Inequality and the welfare state

​In a modern welfare state, pay has nothing to do with work or productivity. It has more to do with income inequality. Poorer people should have more money so that they are able to live more like richer people. This is quite easy to achieve, through redistributive taxation. Rich people will be happy to pay higher taxes because that way they won’t feel so guilty about being rich, and the 99% will be less angry about inequality and hence less likely to take to the streets in the summer, rioting and burning stuff to show how angry we are.

Long ago, before there was a modern-style welfare safety net, people didn't feel the need to have as much money as other people in society. They cut their coat according to their cloth, instead of trying to get more cloth that would make a coat just like the neighbour's.

When asked in 1824 by the Select Committee on Labourers’ Wages whether he had ever applied for an addition to his wages, Thomas Stuart, an agricultural worker, replied, “No, I never did. I always try to do without.”

Anthony Atkinson, Inequality, p. 211.
​

​Poor Thomas Stuart. He must have been suffering from a grave mental affliction. Why else would he try to stand on his own two feet and subsist on his own wages, in conditions where he obviously needed help from public funds in order to attain a higher standard of living? What on earth did he mean by saying 'I always try to do without'? 

​Maybe he really wanted a wage top-up but he was just too shy to ask? Or maybe he was worried that the neighbours would know he got help, and laugh at him? Maybe he was scared that the Daily Mail would humiliate him in the tabloids, calling him a benefits scrounger?

Whatever the case, we must assume that he really wanted to be helped, or at least he would have wanted to be helped had he been in his right state of mind. That way he could live like other people, buying nice stuff, going on exotic holidays, and generally living the good life that must have been quite out of reach for the typical agricultural worker in 1824.

Helping the poor is very important (because of human dignity, obviously) and it’s a bit inconvenient for those who are trying to help if poor people insist on ‘trying to do without’. Now that we are coming into the Age of the Robot and many working people are about to be displaced, measures are being put in place to help them out even more by expanding the welfare state. It’s very important that all workers should be willing to be accept handouts, otherwise the plan won’t really work and things might get a bit awkward. After all, they won’t be able to earn any wages, since all the jobs they are capable of doing will be performed much better by robots.

​Luckily, self-reliant folks like Thomas Stuart are more or less extinct. Soon after his shocking remarks were made public, laws were passed to ensure that everyone would have enough income ‘to enable a man in an ordinary case to maintain himself and his family in accordance with such standard of comfort as may be reasonable in relation to the nature of his occupation,’ as it was put in the Agricultural Wages Act of 1924.

​Following this early example, now we proceed as follows. First decide what standard of comfort people expect. Then offer them social security to meet those expectations. That way it’s fair. A fair income is one which allows people to live the lifestyle that they would be expected by their peers to live.

One other consideration sometimes goes to make up the notion of the fair wage – the worker’s needs. We do not usually think we should pay the butcher more for his meat because his wife has had another baby, but when we pay not for the products of work but for work itself we sometimes are ready to pay different sums to two workers doing one and the same job because their needs are different.

EH Phelps Brown, The Economics of Labor, p. 133 [emphasis added]
​

So in determining a fair wage we should consider how much you need, not how productive you are. If two men are doing the exact same job and have the exact same level of productivity, the one with a wife and baby at home should be paid more than the single man.

​By logical extension, if pay entitlements are determined by need, it is not necessary to do any work at all in order to be entitled to a payout. In fact it’s better if you don’t work at all, because that way your needs will be greater and your pay will have to be higher! If you can add multiple babies to the mix, even better.

If you are rich, paying up whatever taxes are imposed on you is also a way to ensure that we will leave you alone in peace to play with your toys – you can continue building robots, sailing super yachts, and enjoying the other fripperies you like tinkering about with. All the robots who are hired to replace human workers will pay taxes too. So there'll be plenty of tax money to pay out a universal basic income to displaced workers who are staying home forever on an enforced perpetual holiday.

The same scheme can be rolled out on the international stage, so rich countries can help out the poor countries. It is obvious that poor countries are not going to join the Age of the Robot. They're still trying to get a grip of the whole feeding themselves thing, so there's no time for tinkering with technological inventions. That's fine. The tax payers in rich countries will be donating a bit extra, which can be used for foreign aid. That way it's fair, and the world will be less unequal. When you think about it, it's really heartwarming the way humanity pulls together at times like this, willingly paying extra taxes that can be used to help those who are less fortunate.