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December 27, 2003

Matt Y Still Out to Destroy Productive Businesses

Alas, 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