Social insurance: unemployment (no work / disability) (Some initial investigative thoughts on the matter.) I talked with someone who had the idea we could have the various ideological directions (as they currently exist) follow their own rules. In theory this is a nice idea, although in practice it is already possible. Since eventually it is always about money, I figured the bottom line of it would be: how much to pay for social insurance. The ideological directions under my system (www.socialism.nl) would probably have nothing more to chew except such minor details. My system both being more liberal then what liberals have ever proposed, it also being more social/communist (democratic/humanitarian) then the socialists have ever managed to set up. The goals of right/wing (even nationalists, with the exception of militarists) liberals and democratic socialists and communists would all be achieved within the same model (a DAVID system *)), of which they all currently hold a part, which is the center of their ideology (the liberals hold the free trade and free initiative leg, the social democrats hold the democratic leg (at least in pretence), and the far left holds the nationalization of infrastructural sectors and democracy legs, I guess the land-distribution leg is partially held by some communists as well). So everyone holds a leg of a correct system, they've all build their ideology on a fraction of the total picture of what it needs to be. Besides putting liberals and socialists in different countries, it is obvious enough how to handle social insurance differently for liberals and socialists: for a reduced service the liberals get a part of taxation money back. I don't see the problem, as long as they have to pay for a minimum service that is at least enough to prevent starvation. In theory you could even allow starvation when out of work. There are then the obvious options of either resorting the social insurance for unemployment and disability under the state (socialist choice), or in the private sector (liberal choice). Since the social insurance would be something that the socialists will be using and the liberals would be disusing, it makes sense to do it the way the socialists want. Since they after all are the ones who are going to use it. If the burden of management is carried in the taxation, there is no problem, it would make things more controllable and official. The other option is to do it in a private way, but this puts a serious second burden on the people: they then have to keep straight to big moneyed organizations, the state and the social insurance group (however that might be organized). Throwing everything in the free markets is of course the naive idea of the liberals, and there may be no other reason then this prejudice that they want the social insurance in the free market (in the current system that would of course open social insurance up for influence and profiteering by private investment capital, Capital). There is of course the "market pressures" benefit in theory (the bad get tossed out, the good survive), but when insurance is concerned "bigger is better." The biggest possible insurance would be a nation wide monopoly, which requires it be state controlled (or broken up). Secondly you can't even have major insurance companies go bankrupt, which in theory would mean a lot of people suddenly have no income, although they payed for the insurance. With no work and no income, they would be dying. Hence nationalized social insurance seems best. For those that want a taxation rebate, rather then the insurance, or a fractional taxation rebate, there would need to be made rules - obviously - for how to get out, how to get in, by how much etc. Clearly if they want out they can't get back in when they want service. One idea is to have the service be reduced by the amount of times the monthly taxation rebate was taken. Someone who has payed the social insurance taxation all years gets a full service. Someone who is 40, and say hasn't payed the rate from 20 to 30, will get a 50% service. There could be a problem: if someone can suddenly pay all outstanding money, then why not always take the taxation rebate and hoard the money. Then when social insurance is needed and computed to be most profitable, at once pay down the whole sum. Then when they're old and have reached pension age (which could be either a fixed system that is turned out anyway, or a separately computed social insurance) and they hadn't needed to use the unemployment insurance, they could then cash in on their saved unemplayment/disability social insurance taxation rebates. The question then is: everyone has that interest, so why would anyone pay social insurance taxation ? If nobody pays it, except those that have computed they need it, social taxation will always be at a loss. If however it is more difficult to get service, not merely to hand back withheld taxation, then there would be a motive to pay taxation for the chance it might be useful. Then a lot of people who may end up not needing it, will be paying anyway, which is how the insurance works (you only payed for the sense of security in that case, and not to see people die on the streets who did their best in life). A solution is to either use the modern system, which means you can get insurance from the second you payed, but not for outstanding claims. Another solution is to use some kind of fraction against the sudden payement of payements behind. For example: someone who is 40 and hasn't payed from age 20 to 30, won't get a 50% service reduction, but 75%. If he wants a full service at age 40 he would need not just to pay all outstanding payments from ages 30 to 40, he has to pay double that amount. Paying all the needed money would only yield him a 50% service. This may still offer richer people the opportunity to get out of the