When Irrational Incentives Work


It makes the Leftists mad.

I’m convinced that we all want the same thing in this world.  We want people to work hard, take care of themselves and when they can’t, we wanna make sure we do what we can to help ’em.  Serious.  Who doesn’t want that?

The difference is in the process.

But, of course, the process matters.  Giving someone a hundred bucks is different from giving them a job that will pay them a hundred bucks.  And depending on the situation, each is a fine and acceptable solution.  For example, if I have a buddy who is otherwise self-reliant but needs extra cash in a pinch, givin’ him the $100 is okay.  But if there is someone who routinely is down on his luck and requesting aid, perhaps providing the opportunity to work is the better answer.

In one case, having to ask for the hundred is enough to drive behavior.  In the other, having to work is enough to drive behavior.

And this is what frustrates me the most when it comes to Leftists.  No one disputes that folks need help.  What is often the issue is the delivery mechanism.  I am not convinced that simply handing money to someone, often for months and years at a time, is really truly helping that person.  Further, by offering that assistance, we create a situation where the incentive exists to REMAIN on that assistance.

In fact, this power of incentives is very VERY powerful:

Gary Phillips purchased a $400 airline ticket to Hawaii three months ago. He was homeless in San Diego for years, but is now earning cash from Hawaii’s 5-cent redemption program for plastic bottles and aluminum cans.

“I recycle here,” he says. “I make money doing that.” Some days, over $40, he says.

Didja’ catch that?  A homeless man living in America scraped together $400 and made his way to Hawaii for the chance to make $40 a day!  Why, WHY in the world would he do that?

he sleeps at the IHS shelter for $3 a day, with three free meals, $200 worth of food stamps and the state’s free health care program.

Ahhh, I see it now.  Mr. Phillips made his way to Hawaii because he was incented.  The lure of a high quality of life drew him to Hawaii in the same way that the lure of a high quality of life drives an executive to move to where ever HIS next job is.

I mean, check the math:

Mr. Phillips’ monthly take is $800 from his aluminum can business.  His living expenses is $93 a month.  Further, he eats for free AND is given $200 a month in the form of additional government aid via food stamps.

Compare that with a working man who makes 48k a year, or 4 grand a month.  After taxes that comes down to $2,880.  His mortgage or rent is near $900 a month.  In other words, the proportion of the working man’s income that goes to his housing is about 1/3.  Mr. Phillips?  About 1/11th.

Pretty good deal for Mr. Phillips huh?

And the left wonders why we have such a problem meeting the demand:

The shelter’s annual operating budget of $2 million is funded largely by state taxpayers. Connie Mitchell is executive director. She says 28 percent of her shelter and food budget is spent on new arrivals from the mainland.

Why is that?  It’s because the incentives are all wrong:

Many are single, middle-aged men from the mainland, like former computer programmer Gary Titleman.

“Well, I was kind of homeless in Flagstaff and Prescott [Arizona], and a guy told me that you could go to Hawaii for $150, so I had some savings and bought a ticket,” he says.

He chooses to work odd jobs at minimum wage.

The good news?  At least one Leftist gets it:

Connie Mitchell says the resource drain caused by newly arrived single male transients is getting more acute. She says Hawaiian lawmakers need to develop policies to address this problem.

“I think that we really need to begin to look at who’s really homeless — not by choice and by misfortune — and who’s really homeless by choice, and have a different solution for the two different populations.”

Like maybe kicking them out on their asses and telling ’em to get a effin’ job?

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3 comments
  1. Connie Mitchell said:

    Thank you for your thoughtful article. I would agree with about 90% of what you said. But, I want to clarify that at IHS, we DO distinguish what is behind each person’s homelessness and we do issue “aloha letter” to those who are simply not motivated to work. But, we also know that there seems to be a lack of consistency in this approach with many who are feeding and sheltering homeless persons.
    Hawaii is still left with the fact that we have a beautiful place to live and we can’t help that. But, people who live here need to be willing to contribute to our community by working and paying taxes.
    Another correction: we have reduced our non-resident shelter users to 22% from 31% the year before, partially by requiring payment of a program fee. How’s that for not incentivizing the wrong behavior?

    • pino said:

      Thank you for your thoughtful article.

      Wow. Thank YOU for stopping by.

      I want to clarify that at IHS, we DO distinguish what is behind each person’s homelessness and we do issue “aloha letter” to those who are simply not motivated to work.

      I really think that’s an important part of providing aid. At some point, the one doing the “giving has to be the individual.

      people who live here need to be willing to contribute to our community by working and paying taxes.

      Again, an integral part of a society. I am often met with the argument that “all people in a society need to contribute in their way”. I try to ignore the parallel to “from each…to each” I DO answer that argument with the “what if an individual simply chooses not to contribute”? How will the society handle that person?

      Another correction: we have reduced our non-resident shelter users to 22% from 31% the year before, partially by requiring payment of a program fee.

      I am very happy to see programs that do good work innovate; well done.

      How’s that for not incentivizing the wrong behavior?

      I like it!

      Ms. Mitchell, thank you for taking time to read my rambling and to take even more time to comment! Good luck out there and keep the faith.

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