Ever have one of those days where every thought that passes through your head is one that just demands to be written down? Not all of those thoughts are worth sharing, but the last couple days my mind has been occupied almost exclusively to a few specific, related concepts. In the absence of a journal, I’m going to share them here. Feel free to tear them apart in the comments, or add your insights. Much of what follows is “back of the napkin” concepts–ideas with varying amounts of math involved.
I’d like to try and solve three problems, all at once. Those three things are:
There are other problems I’d like to solve, but these are the ones I think we can tackle together, so those are the ones I’m focused on here. What I’ll do is outline what I think are the biggest problems in each area, and then wrap up with my proposal for how to fix all of them.
First some data.
We have a poverty line in the United States, which is used to measure a family’s level of subsistence and/or need for assistance. That line is different depending on how many people are in your family; as a single person, the line is $11k. Two people, the line is $15k. A family of four is $22k.
Right away I see a problem. If one person needs $11k to survive, then four people can’t reasonably survive on double that. Apart from housing (the cost of which should reasonably increase as your family’s space needs increase), every member of your family needs to eat, wear clothes, and live in the same city. The individual’s needs aren’t lessened just because they’re sharing those needs with three other people who also have the same needs. The poverty line should be per person, not per household. If you have four people in your household, your need is four times what it would be if you were by yourself.
That’s one problem. And that line helps determine the amount of government assistance a person might receive.
The federal minimum wage in the United States is $7.25. Working forty hours a week, an inidivual can expect to earn $15,000 a year, before taxes. (Most states have a different minimum wage, and some cities may have different minimums as well.)
As anyone who’s worked a minimum wage job can tell you, minimum wage is not enough to live on. $15 thousand a year isn’t enough to plan for your future, or even to make a working budget. If your job provides you with health insurance (and if you’re working 40 hours a week, it probably does), you’re also paying healthcare premiums that cut into that income.
If you’re living below the poverty line, you qualify for cash assistance, in the form of welfare checks. Those checks aren’t much–maybe only $200 a week–but they’re designed to help you reach a basic level of subsistence. The problem is that once your work pays you enough to reach that level, you stop receiving government assistance. And the difference between what you made on welfare and what you’re making at minimum wage is very small.
This is what tempts some people to stay unemployed: the benefits of working aren’t significant enough to compensate for the loss of government assistance.
In addition to cash assistance, if you’re living below a certain level of income, you may qualify for FNAP, or food stamps. That’s essentially cash assistance, but it’s earmarked for groceries. $150 each week to fill your pantry. If you’re earning minimum wage, you might qualify for FNAP.
And then if you start earning more than that, you suddenly don’t qualify for FNAP, because you’re earning enough to subsist without it.
So the second problem is this: There is an incentive to remain below a certain level of income if you can’t find a job that will push you well above that level. If you get $200 a week in cash assistance and $150 a week in food stamps, that’s $18,200 a year. That’s equivalent to $8.75 an hour, 40 hours a week, 52 weeks a year. If your job pays you less than $8.75, you might as well quit your job and “live off the government.” If your job pays you exactly $8.75 an hour, you need to work every one of those forty hours, with no time off for vacation or sick days, or you’re actually losing out compared to someone who doesn’t work at all.
I’m not advocating that everyone should quit their jobs if they’re only making $18k a year. But hopefully this sheds some light on the two biggest problems facing those living in poverty. The current system of government assistance provides no incentive for working to get out of poverty. So a lot of people stay in poverty forever.
Still with me? Okay. Let’s move on.
Schools are woefully underfunded. That is reflected in uncompetitive teacher salaries, schools with outdated facilities, curriculum that is constantly changing, and an entire country that seems to believe education is an irritating burden.
Part of the problem is that funding is doled out by the state and federal governments, as directed by the Department of Education, which is itself typically run by someone with no experience in public education. Most DoE directors come from a charter or private school background, which typically gives them an operating bias against traditional public schools.
I don’t mean to knock charter schools, or even private schools. If your school is great, that’s great. If you loved your charter school and you learned a lot, that’s fantastic. But what gets brought up a lot with regard to charter and private schools is that they’re unregulated–which means there’s no protection for the students if a school decides to focus more on the revenue it receives from funding or donations or tuition, rather than on the education of its student body.
Higher education has similar problems, but those problems primarily have to do with access and cost. Most college tuition (even for state schools) is tens of thousands of dollars per year; since most students are in college full-time, they have no way to pay for that education without government or private loan assistance, which means most students graduate with tens of thousands of dollars in student loan debt. That debt enters repayment six months after graduation, which means that in addition to food, housing, transportation, clothes, and any other basic expenses, a college graduate also is responsible for paying back student loans.
The good news is that many college graduates enter the workforce with qualifications that may earn them higher salaries. The bad news is that despite those qualifications, many college graduates are unable to find those salaries in the work they’re able to take. Not all college degrees are equal, either. Ask a visual arts major, for instance, how their degree has helped them when it comes to paying the bills.
