For those Americans who have an EBT (Electronic Benefit Transfer) card, e.g., the roughly 44 million on food stamps (SNAP), Amazon has cut the price of unlimited Prime video streaming to $5.99/month.
At a minimum, the folks at CATO will have to update their 2013 work versus welfare tradeoff analysis (summary: for tens of millions of Americans, it is not economically rational to work; this is on top of the tens of millions of Americans for whom it is more lucrative to collect child support than to work).
Readers: Do you expect to see more price discrimination based on whether or not a consumer holds an EBT card?
Related:
Price discrimination is just a tool to increase profits:
https://en.wikipedia.org/wiki/Price_discrimination
I do not see much difference between say student/senior/etc discounts and the EBT discount from the point of view of a specific company. Perhaps, SJW consideration also played a role.
Philg,
What about the student discount, which is even better?
https://www.thestreet.com/story/13257632/1/is-amazon-prime-for-students-a-good-deal.html
I believe the rationale for this was to compete with Walmart for lower income people’s business.
Perhaps, SJW consideration also played a role.
Once again, there doesn’t appear to be a concrete definition of SJW.
John: you can’t be a student for your entire life, but you can be on food stamps from cradle to grave.
“you can be on food stamps from cradle to grave”
The above feature is immaterial if company uses PD for maximizing profit. Also, additional [intangible] benefits may occur like with Google goats:
http://www.telegraph.co.uk/technology/google/5297097/Google-hires-goats-to-cut-grass.html
Vince: And yet we all know what it means. (Where “we” is those of us being honest. )
Philg:
“John: you can’t be a student for your entire life, but you can be on food stamps from cradle to grave.”
As far as the first part, let me remark.
1) I had a 72 year old in my calc 2 class last term. He was the second best student in the class.
2) When I lived Germany 20 years ago, one could register as a student as long as one wishes (with no matriculation costs).
I think that a lot of folks missed the point of the original posting. The question is not whether or not Amazon has the right to offer different prices to consumers whom it can determine have different spending power. The questions are (1) will more companies do this, and (2) if a bunch do, how does that affect an American’s work-versus-welfare tradeoff choice? (In a country where welfare is primarily cash and most purchases are made in the same market that is used by others, it is easy to figure out if a job pays better than welfare, but in a country such as the U.S. where a lot of prices are “means-tested” (e.g., for housing, food, health care, mobile phone, and now streaming video) it is a more complex calculation.
@philg don’t forget financial aid for school. FAFSA as far as I know now looks 2 years back to prevent the intentional drop of income in the year prior to seeking aid. At least that is my speculation as to the reason.
And yet we all know what it means. (Where “we” is those of us being honest. )
If you know what it means, you should be able to define it. That’s the honest, straightforward fact. It’s reminiscent of the way that word socialism was popular for around 5 or 6 years, starting in the summer of 2008. Millions of Americans
(1) will more companies do this, and (2) if a bunch do, how does that affect an American’s work-versus-welfare tradeoff choice? (In a country where welfare is primarily cash and most purchases are made in the same market that is used by others, it is easy to figure out if a job pays better than welfare, but in a country such as the U.S. where a lot of prices are “means-tested” (e.g., for housing, food, health care, mobile phone, and now streaming video) it is a more complex calculation.
The answer to question 1 is anybody’s guess. Some other firms may wait to see how it works out for Amazon and then make a decision.
You work-versus-welfare tradeoff is based on a misunderstanding SNAP. A large portion of SNAP recipients are working quite hard. They just don’t earn much. For example, I know a woman in her 40s who has a job in HR making $35k, not a horrible salary in Arizona. When she was in her 20s she worked in a supermarket for much less money and received food stamps to help feed her two kids. She’s not likely to quit her office job and work for minimum wage just so that she can save three bucks a month on Amazon Prime.
Another large portion of SNAP recipients are elderly of disabled. No “work-versus-welfare tradeoff” applies to them.
Vince: the “work versus welfare” tradeoff is applicable even to welfare recipients with W-2 income. See
http://www.learnliberty.org/blog/the-welfare-cliff-and-why-many-low-income-workers-will-never-overcome-poverty/
for example of an analysis of whether or not a Chicago resident earning $12 per hour would have more or less spending power by taking a $15/hour job (the answer is “less”). See also the 65-page PDF that the article links to, Modeling Potential Income and Welfare Assistance Benefits in Illinois, https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2014/12/Welfare_Report_finalfinal.pdf
So your example Arizona resident, when evaluating a job that would cut her off from SNAP eligibility, would have to consider that, in addition to the loss of welfare payments, she would then be subject to higher prices for a variety of goods and services, e.g., Amazon Prime.
