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<< What Would Jesus Drink? | Main | Top Films of 2003 >> December 27, 2003Matt Y Still Out to Destroy Productive BusinessesAlas, Matthew Yglesias is still dedicated to helping low productivity firms destroy high-productivity companies. How? He wants the government to subsidize low-wage companies. He picks up the idea from Matt Miller's 2% Solution which argues for wage subsidies instead of a high minimum wage. This is essentially a souped up Earned Income Tax Credit, and as I noted in an earlier response to Matt on the issue, it is a terrible idea: But transfer payments means that the rest of us are subsizing sweatshop employers, who artificially dump their operating costs on the public. This is bad not just because it's hard on us as taxpayers, but it distorts the labor market and encourages less productive and less efficient production methods...high-wage jobs get destroyed because low-wage ones are being subsidized by the government.I think the EITC as it exists is generally fine and I should note that Max Sawicky and EPI suggest some good reforms. But expanding it as a substitute for a needed increase in the minimum wage is an insane attack on highly productive firms who shouldn't have their competitors subsidized. And the taxpayers shouldn't have to pay the freight either to keep these sweatshops in business. Check out the whole Minimum Wage series in the right hand column for more on all of this. Posted by Nathan at December 27, 2003 07:45 AM Related posts:
Trackback PingsTrackBack URL for this entry: CommentsI'm with you, Nathan. My blood boils every time I read about Wal*Mart helping its underpaid employees get their hands on taxpayer-funded assistance to the poor. Posted by: Kevin Block-Schwenk at December 27, 2003 01:25 PM I agree with you. There is no substitute for paying employees decent wages. It is a horrible shame that in the richest country in the world, there are people who work for a living and yet they live in poverty. The minimum wage should be made high enough so that anyone working full-time should be able to support a family. Posted by: Paul Siegel at December 27, 2003 03:00 PM How do you respond to the libertarian's argument that this wouldn't subsidize employeers? Posted by: Luke Francl at December 27, 2003 04:18 PM isn't sorta like subsidizing coffee merchants to help them compete with equal exchange (fair trade coffee in previous post)? Posted by: selise at December 27, 2003 04:46 PM Luke-- Well, I responded to that in the post I linked to. To argue that the subsidies will go only to the employee argues that the employee has complete bargaining power and the employer will not have any power to "capture" the subsidy through negotiation. I seriously doubt any reasonable view of the labor market will support that argument. Any even if it doesn't subsidize the employer per se, it definitely subsidizes their mode of production and will help them compete against more productive, higher wage alternatives-- thereby distorting the overall economy. Posted by: Nathan Newman at December 27, 2003 05:46 PM There is another reason to prefer decent minimum wages over subsidizing: bureaucracy and the possibility of fraud. Posted by: FransGroenendijk at December 28, 2003 03:50 PM "The minimum wage should be made high enough so that anyone working full-time should be able to support a family." What if they decide to have 8 kids? What if they want to become an actor but can't act? Or be a full time artist but have not talent? People making minimum wage are basically unskilled and nearly unemployable. Increasng the minimum wage only encourages people to be lazy and not improve themselves. Posted by: David Livingston at July 11, 2004 11:59 PM Posted by: link- at August 21, 2004 12:54 AM The idea that raising the min wage high enough to "support a family" is out-right socialism. By forcing an employer to pay artificialy high wages, one would have to pass the costs on to the customer in order to pay themselves a "family wage" which is the biggest killer of Mom and Pop" retail and restaurant businesses. Posted by: Joe Holbrook at August 31, 2004 08:03 PM Post a comment
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