A conservative alternative to the minimum wage
Published August 14, 2014
by Mitch Kokai, The Locker Room, August 14, 2014.
Joseph Lawler of the Washington Examiner documents a proposal from Douglas Holtz-Eakin of the American Action Forum that would lead to replacement of a government-mandated minimum wage.
Douglas Holtz-Eakin thinks that his policy idea, which he calls the “Poverty Reduction Opportunity” or PRO wage, could replace not only the federal minimum wage, but also the system of tax credits intended to aid poor Americans.
Holtz-Eakin is the president of the right-leaning American Action Forum think tank, a former director of the Congressional Budget Office and a former economic adviser to the McCain 2008 presidential campaign. He says he got the idea a few months ago when President Obama “was running around talking about the minimum wage, which I think is a terrible antipoverty policy.”
The minimum wage is problematic, says Holtz-Eakin, because it harms job creation and isn’t narrowly targeted to benefit poor people. The Earned Income Tax Credit — the biggest federal antipoverty program, one generally recognized to encourage work — doesn’t help low-income single men and women without children. It’s also rife with mismanagement, with up to a quarter of payments made in error.
The PRO wage, spelled out in a research paper released Wednesday morning, would work by setting a target income for families that would place their household out of poverty if all income-earners in the family worked full time. The federal poverty line varies by family size.
Then, the government would simply augment their wages by as much as needed to ensure they met that target income.
So if a business only paid $5 an hour, a single worker with two children would receive a subsidy of $4.90 to earn a total wage of $9.90, putting him over the poverty line. The subsidy would come with his paycheck, with the employer simply remitting less in taxes to finance the disbursement.
The idea is that the wage would be targeted solely at poor workers and would not discourage work or job creation.
“There’s some less-than-perfect features” to the idea, Holtz-Eakin acknowledges, “but this is not a world full of perfections.”
August 15, 2014 at 9:50 am
Norm Kelly says:
If the government, which is really us taxpayers, is going to make up the difference between what the employer pays and what the government deems is a living wage, what's the incentive for the employer to pay any more than necessary? Wouldn't this tend to drive DOWN minimum pay? I know that having the government artificially set a minimum wage is an id10tic idea whose time is long past and probably never should have come in the first place. I know that the PRO has it's flaws. But once again having the central planners be responsible for creating a living wage doesn't solve the problem. It also does not encourage low-skill people to increase their skills to qualify themselves for a better paying job. Just like artificially inflating the minimum wage as the socialists are currently trying, PRO does NOT appear to solve the problem of low-skill, low-motivation people. I know. Not all minimum wage earners are low-motivation. But if you are raising a family while working a minimum wage job it says something about you. Either you lack skills enough to get a better paying job; or you suffer from low-motivation; or you are low-motivated AND expect the central planners to take care of you since you don't want to take care of yourself. And when you have a family (that you can't afford) and are working a minimum wage job, aren't you also qualifying for other government subsistence programs? If so, are these other government payments taken into consideration before deciding the minimum wage is insufficient?
August 15, 2014 at 1:04 pm
Are Buntz says:
Not funny how some people see the government reducing it's use of it's coercive power to take a little less from someone else, in this case employers, is the same as giving money to someone, in the case the employer. It is not ALL the governments to decide how it ALL is to be distributed... and of course in this case lifting every family with working adults out of poverty which the many government social welfare programs have failed to do over decades... at least the government bureaucrats made out like bandits.
