Popped on Bloomberg News the other day (it seems to be less repetitive than CNN Intl), and heard a guy talking about aligned incentives (as it relates to where we need to drive policy). He was specifically talking about unemployment benefits and how the longer they are extended, the less incentive there is to be employed. In other words, if we are giving out a benefit for not working, why work? He was also mentioning that no one is talking about how the job opportunity market has been rising, but the skills required for those openings are not aligned with the those looking for work.
It can’t be an easy task, running a country. We say that everyone is created equal and then we structure laws which end up favoring some at the expense of others. The incentives get all misaligned. We see this all the time in trade policy, with subsidies, and taxes.
Aligning incentives? That is one lofty goal. We know the incentives start with the individual, each of us. But then how far up the chain to we align them? The news guy was talking about the state (our country). But in our global economy, we could roll it up further.
Who understands the logic of our tax code? Taxing is like a penalty. The more you increase a penalty, the more behavior changes. If two people are equal, and one works harder than the other thereby making more money, the harder working person must pay more in taxes. When I worked at a manufacturing plant in off seasons during my pre-college graduate days, when offered, many workers would turn down double-time pay because of the disproportionate amount of taxes they would end up paying.
I remember feeling incredulous in my early 20’s when my tax rate jumped the day I could no longer file single. Had I known, (stupid me at the time), that marriage cert would never have been signed. We let our incentives get so out of alignment.
With so many of us clamoring to fulfill own incentives, it’s damn near impossible to get all of them aligned as a country. But we should be looking at how rules and policy affect general behavior. That’s kind of a basic dumb dumb rule of thumb but we seem to miss it many times.
Oh well. Today, my incentives ended up aligned with a ride in the hills for some fresh air. Whatever is happening on the left side of my head is totally out of alignment. I’ve got to go find me some aligned incentives. Anyone out there have any (extra)?