Should We Want People To Choose Lucrative Careers?

A blog about business and economics.
Dec. 17 2012 11:06 AM

Should We Want People To Choose Lucrative Careers?

The conventional wisdom is that what matters in tax policy for economic growth is marginal tax rates, the rate you would pay on your next dollar of income were you to earn one. Your marginal rate determines whether you want to grab that extra shift, do a super-awesome job to snag that promotion, pitch that extra freelance piece, or whatever else. But Garett Jones argues persuasively that this misses a much more profound set of questions. Most people only rarely get to make labor supply choices on the margin like that. (Economics professors and journalists are important exceptions.) What they make are "lumpy" questions about career choice. That's particularly true for the kind of ambitious people for whom the top marginal tax rate is relevant.

If you're asking yourself, "Should I go into a career where the successful people make really big bucks, or should I pick a career that offers less salary but more nonmonetary compensation?" then the average tax rate—the total amount of money you end up needing to hand over to Uncle Sam—is what counts. As Jones puts it:

[W]hen people are deciding whether to become medical doctors or mere professors, lawyers or struggling novelists, entrepreneurs or Xbox champions, these go/no-go decisions will be shaped by the average tax rate that the rich will have to pay for decades to come. 
Advertisement

A subsidiary question that Jones doesn't address, however, is whether we should be concerned about people opting into less-lucrative careers. It seems to me that having smart, ambitious, hardworking people become lawyers is a huge waste. When Apple and Google compete to produce the best smartphone operating system, consumers win as products improve. But while there's presumably some level of lawyerly incompetence that would be socially problematic, at the margin, big firms getting better and better at suing one other doesn't help anyone. By the same token, it's good to have deep and liquid financial markets, but we're clearly past the point where extra expenditure of engineering talent on devising better and faster high-frequency trading algorithms is anything other than a Red Queen's Race. Arguably it'd be better if talented people put less energy into making money and more energy into seeking other kinds of rewards. Everyone admires inventors, but everyone hates patent trolls—to the extent that people in the invention game are more driven by the quest for prestige and admiration and less driven by the quest for money, you might get more inventing and less trolling.

All of which is to say I don't think it's totally obvious how this cuts. Most generally, I don't think that it is or ever has been possible for anyone to really internalize the economic benefits of truly groundbreaking innovations. So to the extent that high-motivation, high-status people are discouraged from seeking more and more cold hard cash as their main career goal, we might see better results. At any rate, as I mentioned last month, the economic implications of the fact that most people want to find a job they like are understudied as a general matter.

Jones' point about the importance of average versus marginal tax rates further emphasizes the point. An obsessive focus on marginal rates seems to implicitly assume a very simplistic set of work/leisure trade-offs in which the only decisions people make are how many hours of toil to put in on the assembly line.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

The Democrats’ War at Home

How can the president’s party defend itself from the president’s foreign policy blunders?

Congress’ Public Shaming of the Secret Service Was Political Grandstanding at Its Best

Michigan’s Tradition of Football “Toughness” Needs to Go—Starting With Coach Hoke

A Plentiful, Renewable Resource That America Keeps Overlooking

Animal manure.

Windows 8 Was So Bad That Microsoft Will Skip Straight to Windows 10

Politics

Cringing. Ducking. Mumbling.

How GOP candidates react whenever someone brings up reproductive rights or gay marriage.

Building a Better Workplace

You Deserve a Pre-cation

The smartest job perk you’ve never heard of.

Hasbro Is Cracking Down on Scrabble Players Who Turn Its Official Word List Into Popular Apps

Florida State’s New President Is Underqualified and Mistrusted. He Just Might Save the University.

  News & Politics
Politics
Sept. 30 2014 9:33 PM Political Theater With a Purpose Darrell Issa’s public shaming of the head of the Secret Service was congressional grandstanding at its best.
  Business
Moneybox
Sept. 30 2014 7:02 PM At Long Last, eBay Sets PayPal Free
  Life
Gaming
Sept. 30 2014 7:35 PM Who Owns Scrabble’s Word List? Hasbro says the list of playable words belongs to the company. Players beg to differ.
  Double X
The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
  Slate Plus
Behind the Scenes
Sept. 30 2014 3:21 PM Meet Jordan Weissmann Five questions with Slate’s senior business and economics correspondent.
  Arts
Brow Beat
Sept. 30 2014 8:54 PM Bette Davis Talks Gender Roles in a Delightful, Animated Interview From 1963
  Technology
Future Tense
Sept. 30 2014 7:00 PM There’s Going to Be a Live-Action Tetris Movie for Some Reason
  Health & Science
Bad Astronomy
Oct. 1 2014 7:30 AM Say Hello to Our Quasi-Moon, 2014 OL339
  Sports
Sports Nut
Sept. 30 2014 5:54 PM Goodbye, Tough Guy It’s time for Michigan to fire its toughness-obsessed coach, Brady Hoke.