Why Are We Subsidizing Low-wage Employers?

A new study out of the General Accounting Office (GAO) - arguably the least political part of the executive branch - found that millions of families with a worker earning the federal minimum wage are living in poverty.

About 20% of families with a worker earning the federal minimum wage - $7.25 an hour - are living in poverty. Now, keep in mind, most of those families have somebody else in the family who is not working the minimum wage or have additional wages coming into the household. While household income is just slightly above where it was in 1980, individual incomes are a little more than half what they were in 1980. And it's really simple. You've got multiple people in houses going to work.

So Bernie Sanders has introduced legislation called the "Raise the Wage Act of 2017". It has 30 senate cosponsors and would hike the federal minimum wage to $15 and, most importantly, index it to inflation.

And by the way, that hike would take place over about a 7 year period. It goes up to $15 by 2024. So not a lot of immediate impact, at least on the businesses or the people.

Sanders says:

"The gap between the richest Americans and everyone else is wider than at any time since the 1920s. Instead of giving huge tax breaks to millionaires and billionaires, we must invest in critical programs that help working families make ends meet and lift millions of Americans out of poverty."

Well, if he's talking about raising the minimum wage, I'm all in.

But there's this enormous subsidy.

It's like, how is it that minimum wage employers get away with paying minimum wage? Because you and I are paying tax dollars to provide minimum wage workers with what is necessary to stay alive, with earned income tax credits - which is basically the government giving money to low income people - with food stamps, with housing assistance, and educational assistance tied to poverty.

I am in favor of all of these programs as long as the federal government requires that businesses, if they are going to get all the wonders and benefits and freebies and goodies that you get running a business, take the responsibility of paying their workers a living wage.

Here's the question: should the government - both federal and state governments are doing this - continue to subsidize low-wage employers?

I guarantee you if these social safety net programs - Medicaid or the parts of Medicaid that are available to low wage workers - went away, if housing support went away, if earned income tax credits went away, if food stamps went away, if these programs went away, employers would be feeling the heat hugely. And, you know, they're not going to put up with that.

But why are we subsidizing low-wage employers? I don't get it.

Why can't we just say, 'hey, you want limitations of liability, you want to be able to deduct your three-martini lunches? Pay your people a decent wage.'


changeX's picture
changeX 5 years 30 weeks ago

Turning on call waiting....

Call Wait On SOUND Effect


Kend's picture
Kend 5 years 30 weeks ago

"Get all the wonders and benefits and freebies and goodies that you get running a business"

Things must be different in the US here in Canada I get none of the above. I just pay and pay. What is Thom talking about.

If you want to raise wages, deport the 35 million illegal immigrants there that are driving down the wages, you have more illegals than Canada has population.

2950-10K's picture
2950-10K 5 years 30 weeks ago

Trump's massive tax break for billionaires will eventually be the reason those safety net programs will end up getting cut. Walmart will be the first and largest employer to feel the low wage employee heat from Crooked Swamp Donny's insider greed.

This bill will be far more devastating than Trumpcare would have been, or still could be, yet most still seem oblivious to it. Corpse news sure is hell isn't sharing the truth about it. Just like the Medicare for All, and Raise the Cap, there's hardly a peep.

Remember the last time we had a war and massive tax breaks for the rich simultaneously?... and the war I allude to will dwarf all the ones the Fascists currently profit from.

deepspace's picture
deepspace 5 years 30 weeks ago

Paul Krugman does an admiral job laying out the staggering lies of Republicans and Trump about their so-called tax "reform." Naturally, the world of corporate media punditry will debate the huge significance of these blatant lies into meaningless babble.

Following are the ten bullet points from the article, which Thom discussed on his 10/16/17 radio program. Krugman breaks down each lie in detail:


"Lie #1: America is the most highly-taxed country in the world.

Lie #2: The estate tax is destroying farmers and truckers.

Lie #3: Taxation of pass-through entities is a burden on small business.

Lie #4: Cutting profits taxes really benefits workers.

Lie #5: Repatriating overseas profits will create jobs.

Lie #6: This is not a tax cut for the rich.

Lie #7: It’s a big tax cut for the middle class.

Lie #8: It won’t increase the deficit.

Lie #9: Cutting taxes will jump-start rapid growth.

Lie #10: Tax cuts will pay for themselves."

