Mankiw’s Work Incentives
Greg Mankiw’s recent blog post makes some interesting claims, but in it he glosses over some important pieces of the real-world situation for the majority of Americans. Most Americans are not in Mr. Mankiw’s situation – most Americans will see their income and payroll taxes drop under Obama’s tax plan; most Americans have limited investments in the market, and so are less impacted by a change in the corporate tax rate, or in the dividend and capital gains rate; and most Americans leave less to their heirs than the exemption allowed by the estate tax. Thus, really, most Americans see an increased, rather than reduced, incentive to work – not because someone is literally forcing them, but because it is actually more rewarding to do work when one knows that it will increase one’s chances not only of passing something along to the next generation, but of feeding one’s family and paying the bills. Some people might describe this as a perverse sort of incentive, but that does seem to be the nature of our economic system, and I prefer incentives that make life easier for folks who have it rough to incentives that make life easier for those who already have it pretty good.
I hope those of us in Mr Mankiw’s situation who are motivated not by the love of what they do but by the desire to do something nice for their children will consider spending more time with those kids. They and their descendants might find it more valuable in the long run to have had a model for joy in the pursuit of happiness than for suffering in the pursuit of accumulated wealth.
Speaking from my own perspective, I find it incredibly valuable to reflect on the transformation I saw in my own father when he switched careers from something that was draining him to something that refreshed him. Through the course of the early 90s, he appeared to reverse the aging process, becoming ten years younger in a period of five. I don’t believe for a moment that this was because his new job(s) paid better; I believe that it was because he became not just a professional, but an amateur – one who does what he does for the love of it.
And I think it’s dangerous for anyone to suggest that incentives to spend time with one’s children might be a bad thing. How else are those of us who *are* inheriting wealth to have any idea what to do with it? Don’t the children of privilege need to be raised carefully, so that they understand that they are inheriting not only power but responsibility?