The problem with the current structure of our safety net programs

All predominantly capitalist societies, in one form or another, have some type of safety net in place. The rationale for them are diverse, but nonetheless compelling. Most obvious is the safety net’s role in preventing citizens from experiencing the suffering of abject poverty, to the extent that their very survival is at stake. Besides this, safety nets play crucial roles in stabilizing the business cycle, reducing structural unemployment (arguably, by allowing people time to find jobs that best match their skill-sets), and boosting productivity by boosting citizen well-being.

America’s complicated web of social assistance programs also serve these crucial purposes, albeit oftentimes inefficiently and rather ineffectively. Multiple programs tend to overlap, and many are desperately under-funded and poorly designed. Yet arguably the most damaging aspect of America’s social safety model isn’t the public element; rather, its the usage of the private sector for purposes of social justice.

Take, for example, the current structure of our post-World War 2 healthcare system. Utilizing tax exemptions, the government essentially subsidizes employer-sponsored health coverage for employees, incentivizing employers and employees alike to obtain generous employer coverage. In other words, the government uses the private sector to achieve the goal of public health. The ACA worsens this via the “employer mandate”, forcing employers with 50 or more “full-time employees” to provide coverage to their employees or pay a penalty. Rather than ensuring skimpy but adequate government insurance for all citizens as a safety net baseline, the government uses the private sector to do its bidding so as to avoid the label of “government takeover of healthcare” and to give the appearance of limited government.

Arguably, the same might be said for the imposition of the minimum wage. Rather than guarantee its citizens a bare minimum financial safety net, it forces businesses to look after employee’s personal well-being themselves (which, obviously, one can make an argument that businesses looking out for their employees and not “taking advantage” of them is a good thing that is to be desired; but the point that the government seems to offload its responsibilities to its citizens by placing it on the shoulders of businesses shouldn’t be automatically ignored).

This (arguably, uniquely American) structure likely has many ill-effects. First, rightly or wrongly, it places the responsibility of minimum standards on institutions whose foremost goal is the achievement of profit (which is not a criticism; it is, rather, the natural aim of businesses) which, although oftentimes in alignment with the goal of worker well-being, is not always so, especially in industries with large quantities of lower-skilled labor. Second, this model inherently has rather large amounts of red tape imposed upon businesses that make it much more difficult to function efficiently and without liability. This can often create scenarios of costs vastly outweighing the benefits, hurting citizens more than it helps. Third, it is an incomplete safety net model, as many people are temporarily (or for longer periods of time) disenfranchised from the labor market, and therefore have little to no interaction with the businesses  the government attempts to use to achieve social goals.

None of this is to say there is zero need for internal regulation of businesses or that businesses can’t play a role in the social safety net. But we should consider the idea that there are many circumstances in which the government ought to play a role in provisioning social assistance that is entirely independent and separated from private business – both for the benefit of business, and the benefit of society as a whole. Right now, in my opinion, we have too much government manipulation of the private sector for social aims – and not so much to show for it.

Overcoming the Tyranny of Entrenched Patterns

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Lately I’ve been thinking a lot about the inability for some aspects of human society to change – whether it has to do with culture, societal norms, the economy, etc.  We always think of the human species as adaptable – and we are, to an extent – but really, we adapt only when we have no other choice.

Personally, I have had no shortage of instances where have remained stubbornly un-adaptable.  For example, for years I have consistently told myself that I should exercise more.  Exercise begets both good health and a happier mood in the long-term – benefits that clearly outweigh the short-term “benefits” of slothness.  Yet, every day, year after year, I never set aside the time – at least, not on a regular basis – to establish a consistent exercise routine.  This pattern of procrastination and non-adaptation is even evident on this very blog (you’ll notice that, thus far, I generally post only once every couple of weeks, a pattern I am desperately trying to break).

Why is it so difficult for us humans to adapt?  Habits make us practice the status quo.  Consistent practice, in turn, makes it far easier for humans to resort to the status quo rather than trying something new.  Additionally, the environments we choose to live in tend to reinforce the status quo, making it difficult to change behaviors easily.  For example: the environment I live in naturally contains several people who are almost exactly like me, especially when it comes to a lack of consistent exercise.  Even if I wanted to exercise, the people in my life a) give me no competitive urge to exercise b) oftentimes will not go with me to exercise, as their lifestyles are also structured in a way that emphasizes other activities c) the status quo environment provide makes it difficult for them to have the will to exercise/actually exercise, reinforcing my lack of will to exercise/actually exercise.  It is a vicious cycle.  Not that any of this is an excuse for my laziness; I alone am responsible for that.  But the environment I live in certainly does not help.

This lack of adaptability can easily be identified in several economic and overarching social patterns.  For example, think about a scenario of economic recession.  Aggregate demand is declining, and to maintain profits businesses must reduce output and cut costs.  This cost cutting can take many forms, but the focus is usually on two aspects of labor: wages or employment.  In other words, an employer can either lower wages or shrink payrolls to cut costs and remain profitable.  Although both occur, the emphasis tends to be to shrink payrolls.  Why?  One explanation is, culturally, it has always been this way, making a change in behavior more foreign and difficult.  Another is that everyone expects businesses to act this way; their is an expectation that wages remain stable (or, better yet, increase) for the vast majority of employees.  As a result, during recessions, we tend to see shrinking payrolls as opposed to wage cuts (side note: could this actually be increasing income inequality? if wage cuts were pursued, employees would be poorer but everyone would at least have income; however, with payroll cuts, some former employees suddenly receive an income of $0 while the remaining employees continue to receive income; the latter scenario creates a wider income gap, at least within a business).  The question is, to what extent are businesses caving into societal pressure and pre-existing patterns of operation as opposed to sound business/economic practice?

Entrenched patterns also bedevil the consumer.  Think about how people go grocery shopping.  They tend to always go to the same place/places, right?  Over time, this doesn’t really change, even if it would eventually make slightly better economic sense to start buying groceries at Walmart as opposed to a local mom-and-pop store.  Even if we begin our grocery-shopping lives initially by looking at price differentials, we tend to choose places to shop for groceries based on the locations we know and the patterns of grocery shopping of people we know.  As time goes on, shopping at that particular location becomes an entrenched routine in our lives.  Even if it the cost differences between two locations become substantial, we often will still choose the more expensive location just because it is what we are used to; it’s what we know.  Our shopping decisions will change eventually when the cost becomes large enough, but not in time for our change to be reasonably considered “adaptable”.  Something that normally would be a generally competitive market – similar goods offered, few barriers to entry, etc. – has less competitiveness than meets the eye.

Patterns aren’t necessarily a bad thing – they can be good if they promote something that truly is superior.  However, patterns have a tendency to become too entrenched, entrenched in a way that is often a detriment to ourselves and society.  We humans must have the will to adapt when necessary – even when the short-term pain of doing so is severe.  Otherwise, the comfortable little world we create will doom us to long-run failure.