any sort of investigation of the claims that would be filed for the negative income tax. Obviously internal revenue would pay the agency that would have to. So they were trying to bury some one agency to another agency to perform the investigation function. In other words you're still be an investigatory function. You think I don't see where that would be completely eliminated. It has been argued that the social workers would have a different role to play in terms of providing more meaningful counseling and guidance and in these sort of activities rather than be concerned about how much money a family spends on a given item. Recognizing there is a humanitarian view as well as the economic view both of attempting to do something about this percentage of our people that are below the poverty level in terms of

decent housing and standards of living and attempting to raise them up at least to some minimal standard from both as I said a humanitarian viewpoint from an economic viewpoint. Are these plans of some form of a guaranteed annual income. Do you think these are the best kinds of planes some modifications or some aspect of these plans. My judgment is that. There is great merit in discussion and active consideration of these negative income tax proposals. Not necessarily that we will adopt any one of the plans that's now being talked about. But I think it helps the discussion the process of discussion helps to bring out some of the great weaknesses that we have in our present system of income support. I think further it forces on us some realization that we have to make a basic choice of strategy in dealing with the poverty problem. There is a school of thought which holds that the main the only thing

that is wrong with the poor is they haven't got enough money to just hand the money that solve the poverty problem. Another school of thought which holds that poverty is a great deal more than just a lack of money that it is very important to provide remedial services such as education training rehabilitative services a very this was a point I was just going to make. Isn't it true that overcoming this problem is a long range problem. You need perhaps short range plans and some long range plans and obviously as you mentioned you need for some of these people they need obviously better education. The long run it seems almost impossible to many people in our country that without raising a level of education of these people that they're always going to be in this problem their children are and their children are and so on. So it's a very important point that you're making to the I think we need a bag of tools not just a simple guaranteed annual income as if this were to

resolve the complex problems of 200 million people living and working with each other out. For some we do need training for some we do need improved education for the olden for the disabled we need to improve the existing programs. You know the arguments by the the guaranteed income for all. Just too simple and I salute to a complex problem. Or do you what would you think as we all how we how should we attack this problem. Is it some combination of these that we start new years. I think for example the manpower programs which were introduced several years ago need to be strengthened considerably. We're just involving the pittance I think the programs for the next fiscal year old man color programs amount to just about two billion dollars. What do you mean by the manpower problem which are but the manpower development training activity.

Comrade employment rate employment program and the Neighborhood Youth Corps the new careers special impact. These are all business the new business sponsored program. These are all different forms of training like training and getting jobs. Incidentally we haven't talked about one of the proposals which is receiving some attention these days namely the government is going to be in the employer of last resort that comes with you want to comment on that. I think it's a rather unfortunate phrase that implies that the federal government will take the dregs of the labor market so to speak. I happen to believe that there are some very urgent needs in the public sector that are not being met at the present time. And that should be Matt. I don't have to be mad by employing some people. Usually people from the slums who might not otherwise be able to be employed but there have been experimental programmes of showing the possibility

of training people simplifying the job training these people in the words training the people of the slums to help the people of the slums. A very promising approach in trying to get into several pieces of whatever bills have been introduced directed to Doctor I'm sorry to interrupt but our time is up on the Business Roundtable thank you very both very much for an interesting discussion. This is the twenty sixth and the last of the weekly business roundtable programs. We have had as our guest distinguished and knowledgeable business executives government officials labor leaders and faculty members. They have just gusted a great variety of public policy issues facing our country today. I hope that you the audience have found their views interesting stimulating and provocative. Participating in today's business roundtable where Daniel Krueger and Charles Killingsworth professors of labor and industrial relations at Michigan

State University posed by the program was Alfred L. C. Lee Dean of the Graduate School of Business Administration. At Michigan State University. This program was produced by the Graduate School of Business Administration and the

Broadcasting Services of Michigan State University under a grant from the nation's business a publication of the Chamber of Commerce of the United States. Business Roundtable is distributed through the facilities of national educational radio. This is NPR National Educational Radio Network.