system, and get back in when it is more profitable. For example someone decides to opt out of the disability insurance and gets a taxation rebate, but he/she is rich and knows he/she can easily pay the double sum. Then an accident happens at age 25, only 5 years of payments behind. She knows that a life long of collecting disability is worth much more then twice the monthly sums, so the pays the outstanding amount plus penalty amount, and is better off. If she hadn't been disabled, she'd used the money for her self. The same is true for unemployment insurance. Maybe the best way is to use the "no outstanding claims" rule, but to reduce service according the number of payments having not been made. Then if there is no claim, someone can reverse steps and start paying more of the out- standing sums, thus increasing coverage. Reduction of service when rebates are taken reduces the danger of (typically younger people) trying to see how far they can get without taxation first, then when starting to feel less brazen/secure (less healthy maybe, older), they'd suddenly start paying taxes. This will drain the funds, be a drain on services they may themselves later want to use as they are confronted also with non-paying younger people. By having their outstanding payments haunt them like that with a reduced service, they might think twice before putting themselves into such a problematic future situation, where to get better service they'd have to pay all the money they had then used on themselves. They'd be borrowing from their own future if they took the taxation rebates. If more people do such borrowing, then this could reduce wages, at least if work is hard to get (not talking in a capitalist model, where work is always hard to get and there is always pressure toward lowest possible wages from capital - but markets can also have problematic periods by themselves, even without the destabilizing and hostile effects of private investment capital; there can be an abundence of a certain type worker, there can be a crop failure, there can be a sudden reduction in exports for some reason, a mine can dry out, a competing import product can win over the consumers enough, etc). If a lot of people see the taxation rebate as easy income, then they might be willing to work for wages people who do want to pay the social insurance can not work for. This then means the people who take the rebate will always get the jobs, there would be pressure on the others also to take the rebate. This could lead to a problem for the social insurance system. The cheapest and simplest way to do social insurance is to take it from taxation and have no possibility of getting out from under it, as that would reduce bureaucracy. One way or the other it is probably a good thing that the service can never be reduced to 0%. It must always remain at some level to make survival possible. Without that poeple would actually be dying on the streets, they would then start begging and collect their benefits anyway. They may also start stealing. That would mean the taxation rebate can only be a percentage of the taxation payed for social insurance. Note that this is not meant for under the capitalist model. Under the capitalist model the pressure on wages is so extreme, that capital must not be allowed any avenue to pressure people into not paying for insurances. Under a capitalist model there shouldn't be any tax rebate system for social insurance, it should be fixed and mandatory, on all wage / income groups. However within a DAVID model, you could play a little with individual choice from "bare bones mere survival social security" toward "high end comfortable service social security." There is of course another problem: rich people will be able to afford better social security then poor people. Is that fair ? In the capitalist model it is the opposite of fair, because people get rich from exploiting other people in the main. But under a DAVID model the income may be correctly earned from hard work. Under the DAVID model the wages are also likely to be much more similar, accross the board. Maybe one way out of it is: if someone worked reasonable hours (say 40 or 35) a week for a minimum wage, could he/she still pay all the taxes and have a living life ? If so, then there isn't too much of a problem hopefully. When someone is collecting social insurance, one can manipulate whether they are or are not paying their monthly payements. Naturally they need to be rewarded to them, since otherwise if someone becomes disabled at age 25, the service would reduce to near nothing in later years. You could also say: "people who are richer in the DAVID system, also deserve to be able to pay for more social insurance, assuming their wealth is usually justly earned." Note that in my version of the DAVID system there is also a wealth maximum, and an (undefined) minimum wage. Another option is to have a private social insurance bonus market, where richer people can buy additional insurances, while the state provided services would already be more then adequate to meet the needs of those needing them. On the whole I think it probably is not worth the trouble. People who will not want to pay social insurance would generally be taking additional risk for additional cheap thrills. To the degree they do not seek luxuries for taking the risk, but take taxation rebates because they really need that money, they are moving one social problem into another. Group pressure might evolve, where people justle up to each other in an effort to take the rebates and go on a long vacation "we'll later deal with the future." Then one of them becomes disabled and suffers for the rest of its life. On the upside of that: these persons might have learned something worthwhile in their life, namely not to put cheap immediate thrills over long term security. However people might also "learn" the reverse: after a life long of paying taxations, they might conclude after reaching pension age "if only I had taken the taxation rebate for 10 years, I could have taken a long vacation." Who is to say that is wrong ? You could also dynamically compute how much of taking a taxation rebate on the higher ends of the social insurance service actually costs the social insurance in total, not being compensated by the lessened pay out. Since usually the people who expect least trouble will choose the rebate, they wouldn't collect but benefit the fund (which is an infinite fund, since it is the Government, but it could still be accounted properly wrt inflation). Them taking rebates would therefore probably cost the fund. One could try to get that loss back by giving an even greater reduces service to those needing it anyway, or by giving less of a rebate for the same service reduction. How one would compute this loss to the fund isn't obvious to me now. Conclusions: - Social insurance should be done by the state. - Under capitalist model nobody must get out from under it, it should certainly not be privatized in a capitalist system (which is a bad system). - Social insurance should for everyone provide a minimum livable service, no ability to escape such costs (crime, begging). - There are some arguments for letting individual people play with the amount between "basic survival" and "good or even high end service." When that is done one could use the past history of payments to compute present service rights. A 1:1 scheme (% payed ~ % service) could perhaps be used in conjunction with the "no outstanding claims" rule. This seems reasonable from the fund its point of view: you get service to the amount you've up until then provided the fund with the funds needed for that kind of service. From the point of view of the person: when starting to take the rebates he/she still has nearly full coverage, it only drops down slowly when the percentage of rebates increases relative to already payed taxation. On the other hand, once full taxation is being payed, the service only increases slowly if there was a previous gap, unless previous rebates are again returned (quicker restoration of full service). Repairng the gap can then no longer affect a standing claim. Serious problems exist with such a scheme: - Additional bureaucracy: additional cost, lesser service for same money. - Thrill first, bleed badly later (by choice). - Bleed first, never get a personal money reward back (by choice). - Danger of ultra-cheap labor flooding the market (some sectors), pressing out people who do wish to pay social insurance fully. This danger is high(er) when the minimum wage is hardly livable and when many people are at such a low wage that makes them need the rebates to survive. Hence it seems the rebate question is dependent on pretty good wage conditions for everyone: without that it does not seem like a good idea. People on a very low wage are typically the most vulnerable (least socially organized/powerful, most flooded market sectors, which has caused the low wage), being pressured by basic life needs to give up social insurance pushes such already vulnerable people into an even more vulnerable position. That can also cause their wages to drop further and working conditions to become poorer or stay that low, since they all would fear unemployment more if there is no or hardly no social security left (which will be an extreme problem particularly when a family is depending on the work). - Social pressure on individual people to take rebates they don't really want, to be wasted on things the person doesn't really want to spend it on. On the other hand this could be a learning experience: always a good thing in principle, isn't it. Benefit: - More individual freedom, power to trade future risk against present day money. - If service rises and drops relatively slowly with a "past payments is coverage" scheme, people might not be taken by surprise easily, will have a harder time accidentally hurting themselves badly (such as one might have when stopping an insurance for a couple of month, reducing service to 0, and just then hitting on the problem and getting nothing at all). - Outstanding claims can not be rewarded (unless of course they exist at the moment a person becomes taxation liable or before.) Conclusion, conclusion: it does not become useful to think about differential social security insurance service through taxation rebates, until the whole society is fairly well to do, so that rebates or not would definitely not affect the kind of life people have (significantly), when all are doing so well that the rebate money is expendable income one way or the other for all people, even small minority groups. When that is achieved, merely for amuzement one could open up this possibility, which does not seem to offer that much, or take away that much. It is more or less meaningless, but that doesn't mean that a lot of people couldn't be happy with the personal ability to get rebates in exchange for risk. If it gives enough people a good feeling to be able to do that, to have more control over their life that way, then it is probably worthwhile ... In general individual freedom is a good thing, it makes people happier. Conclusion, conclusion, conclusion: we are at present day not anywhere close to achieving above mentioned circumstances, no country even has a DAVID system yet. One would guess only after the DAVID system has stabilized and works well enough, all are out of poverty in a nation at least (or better), only then does it become useful to even start thinking about this problem again - even then it won't be that much of an important matter probably. -- *) Notes: DAVID system, Democratic Authorities, Ventures, Investments, Demarcations (borders), see http://www.socialism.nl for rational economics theory.