Replacing EITC with wage subsidies

[PolishHeadlock]

Thought this was an interesting idea.

http://www.vox.com/2015/8/25/9206571/wage-subsidies-poverty-rubio

Here's how it would work. The government would set a target hourly wage; this could either be the same everywhere, or vary locally based on state and local labor market conditions. One option Cass floats would be to set the target wage at 60 percent of the median wage in an area. So if the average worker in a region is making $20 an hour ($40,000 a year if working full-time), then the target wage would be $12. The government would then commit to paying half the difference between an employee's market wage and the target wage. For example, imagine the target wage is $12, and an employer is paying a worker $8 an hour

 

[ChainFlow]

This is not as good an idea as it sounds.

Employers would have an incentive to pay less than the "target" wage. I'm not sure why people always go on about supposed disincentives to work but ignore the tangible and definite effects proposals would have on employer behavior.

Employer gets the positives of having a much lower turnover and higher employee satisfaction from their employee getting 10$ an hour vs 8 (amazing how much 2$ more has on that when it's a 25% boost) but only has to pay the 8.

This sounds like yet another attempt to redistribute wealth from taxpayers to business owners.

The article itself mentions how just broadening the EITC would help those currently left out, like childless individuals in poverty.

If anything, this article makes a good case for expanding the EITC and maybe breaking it into 12 monthly payments.

 

[Briar]

This sounds shitty, 60% of the median wage where I live is less than minimum wage. The only way this would be decent is if it matched the median.

 

[PolishHeadlock]

This sounds shitty, 60% of the median wage where I live is less than minimum wage. The only way this would be decent is if it matched the median.

If that's the case maybe the minimum wage is adequate in your area.

 

[UpaLoompa]

This is not as good an idea as it sounds.

Employers would have an incentive to pay less than the "target" wage. I'm not sure why people always go on about supposed disincentives to work but ignore the tangible and definite effects proposals would have on employer behavior.

Employer gets the positives of having a much lower turnover and higher employee satisfaction from their employee getting 10$ an hour vs 8 (amazing how much 2$ more has on that when it's a 25% boost) but only has to pay the 8.

This sounds like yet another attempt to redistribute wealth from taxpayers to business owners.

The article itself mentions how just broadening the EITC would help those currently left out, like childless individuals in poverty.

If anything, this article makes a good case for expanding the EITC and maybe breaking it into 12 monthly payments.

My first thought too.

 

[kpt018]

This is not as good an idea as it sounds.

Employers would have an incentive to pay less than the "target" wage. I'm not sure why people always go on about supposed disincentives to work but ignore the tangible and definite effects proposals would have on employer behavior.

Employer gets the positives of having a much lower turnover and higher employee satisfaction from their employee getting 10$ an hour vs 8 (amazing how much 2$ more has on that when it's a 25% boost) but only has to pay the 8.

This sounds like yet another attempt to redistribute wealth from taxpayers to business owners.

The article itself mentions how just broadening the EITC would help those currently left out, like childless individuals in poverty.

If anything, this article makes a good case for expanding the EITC and maybe breaking it into 12 monthly payments.

Good points here, especially the point about employers losing the incentive to pay a fair wage.

The major issue I have is I don't believe "disincentives to work" are a factor. Besides, the law it would replace is the EARNED INCOME tax credit, meaning you have to earn income! So how does this change disincentives to work?

Additionally, would the new law impact welfare benefits that are based on income levels? Depending on the answer, you remove the tax credit and increase their wages, so does that then disqualify them for welfare if they are now above the threshold?

 

[PolishHeadlock]

Good points here, especially the point about employers losing the incentive to pay a fair wage.

The major issue I have is I don't believe "disincentives to work" are a factor. Besides, the law it would replace is the EARNED INCOME tax credit, meaning you have to earn income! So how does this change disincentives to work?

Additionally, would the new law impact welfare benefits that are based on income levels? Depending on the answer, you remove the tax credit and increase their wages, so does that then disqualify them for welfare if they are now above the threshold?

Not sure how much of an impact it would have but if you go over a certain income it lowers or elimnates your EIC so you could work more hours at the same wage and lower your EIC. In this scenario you can work more hours and it won't lower your subsidy as it's based on a salary and not income.

 

[panamaican]

My current thinking on these subjects (and always subject to change as I learn more) is that programs that target wages will always fail since they're predicated on the individual having found work in the first place.

And my issue with this specific policy is that as the employer lowers the wage, the government will only pay half of the new difference. If the employer cuts your wage by $1/hour, the government only pays $0.50 of the difference. So, you're still making less money. I'm not sure what it solves.

Another problem is that as the area's median wage decreases, the government's assistance decreases. So there's no incentive to increase wages.