Hephaestus's picture
Hephaestus 5 years 30 weeks ago

Bernie Sanders proclamations are way above the narrow views of comment so far

Kindly expand!!!!!

deepspace's picture
deepspace 5 years 30 weeks ago

Kend. If you legally set the minimum wage at a livable wage, then immigrants, illegal or not, can't drive it down -- unless illegal employers are breaking the law, right?

In the U.S., as far as legal immigrants driving down salaries in professions that require advanced skill sets is concerned, there has been a below-the-radar weakening of work-visa laws as a result primarily of Republican legislative policies.

A good example of this cause-and-effect interrelated dynamic is their privatization obsession, which, as an unintended (hopefully not deliberate) consequence, has put higher education out of the financial reach of more and more young people in a dwindling middle class. When fiscal right-wingers cut funding (or try to divert it to the profitized schools of their big political campaign donors) it forces public colleges and universities to raise tuition. So thanks, Republicans and corp-Dem enablers, for making America too ignorant to compete for better jobs!

From some of your previous posts, in which you have briefly described your relationship with employees, I believe you are an ethical employer. I was curious though: If, hypothetically, you hold dual citizenship as a Canadian doing business in the U.S., doesn't that make you an immigrant in a sense? If so, doesn't that also demonstrate that immigration per se is not a bad thing, that there are many worthy immigrants who not only add to the richness of culture but to the economy as well?

I'm not fishing for personal information, Kend, but was just wondering about your take as a matter of general philosophy.

Oldskoold's picture
Oldskoold 5 years 30 weeks ago

I wish I could be so eloquent as you deepspace! That was great. I decided to take tonight and relax but after just reading your post I felt compelled to at least bid acolades to your response. Yesterdays experience with real Republican's who won't stand up frustrated me so. Even with the gerrymandering, if the Fascist side of their party didn't use the dog whistle and racism, which I still hear as a southern white male almost daily, we would have a much better anticipated outcome that I see on the horizon. Kudos! That's the playbook the Fourth Reich has used anytime in a pinch. To see these good people let the "corn get so high they can't see" is appauling! I do wish spell check was part of this...... Hate to have to check if appauling is one p or not! LOL. God's speed.

deepspace's picture
deepspace 5 years 30 weeks ago

Haha! Sorry for ruining your relaxing evening, Oldskoold.

I also constantly hear the dog-whistle racism and bigotry in my neck of the woods. White Americans in general, certainly not all, seem oblivious to their white privilege, with some even proud of it. Many are convinced that America has moved beyond racism to an enlightened age. How far from the sad reality! While we have made great strides in some ways, we are still largely a racist nation in so many other ways.

FYI: At the top of the comment window is the "ABC" drop down menu: select "Enable SCAYT" -- that is the spell checker. However, it doesn't carry a very large vocabulary, so it can lead you astray with prefixes, suffixes, slang, and other less-formal or less-used words.

G'nite. Now, it's time to relax.


changeX's picture
changeX 5 years 30 weeks ago

The social safety net should be expanded while low-wage employers who abuse the social safety net should be ostracized by the community and offered unincorporation insurance assistance.

If the Government of the people were run properly, a safety net wouldn't be needed for half of the population. Safety nets are for emergency situations, not standard operating procedure.

It would be great if corporate charters were approved or denied by the communities they operate in. They would be answerable to the community where only the best, brightest, and most profitable to all the employees would be chosen to operate. As a result, would the corporations flock to communities who accept the worst and dullest corporations paying the employees the least? It seems the entire nation has become a community of the later type.

Kend's picture
Kend 5 years 30 weeks ago

Deepspace, I am a Canadian doing business in the US. I pay taxes in the US as a non resident. I only bring money in to your country do not use any schools or healthcare as I provide my own, which is the total opposite from a illegal. I also provide employment to those I hire as I not allowed to work there. That would be wrong because I would be taking a job away from a US citizen. I can only invest as I do not have a work visa. I choose to follow the law. Those who don't should be caught and send home like every other country in the world does. That would naturally drive wages up. The problem with a high min wage is as a business owner I will just pay my best workers more and give them work that is what causes a larger wage gap. From my experience a $30 / hr guy usually does twice the work as two $15 / hr guys and I only have to pay benefits to one. If they are only making a forced min wage chances are very high they are not very skilled, it is also expensive to train them and also getting harder and harder to fire them. This is a horrible idea.

