Sunday, 28 December 2014

Summary: Hourly Averaging to assist the less economically fortunate

In some of my recent blogs I have compared hourly averaging to other policies designed to assist the less economically fortunate.

My conclusion was that hourly averaging promises a much more effective means of helping the least well-off than a universal/guaranteed/basic income, a high ‘living’ minimum wage, or alternative earning subsidy proposals.

One reason for this is that lifetime hourly average income is a much better indicator of economic fortune than a snapshot at a particular moment of time or year. This is good for the worst off as it means fewer resources are spent on those who are less needy.

The second reason is that hourly averaging is calculated using the amount of time people have worked. By providing people with an incentive to work more hours, hourly averaging encourages economic activity despite its highly redistributive nature.

Encouraging economic activity is good for the worst off for two reasons. The first is that economic growth is generally good for all workers as it creates opportunities. Some alternative proposals, such as a very high minimum wage, are instead likely to reduce opportunities by taking opportunities away.

The exception to the rule that economic growth benefits the worst off is the case where some are excluded from these benefits. Fortunately for hourly averaging this will not be a problem as the systems provides the largest sustainable subsidy available to low earners. The worst off will have more money to spend and/or often more time in which to spend it.

The second reason that the worst off benefit from a strong economy is that they will it will provide more goods and services and at cheaper prices. Other proposals to improve the situation for the worst off will be more likely to cause price rises than would hourly averaging.

These summarise the points I have made in my previous blogposts in favour of hourly averaging; these are the basic reasons to prefer hourly averaging to alternative redistributive policy proposals. My arguments are entirely theoretical, and would need to be tested. However, I have explained the theoretical reasons which suggest that such tests are necessary.

Hourly averaging offers the best prospects for those who do not benefit very much from the capitalist economy, who are treated unjustly as long as greater steps are not taken to make that system fairer.

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