BOTH the House of Representatives and the Senate have recently passed bills raising the minimum wage. The Senate bill includes tax breaks for businesses, based on the following logic: While a minimum wage increase is popular, the resulting higher labor costs will translate into fewer jobs, more expensive products or both. The solution, the senators concluded, was to subsidize companies that hire disadvantaged workers, in order to reimburse them for these higher wage costs.
Does this reasoning hold up? A look at one of the key pieces of this business tax package — the Work Opportunity Tax Credit, which has been in place since 1996 and would be extended for five years under the proposal — suggests otherwise.
If we don’t think that people with low incomes are getting what they need, let’s not look to ineffective employer tax credits to try to create jobs. And let’s not burden employers with the costs of a higher minimum wage, most of which won’t even go to low-income families. If additional investments are to be effective — and directed toward the intended recipients — they should focus instead on making sure our Earned Income Tax Credit program provides an adequate income supplement for the working poor.
Sunday, March 11, 2007
A New York Times writer actually gets it right about the minimum wage. Excerpts:
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