So that’s a few problems with education. That doesn’t even enter into the question of quality of education. The biggest problems facing education right now have to do with funding; solve those problems, and I believe that everything else will fall into place.
At this point, we’re all armchair experts on the healthcare system and why it’s a mess. You may have seen on Facebook an image touting the top ten reasons why the US should move to a single-payer system. What you might not have seen is the underlying economics for why that system is advantageous.
In the insurance industry there’s a concept known as Adverse Selection, which basically says that the more likely an individual is to incur loss, the more likely they are to want coverage. It makes sense; if your risk is greater, the urgency of your need for coverage is also greater. Insurance providers offset this greater risk by also insuring a lot of people who are lower risk. The lower-risk individuals might go a full year without needing to file a claim, which gives the provider a full year’s premiums to help pay the claims of those who are higher risk. The more low-risk individuals in the group, the easier the burden is to bear for the insurance provider when anyone in the group files a claim.
There’s another concept, which has to do with budgets, called the Law of Large Numbers. That concept states that with a sufficiently large pool of insured people, a provider can accurately predict the claims that will be filed for the group as a whole.
These two concepts work together to build a third concept, called risk-pooling. The more people you have in the group, the lower the cost is for everyone in the group, and the easier it is for the provider to pay the claims of anyone who gets sick or injured.
The added benefit of insuring everyone equally is that it lowers the administrative costs for the provider. If everyone has the same plan, the provider doesn’t need to maintain a hundred different plan summaries, meaning the provider can focus on providing better care.
Lowered costs for the individual, lowered costs for the provider. It’s a win-win, which is why most big employers use group health plans: by guaranteeing coverage for all their employees, the total cost for the group’s plan is much, much cheaper.
Back of the Napkin
So we have a few problems.
- There is no incentive to work when you’re already receiving cash assistance in the form of welfare or food stamps
- Schools are underfunded, resulting in lower salaries for teachers, worse facilities, and outdated curriculum
- College tuition is unaffordable for most students, resulting in a glut of student loan debt that reduces graduates’ ability to support themselves
- Healthcare is too expensive for the people who need it, and the people who don’t need it might choose not to purchase it in the first place, thereby further increasing the cost for those who do
So, let’s get this out of the way: move the entire country to a single-payer system, like Medicare. Pay for it just like we pay for roads and schools and the military, make it part of the country’s operating budget, make it a public service. That will lower the cost to individuals by shifting the budgetary concerns to the federal government, encouraging Congress to negotiate better prices with pharmaceutical companies and healthcare providers.
That one’s easy. And the other three problems are even easier to solve:
Give every citizen, regardless of current income, a basic Survival Income of $20,000 a year, paid weekly (roughly $384 each week). Family of four? Each family member gets $20k.
Now, a couple things. First, children don’t have the same needs as adults. But children also need to go to school. And we need to fund our schools somehow. So how about this: Until the child turns 18, the family gets $10k a year, with the remaining $10k going to whatever school the child is enrolled in. Charter school, public school, private school, half the child’s Survival Income is paid as annual tuition.
That means if a school has a hundred students, its annual budget will be $1 million. A thousand students? $100 million.
When the student turns 18, they start receiving their full Survival Income, just like any other adult citizen. They can use that money to fund their education, or to help them get on their feet as they look for work.
And speaking of work, we’ve guaranteed everyone a basic income of $20k. So what do we need a minimum wage for? Let’s get rid of it. That’s right: with a guaranteed income from the government, we can safely eliminate the minimum wage altogether. Why? Because whether you’re working or not, you have enough money to survive.
Suddenly $7.25 an hour doesn’t sound like chump change. It’s extra income. It’s money you can set aside for a rainy day. It’s money you can use to travel. You can take the vacation you need. You can take a sick day if you get sick.
And if you’re a small business and you can’t afford to pay your employees $7.25 an hour? Pay them $5. Pay them $2. Heck, ask them to work for free if they’re willing.
In an economy where everyone is guaranteed enough money to survive, people will be more willing to wait for the jobs they want to work, and will be willing to work those jobs for less. Which means the business has more room to grow its budget, which means it has more room to innovate and provide better products and services.
Anyway, that’s the back of the napkin. Single payer healthcare, Survival Income, and no minimum wage. All that’s left is how to pay for it.
And that’s the complicated question I don’t have an answer for. My gut says to just increase the sales tax to 25%, to set the bottom resting point for income tax at 25%. I don’t know what the healthcare costs would be. But I do know what the costs for Survival Income would be: $6 trillion. 300 million citizens, $20k each, easy math. We already spend $3 trillion each year in government assistance programs like food stamps and cash assistance, but I also know that number is more complex than it sounds.
The point is, it’s cheaper than it sounds. We just need to do the math. What do you think?