Dianereynolds's picture
Dianereynolds 5 years 30 weeks ago


You just brought up one of the big problems in some union shops. A manager does not have the ability to pay a worthy worker a higher wage than one that does not carry his own weight. We ran into this along with the seniority issues that constantly affected our drivers routes. A competitor of ours went non-union and found they could get better production with fewer employees but paying well over union scale. We lost our top workers to them and three years later they bought us and continue to thrive today.

Legend 5 years 30 weeks ago

I remember in my teens when minimum wage went from $1.25 per hour to $1.35 per hour. It was a really big raise to me. I worked my way through college on crappy jobs that mostly paid minimum wage. Hard to do today.

Dianereynolds's picture
Dianereynolds 5 years 30 weeks ago


Why did you quit?

Legend 5 years 30 weeks ago

Quit what?

Dianereynolds's picture
Dianereynolds 5 years 30 weeks ago

Your job.

deepspace's picture
deepspace 5 years 30 weeks ago

Kend. Thanks for clarifying your perspective as a foreign employer, one who follows the law and would not hire undocumented immigrants. Those who do should be caught, sent to prison, and forced to sell their businesses. The main reason undocumented foreigners illegally overstay their visas (the primary method of entry) is because illegal employers are giving them jobs in their mad race to the bottom of the wage scale.

Also, it's quite understandable that, as an employer, you would prefer not to have a union. That is not untypical of most employers who want to maintain uncontested control over their employees and who do not want the extra hassle and expense of ceding that power.

Naturally, every point you've made is from the sole perspective of a business owner (which I respect); however, there are equally valid points made from the perspective of employees. Besides unions, how else can those points be taken seriously and how else can workers' rights be respected and guaranteed in this dog-eat-dog world of ruthless, free-wheeling market capitaism, where revolving-door political cronyism and mega-monopolies are the primary forces controlling our destiny?

A strong middle class emerges when workers' rights are on the same footing as their boss's. A healthy economy has a strong middle class with lots of money to buy the products and services that businesses provide. All wealth is derived from labor and from consumers, who are one in the same.

BTW, no union ever prevents employers from firing workers who can't or won't perform their duties properly. None. The point is not to allow a totalitarian boss to take away another human being's livlihood on a whim without just cause. If to conduct an honest investigation to determine whether or not there is just cause to fire or to otherwise decipline a worker is "hard" ...well, it should be!

changeX's picture
changeX 5 years 30 weeks ago

@#12 Legend, tell us more about the "crappy jobs".

One of the big problems with right to work for less shops is that they usually pay worthy workers lower wages.

deepspace's picture
deepspace 5 years 30 weeks ago

That's the truth! Companies doing business in this country are profitting on our socialized infrastructure -- a publicly educated workforce, water and sewer sysyems, electrical grids, highways and bridges, fire departments, police, military, the court system, and on and on.

These are goodies largely paid for by the same workers who disreputable employers are quick to marginalize. The imperatives of the so-called "free" market dictate that most wealth should accrue at the top and that workers should have no rights or say in how the economy should be structured. Damn the People!

deepspace's picture
deepspace 5 years 30 weeks ago

Diane. A union seeks to quantify and qualify the exact duties that an employer expects from an employee, incorporating whatever flexibility is required by the nature of the business, and then negotiates a wage scale based on those duties. Please quit blaming unions for the low pay that too many employers invariably seek in their race to the bottom.

Also, please cite any clause in any union contract that prevents employers from raising the pay scale of those primary duties or from paying an individual extra for performing extra duties beyond the scope of their original job description.

One of the main tenets of unionization is that everyone should receive the same pay for the same job -- once their training period has been successfully completed. (Favoritism in the workforce, especially when it violates the principle of equal pay for equal work, is highly unethical and unacceptable!) If someone can't perform the duties on par with what is expected then prove it and fire them -- or weed them out during their initial training period, which most union-negotiated contracts allow employers to do freely without conducting an investigation. That's what a trial period is for and why it should pay less than a fully qualified employee.

Again, please cite any clause in any union contract clause that prevents an employer from exercising their right to retain or fire employees for not performing their duties sufficiently.

Dianereynolds's picture
Dianereynolds 5 years 30 weeks ago

DRC2, You are again drifting off into la la land. You know damn well the employer cannot selectively pay one union worker more money for doing the same job as a slacker. You are also aware that older drivers can bump off the delivery routes of a younger who has established a relationship with the customer and the customer wishes to retain him/her on that route.

