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.'

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