Thursday, August 14, 2014

Skills Liquidity is Better Than Tax Complexity

One advantage of greater skills liquidity, would be the gains in negotiation leverage that skills arbitrage makes possible at individual levels. For instance, imagine being in what might appear (to some) as a "minimum wage" skills set position. This - by no means - need be thought of as purely a "starting" position.

Now, imagine negotiating directly with others in this (subjective) relative position, for what you think is the best "minimum wage" skill set approximate. Instead of remaining stuck in a marketplace which places a salary range as hostage to existing service offerings, the buying power of our time becomes a valid part of both the negotiation process and the definition of the product as well.

That in turn gives our time use greater validity than a minimum wage. The service options gained in such a scenario, have a wealth of possibility which simply can't scale up within the structure of today's institutional settings. This scale is only possible through coordination and focused education within given local populations, at equal time use points.

After all, when time is the arbitrage point, non monetary gains on the part of all concerned, make the negotiation process greater than the limitations of services which are negotiated beyond ourselves. Money comes into the picture, to support (compensate) a process which strengthens both participants, over time. That is the cumulative gain which goes well beyond zero sum, even in the short run. Granted, some aspects of voluntary skills divisions presently appear problematic, as Timothy Taylor aptly points out in this post. Just the same, some who need services, have only limited access to the prosperous regions which presently provide them in their present day "ultimate" form.

This is why coordination for aggregate skills gains - which would also generate new growth in GDP - is needed within local arenas which have been economically left behind. Eventually, new services wealth options could erase the negative skills approximate (by comparison to high skill) so many of us face in the present. Many of us appear as negative skills components, in a world which understandably seeks high skill components to perpetuate prosperity. The "price of entry" for prosperous regions reflects this reality, which can only be amended by greater knowledge dispersion. The price of knowledge use entry can be as problematic for illegals who cross into the U.S., as for rural residents of the U.S. who seek entry into prosperous coastal regions of the country.

When knowledge dispersal is inadequate across regions, tax complexities pretend to erase many of the vast differences in skills sets which are sought in developed nations. Policymakers of every stripe remain caught up in the pretending process. However, governments cannot even come close to providing what they attempt to promise in this regard - even if they sincerely want to be able to do so. No amount of redistribution is capable of filling the hole of negative skills capacity, which highly valued skills compensation in time use terms, has created.

Redistributive illusions become problematic, wherever high skills compensation occurs in the guise of artificially limited skill sets. Unfortunately this process tends to occur all too often, within what society defines as basic goods consumption baskets. In other words, it is hard for the average individual to engage in ongoing (lifetime) rational decision making processes, without access (at some point) to this basket of skills goods. The negative skills effect this generates on lower income, is a result of one's time use not being capable of making up the difference. One could work "nonstop" to access a primary component of the (basic) consumption basket, and still not be able to fulfill their responsibility (i.e.individuals without insurance or government support).

However, high income compensation in this regard is different from income compensation which results from engagement with alternative or luxury options. That is, being a one percenter in a common resource pool which represents resources separate from time, generally does not impede the ability of a poor individual to get from point A to point B in daily routine. For instance, those who get rich building yachts, may not affect common resource or time pool structures negatively in any measurable way. After all, no one (at least that I know) needs a yacht in order to get around.*

While some prosperous regions have adequate skills capacity for their asset to services monetary flows, other regions are forced to rely on additional resource capacity at national levels in order to make up the difference. Tax complexities have hidden the degree to which nations and smaller regions have become dependent upon one another. But tax complexities cannot be eased, until the differences between pools of time use aggregates, versus the much larger pools of resources separate from time, are approached and dealt with on their own merits.

As is too often the case, I wrote this post intending to focus on some individual components (in this instance, tax complexity), only to get sidetracked by a discussion in comments yesterday at a Simon Wren-Lewis post. However I really can't complain, because I came away from that comment thread with a better understanding of some of the differences between resource pools and time use pools. As a result, much of this post ended up rewritten.

Just the same I want to provide the links which initially prompted the post title. Tyler Cowen was concerned about tax complexities being subject to gaming and a lack of transparency, as indicated in this post. He also linked to one he'd written ten years earlier, and cited a recent experiment with piecemeal work which was paired with both simple and complex tax structures. In the experiment, participants were far less likely to respond to the complex tax structures - particularly individuals with less cognitive ability. Small wonder that targeting the ones who appear to be deficient in this regard is a perennial favorite strategy, for policymakers. A recent Tax Foundation post provides what turned out to be an apt illustration of Tyler's concerns, as well as some of his commenters.

*There is one resource separate from time which will become increasingly problematic, thus deserves mention: water. We have limited ourselves to building structures which use more water than necessary, which in turn presents problems for water use not just in developing nations, but increasingly, in the U.S. as well. Buckminster Fuller tried to address the looming problem of water in his lifetime and many supported his ideas. It is time to revisit what he already envisioned, which could solve so many of the problems of the present.

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