Please stop with the bullshit. I did not say unions are bad, I said they can get in the way of progress and can be eliminated by a smart competitor.

Go back in your stall, I will call you when I need you to come out for a carrot. Your desire to be right all the time is indicitive of one who has spent too much time in their parents basement.

deepspace's picture
deepspace 5 years 30 weeks ago

Gee, Diane, so angry and insulting! "I feel your pain." (And Bubba does too.) All I did was attempt to contest your points and submit reasonable (I thought anyway) counterpoints. I'm sorry that a critique of your statements and another viewpoint is apparently so difficult to handle without losing it and resorting to ad hominem attacks.

It's not that I have a pyscho-mumbo-jumbo "desire to be right all the time" (I don't.); it's that you obviously failed to get past your anger enough to fully comprehend what I was trying to get at -- or, if you did, to mischaracterize it.

Wouldn't the best solution be just to fire an incorrigible "slacker" rather than to seek pay inequality that invariably sows resentment and discord among workers? Agree or disagree, isn't that the meat of this particular issue?

Also, please show where I said or alluded to the non-fact that an employer could "selectively pay one union worker more money for doing the same job as a slacker." I do know "damn well" that is most definitely not true and would never have suggested otherwise. What I don't know though is if you create straw man arguments unconsciously or deliberately.

In fact I clearly stated the opposite case, "One of the main tenets of unionization is that everyone should receive the same pay for the same job..." Nothing stops an employer, however, from increasing the pay scale for job categories -- prescribed duties negotiated with the union -- to attract quality workers, or to have different rates of pay for different jobs.

Yes, the needs of a customer should come first in any business, but should that motto also extend to a customer having a say in the relationship an employer has with an employee?

For example, Wall Mart is a non-union shop; should a customer be able to dictate to management which cashiers they should place at the cash register? ("I prefer the petite redhead lass over the beer-gut guy.") If a driver is not satisfying a customer, then why not conduct an investigation to get to the bottom of it and take appropriate measures, including disciplining, firing, or disqualifying the offending employee from working a job that he or she can't handle?

Also, please reread my post: I never said that you said that unions are bad. Even now, however, that's what your own words are heavily insinuating with this statement, offered up in the same breath as your unfounded protestation: "I said they can get in the way of progress and can be eliminated by a smart competitor." Huh? Whose progress? In other words, a "smart" competitor is non-union? Sooo... unions aren't bad, just dumb. Got it.

Does that also mean you had to sell your business because you weren't smart enough to run it? And can you honestly blame a union for that? In general, unions have played a key role in creating a thriving economy and the largest middle class the world has ever seen -- a salient point backed up by much historical evidence.

2950-10K's picture
2950-10K 5 years 30 weeks ago

deepspace #4: Yep, all great info. Krugman always speaks truth to power...which is why you rarely see him on shows like Meet the Press.

deepspace's picture
deepspace 5 years 30 weeks ago

Him and Greg Palast, who is virtually blackballed by America's "corpse media" (to borrow your phrase).

Hephaestus's picture
Hephaestus 5 years 30 weeks ago

#21 - Right on!

changeX's picture
changeX 5 years 30 weeks ago

Maybe if one were to try some 'out of the box' technique they could try treating the slacker differently whether that means an increase in pay or acting more respectfully to them, treating them as a valued part of the company, finding a key role for them to succeed in, it would be a win win situation and drive the once slacker employee into one of the best overall performers. Somehow those sitting in fat cat positions feel all powerful for no reason, hurting themselves in the end; some having to sell their company who then point fingers and placing blame on anything but themselves.

The December 2016 Presidential report on Artificial Intelligence, Automation, and the Economy states that "Advancements in computer vision and related technologies have made the feasibility of fully automated vehicles (AVs), which do not require a human driver... over roughly the next decade or two... 47 percent of U.S. jobs are at risk of being replaced by AI technologies and computerization." furthermore, "Growing and sustaining the middle class requires strong labor unions. Labor unions help to build the middle class and have been critical in restoring the link between hard work and opportunity so the benefits of economic growth can be more broadly shared. Unions have been at the forefront of establishing the 40-hour work week and the weekend, eliminating child labor laws, and establishing fair benefits and decent wages. Policymakers should explore ways to empower worker voice in the workplace through strengthening protections for organizing and creating new and innovative ways for workers to make their voices heard."

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