[Note that I don’t agree with the “learnliberty.org” author’s conclusion that presenting Americans with welfare cliffs and disincentives to work is “appalling”. We live in a democracy and if what voters want is a society where some people can take it easy while being supported by others, that is an expression of our national character and shouldn’t be judged according to Victorian morality to which most Americans never signed up.]
(The woman you cite might be an example of intelligent decision-making. You say that when in her 20s she had two dependent children (the heroic “single mom” of American political discourse!). She was therefore eligible for all kinds of welfare programs and would have been in the 100-percent or greater tax bracket. She consequently didn’t earn so much that she disqualified herself from welfare. It has been roughly 20 years so her kids have aged out of the welfare system and she can’t qualify as a “single parent” anymore (unless she gets one of them labeled “disabled”?). Her effective tax bracket might now be down closer to 50 percent so she is pursuing her career.
In other words, she is behaving exactly as predicted in https://philip.greenspun.com/blog/2015/06/01/book-review-the-redistribution-recession/ (excerpt: ” Mulligan finds that American women behaved in accordance with Econ 101. The married women who could not get welfare worked similar hours to their 2005-2007 hours. Single mothers, however, even those with at least some college education, dramatically reduced their working hours as welfare became more lucrative.”))
the “work versus welfare” tradeoff is applicable even to welfare recipients with W-2 income.
So why would anyone refer to the tradeoff as the “work versus welfare” tradeoff? What’s going on there?
Apparently, those learnliberty people have identified a real issue – those welfare cliffs. Half a century ago Milton Friedman came up with the idea of a negative income tax to avoid that problem. I won’t bother reading what they’ve written though. Usually, websites and organizations with the word liberty in their name just advocate for policies that benefit business owners and rich people. Ultimately, it’s the children born to wealthy parents who would do best in their ideal world. On the other hand, if they want to call SNAP appalling, they’re free to do so.
Regarding my friend in Arizona, she did not behave as Mulligan’s book predicted. She was working full time. Unlike you and people you know, she came from a miserable family who didn’t help her and push her to go to college. She left home at 16 and started working to support herself. Her big mistake was to have kids at too young an age. When she eventually got married, her husband was a drinker who couldn’t hold down a steady job. So she essentially supported him. This was possible because she had a job paying over $45k and she owned a house in a working class section of Phoenix that probably cost less than $100k. She was earning that good salary when her kids were teenagers, meaning she was missing out (in your view) on benefits available to poor parents. Having a decent salary enabled her to take her kids to Disneyland a couple of times and also engage in hobbies like riding jetskis, which wouldn’t be possible on $12 an hour. The father of her first child was a deadbeat dad who still owes here $50k in back child support for her kid who is nearly 30 now.
This a really story about a person who took advantage of food stamps to feed her kids for a few years. Casey Mulligan should get out of his office and go speak to such people if he wants to be considered an expert on the subject.
Vince: You asked “why would anyone refer to the tradeoff as the ‘work versus welfare” tradeoff’?” I think that the answer is that this is standard terminology. A person who is ineligible for welfare faces a “work versus leisure time” tradeoff. He or she can decide to work additional hours and receive more pay (either directly, if an hourly job, or through career advancement if a salaried job) or can decide to relax at home with friends and family. So for a person who is eligible for welfare that varies with earnings, the tradeoff calculation becomes more complex due to the fact that spending power may go up as earnings go down.
Regarding your second message: That is a tragic tale, Vince. If the foreseeable end result was being a single mother with two kids from two different fathers, I don’t think it is accurate to say that “Her big mistake was to have kids at too young an age.” Regardless of the age at which she started, if she’d had sex with guys earning $250,000 per year in Boston, for example, she’d have enjoyed a tax-free personal income of $80,000 per year for roughly 23 years, plus all of the kids’ expenses paid. Median household income in Arizona has been about $50,000 per year, pre-tax, for the period covered (see https://fred.stlouisfed.org/series/MEHOINUSAZA672N ).
Separately, note that working taxpayers who were never fortunate enough to have kids will be paying into the $6 billion child support enforcement bureaucracy to try to get her an additional $50,000 now that her “child” is 30. And, finally, if the “child support” is supposed to be for children but is paid to an adult plaintiff because minor children can’t be trusted to manage money, if this woman is successful in recovering the $50,000 why wouldn’t it properly be paid directly to her now-adult child?
