So I like Caplan's argument that social welfare programs make unemployment more palatable. But his justification of supply and demand ignores social pressures which encourage employment over jobless welfare use. I don't that's an insignificant impact. In fact, I think it's probably one of the main factors in the decision. And if you have a floor amount of money where it is 'worth it' to take a job and dedicate your time to employment, then Wal-Mart benefits from that floor being otherwise occupied by government programs. You can prove this the same way he 'proves' his theorem, which is to ask 'If I was in charge of Wal-Mart, would I encourage a social pressure to take employment even when the pay is not at the level which produces a meaningful wage?' Of course I would, because then I can pay less as the worker gets an less tangible, but very valid, value of respect and participation in the employed labor force. Another example on another end of the employee would be a retiree who takes Social Security. It's available to workers and non-workers, but Wal-Mart wouldn't have access to a group of workers that they prefer to hire in that position (nice old people) if those old people were still working in the job that they otherwise were able to retire from with the aid of social security. The EITC is our greatest hope of a UBI in the near future. And was actually the idea of the EITC in the original Friedman plan, which he called a 'guaranteed income.' There's better sources than that, but his book (which is like Gospel to me) is harder to link.
Caplan might be counting the palatability of public assistance as one of the "other things equal" when comparing the effect of a public benefit on Walmart salaries. I don't know how much of a factor such shame is. - I disagree (though I thought the same way before the Salary Quiz conversation). Say my floor is $2000 per month to work part time at Walmart. Anything less than that is not worth the trouble and I won't work at Walmart at all. Say a new benefit appears that gives me $500 per month. Does my floor now change to $1500? No. It's the same miserable work and I demand the same $2000 to do it. The extra $500 makes me more comfortable than I was before. If I make any change at all, it will be to increase my floor, since I need the income from Walmart a little less now. I think the right way to take palatability into consideration is to estimate a shame cost. If I have to choose between rubbing a magic lantern every month to get $500 or applying for a government benefit for $500, I'll take the lantern. Even if the lantern only gives me $450, I'll choose the lantern. But if the lantern payoff drops to $250, I'll swallow my pride and get on the dole. So what appears to be a $500 public benefit is only worth $250 to me. It is still a benefit, and it still has the effect of increasing my wage floor for working at Walmart. Therefore, if I ask myself "If I was in charge of Wal-Mart, would I encourage a social pressure [against accepting public assistance]..." it's clear that I would encourage such social pressure, because it reduces the value of the "competition" from public benefits. If that pressure is sufficiently large, it will completely eliminate the value of the alternative form of income. Then we are back where we started, before the benefit was introduced, and my wage floor is back to $2000.Some parents, she said, don’t encourage their children academically, and even actively discourage them from doing well, because they view disability as a “source of income,” and think failure will help the family receive a check.
And if you have a floor amount of money where it is 'worth it' to take a job and dedicate your time to employment, then Wal-Mart benefits from that floor being otherwise occupied by government programs.