Instead of my usual bloated blog I herein lay out my proposal and its challenges, and let you the reader think through the details. Our task is to define the Welfare Reform Act of 2014. Instead of handing out money or debit cards we give chits to the needy, which are redeemable by private employers. You work for an employer, turn in your chits, the employer gives you cash, and the employer gets reimbursed for the chits by the government.
Instead of a handout, we give a paying job.
I envision almost anyone (with cash) being able to employ the unemployed. Leaf raking, lawn mowing, handyman work, driving grandma to the clinic, cleaning up the local dog park. Anyone with a taxpayer ID can accept and redeem chits for almost any (legal) employment.
Dear reader. How do we make this work? Recall we don’t want to over-engineer the program. Even with the most outrageous corruption the government will not be worse off financially than it is under today’s approach, which hands out cash. We want to avoid a massive bureaucracy but for appearance sake we must also guard against flagrant corruption (e.g., buying and selling of chits on Craigslist).
How do we minimize transaction costs for private employers to accept chits (e.g., exemption from payroll taxes)? Recall that giving a job is more than just paying a wage (here). How do we design the program to better encourage employers to transition chit workers to permanent positions? How do we discourage chits-for-goods trading (e.g., chits for booze)?
- What are the most obvious cheats and how can we guard against them in the design of the program?
- How do we guard against employers laying off staff then hiring them back with chits?
- How do we guard against state, local and federal governments using chits to avoid their fiscal responsibilities?
- How do we value chits? Is there a minimum chit transaction size? Do they expire?
- Do the rules or chit exchange rates vary based on economic conditions (e.g., during a recession)?
- Can this concept be extended into other social payments (e.g., food stamps, minimum wage, social security supplements)?
- Do we need tangible specie for chits or can we do this with a Mobile Phone Payment System?
- How do we avoid capture of the chits program agenda by special interests (e.g., set asides for green jobs, union jobs)?
What could possibly go wrong? (e.g., money laundering, chits for casino chips, chits to circumvent campaign contribution limits). Think of this as setting up a complementary currency system (e.g., traveler’s checks) with the pitfalls and challenges this entails.
The Welfare Reform Act of 2014 is designed to get people into a job, any job, while they look for permanent work. Ideally they use their chits as a way to find employers and demonstrate their attractiveness as future employees. We don’t want the unemployed staying home and going stale. We don’t want the unemployed getting discouraged. We want all job seekers to have up-to-date resumes and job references. We want to maximize people doing stuff for other people.
And the answer is?