(As noted above, I don’t think that a “welfare cliff” is a bad thing. As a society we’ve gotten rid of the idea that spending power should be related to work effort and wage income. So it is not a “problem” that a person who earns $0 in the labor market may be able to out-spend the person who earns minimum wage or that the $12/hour wage earner may be able to out-spend the person who earns $18/hour or that, given a constant hourly pay rate, the person who works 25 hours/week will be able to out-spend the person who toils for 50 hours/week. The relevance of these cliffs is that young people planning lives and careers should be aware of them so that they can optimize accordingly. Just as I don’t think it is illegitimate for the government to set up these programs, I don’t think it is illegitimate for a citizen or resident to scale back on work (maybe to nothing) in order to maximize his or her utility from spending power and leisure time. That’s Econ 101!)
I think that the answer is that this is standard terminology. A person who is ineligible for welfare faces a “work versus leisure time” tradeoff. He or she can decide to work additional hours and receive more pay (either directly, if an hourly job, or through career advancement if a salaried job) or can decide to relax at home with friends and family.
I don’t believe this. It’s much more likely that the intent is to propagate the notion that no one receiving SNAP holds a job.
Also, regarding those deadbeat dads, there aren’t that many guys who earn $250k, so having kids with one of them is only an option for very few women. It’s irrelevant to this discussion.
Separately, note that working taxpayers who were never fortunate enough to have kids will be paying into the $6 billion child support enforcement bureaucracy to try to get her an additional $50,000 now that her “child” is 30.
She’s owed money and the authorities are working to get it. It’s probably not that expensive to track the guy’s income with his SSN and electronically garnish a small amount.
The more basic fact of the matter of this story is that a very large portion of the jobs in America are crappy jobs with low pay and no benefits. So even if every able-bodied American works are hard as they possibly can, millions will not earn enough to get their heads above the poverty line.
Vince: “there aren’t that many guys who earn $250k, so having kids with one of them is only an option for very few women” — she only would have needed to find one, regardless of age, marital, or alcohol consumption status, for about 15 minutes. The litigators whom we interviewed said that finding the right defendant had never been a problem for a properly educated plaintiff.
“She’s owed money and the authorities are working to get it.” This doesn’t track the American legal environment. Although she may have been the lawsuit plaintiff, the whole system rests on the assumption that it is the child that is owed money from her former sex partner. If this weren’t true, she would have been able to enter into a pre-sex or prenuptial agreement with a man that controlled the amount of cash that she would get if she were to become pregnant. But such agreements are unenforceable as a matter of law because she can’t waive the child’s right to child support.
“It’s probably not that expensive to track the guy’s income with his SSN and electronically garnish a small amount.” Same reasoning as “we thought it wouldn’t be that expensive to run an ecommerce site with a handful of SKUs” (healthcare.gov). http://www.realworlddivorce.com/InOurEconomy lays out the costs to the U.S. economy.
“a very large portion of the jobs in America are crappy jobs with low pay and no benefits. So even if every able-bodied American works are hard as they possibly can, millions will not earn enough to get their heads above the poverty line.” — if you believe this, why would you support any low-skill immigration into the U.S.? What you’ve described is a labor market glutted with oversupply, no?
“why would you support any low-skill immigration into the U.S ?”
Fortunately we have an answer to that question from the president of the Federal Reserve Bank of Dallas:
”
President Trump’s immigration crackdown is already crimping economic growth as undocumented workers fearful of deportation stay home and reduce their spending, the president of the Federal Reserve Bank of Dallas said Wednesday.
”
https://www.usatoday.com/story/money/2017/05/31/feds-kaplan-immigration-crackdown-hurting-economy/102345852/
Pretty bizarre statement.
Apparently, what he imagines is money flowing, through redistribution Maduro-style, from those who “get their heads above the poverty line” to those who likely do not (“undocumented workers”) because “low and middle-income Americans in particular, including immigrants, typically are more likely to spend than save their income”. This neat trick will keep economy booming because “consumer spending makes up about 70% of the economy”.
Ivan: I think that Vince’s statement is consistent with the Fed Dallas executive’s. If what you care about is aggregate GDP growth (“economic growth”) then population growth (via immigration or otherwise) is great because you can have a larger economy even if everyone is worse off than before.
(Also, what if you deplete capital reserves or borrow money and then hand it out as welfare? Wouldn’t that boost the GDP and therefore constitute “economic growth,” at least until you’ve run out of savings and/or borrowing ability?)
My point to Vince was that, unless you enjoy watching millions of people struggling “to get their heads above the poverty line,” if you accept the premise that it is impossible for the typical person to get ahead, why import more low-skilled humans to share this fate?
[Note that I don’t necessarily accept Vince’s premise. My point is IF a person does THEN why support immigration?]