Wage subsidies

Unlike most people called “conservative,” Reihan Salam actually cares enough about income inequality to propose actual policies to shrink it..

Reihan Salam is often identified as a “conservative,” but for my money anyone thinking hard about how to reduce income inequality is playing for the Blue Team. Wage subsidies – variations on, and expansions of, the Earned Income Tax Credit – seem like an excellent idea.

One question is whether any actual Republican elected official would support such a thing. GOP resistance to extending Medicaid to the working poor, and GOP enthusiasm for cutting Food Stamps, provide discouraging signals.

A second question is whether, or when, libertarians who care about inequality decide to start calling themselves liberals and voting Democratic.

Author: Mark Kleiman


25 thoughts on “Wage subsidies”

  1. I like the idea of wage subsidies and subsidies in general for employers to hire people, but they’re harder to sell than minimum wage hikes. Probably because the wage subsidies take a tax toll, while the minimum wage hikes tend to be more invisible in how they affect people.

  2. As I’ve previously pointed out, libertarianism is all about means, not ends. What keeps libertarians off “the blue team” is not a disagreement about ends, so much as the fact that you’re devoted to means we believe to be ethically prohibited.

    1. I don’t think that Reihan is a libertarian.

      Indeed, he sometimes (as now) hearkens back to a day when conservatives and libertarians disagreed strongly about ends, but adopted similar means. IIRC, his wage subsidy proposal–which does sound “liberal”–is part of a pro-family package that is a bit strange to liberal ears taken as a whole, although most of its components are liberal-friendly.

      1. Reihan is definitely a conservative. Somewhat similar to Ross Douthat– he’s a social conservative who thinks the party should move to the center / left on economics issues.

        Unfortunately for them, that’s not in the cards, as the money people have all the power in the conservative movement and Republican Party.

        1. I think it’s somewhat tendentious to pretend that it’s only the evul “money people” keeping the GOP from moving left on this issue or that, as though there weren’t a significant fraction of the population who simply don’t agree with the leftist take on many things. If anything, the ‘money people’ are trying to push the party left on a variety of issues, such as immigration, and failing because of push back from the base.

          1. Brett, I don’t deny that many people agree with the conservative economic agenda. Many people agree with the conservative social agenda as well.

            The point I was making was different. In all parties at all times, there are calls to move to the center. The issue is always with respect to which issues the movement occurs.

            For instance, in the 1990’s, the Democrats moved to the center on welfare, the death penalty, and trade. They did not move to the center on affirmative action or sex and gender issues. Based on that, you can reasonably conclude that women’s groups had more power in the coalition than unions did.

            Well, in the Republican Party, the moneyed interests have more power, so they are able to prevent Douthat / Salam style conservativism from being the option to reform. Instead, it’s to become more libertarian.

    2. If you end up rejecting every proposed means to a particular end, your commitment to that end isn’t very strong.

      1. If you will only accept one particular means to any end, that means is your actual end. The actual end of ‘liberals’ is more government, I think, and not any of the things they claim they want to achieve by it.


    Perhaps that would depend upon whether, or when, liberals rediscover their roots (hint — it’s got something to do with “Liberty”, for which liberals seem to care not a whit).

    1. Last time I suggested that, I got a lecture on etymology, purporting to demonstrate that, no, “liberal” didn’t have anything to do with “liberty”.

      I think the real problem here, is that we need to remember that the people who call themselves “liberals” today are not the philosophical decedents of the “liberals” of the late 19th, early 20th century. (Who actually did value liberty.) They’re the decedents of their opponents, who adopted the title because it had better PR than “socialist”.

      Rather like what Jack Balkin is attempting by calling himself an “originalist”. If your opposition has a better reputation than you do, start calling yourself by their name. At best, you take over their rep, and they have to find another name, at worst, you drag their reputation down.

      1. This is especially true of Republicans, who, what with the theory of the unitary executive, and their negotiable relationship to the Establishment Clause, seem to be not so much small-r republicans as divine-right monarchists seeking better PR.

    1. I don’t think the tinkering suggested in your linked piece is going to get us there but it was still nice to see it. My gut instinct *would* be to say that what we need is a tax reform that would put income ratios of CEOs to workers back nearish to what they were in the 50s or 60s. Except, I’m not actually clear on where/how the bulk of income currently flows upwards so steeply. Because if Bair is right (I think it was her?) and it’s all because of globalization, then US domestic tinkering won’t work.

      Similarly if it’s really all income from investment, then a worker ratio won’t mean anything. Though, I wonder if there isn’t some way to tax incentivize worker training, b/c I hate this idea that you throw out old people for new people, rather than just train the people you already have.

      And ed reform is good in itself for humanitarian reasons — though *not* the current, corporatist model, which I oppose — but it won’t do diddly for inequality, since I think a lot of the action happens after college, if indeed it’s not just based on your family wealth anyhow (who goes on after high school, that is). Plus, if everyone has a college degree, then they’ll just be worth less, right? I’d think that having more unions would do a whole lot more.

      I’m just thinking out loud. I’m not sure what to do about inequality. And the whole grotesque fear of “redistribution” seems funny to me, but that’s why I’m not a rightie I guess. Maybe Bill Gross should run for something.

      1. I think the basic problem is just the march of automation: Labor gets a declining share of the fruits of production, because it is a declining contribution to production. Eventually labor will constitute a vanishingly small contribution to the production of most items of commerce, and be compensated not at all, simply because it won’t be needed anymore.

        A serious question this, what we do when the means of production don’t require labor, and so those without them have nothing to offer. But it’s not a question to be answered by pretending labor is somehow being cheated of it’s fair share.

        Government policy does exacerbate this somewhat, though. Just like the farmer would rather let the cows eat the grass, and then eat the cows, rather than have to live on grass, the government finds income inequality useful for its own purposes. The less equal incomes are, the less the cost of tax collection, because the income passes through easily monitored choke points.

        The more centralized the economy becomes, the easier it is for government to control. This may come at some cost to the average person, or even to the gross output of the economy, but is this really something to concern the government, when income inequality makes buying votes by taxing the wealthy, and putting the poor on the dole, a more reliable way to hold power?

        Think of the wealthy as a sort of resource curse. Just as easily extractable resources allow a government to finance itself without caring about the overall health of the economy, or the plight of most people, so do easily taxed individuals.

        1. “A serious question this, what we do when the means of production donâ€™t require labor, and so those without them have nothing to offer.”

          I think the answer to this is obvious: we respect their freedom to starve to death.

  4. There is nothing prohibiting state governments from enacting such proposals but the Constitution confers on the federal government no such authority.

    The advocates ought to go to their state capitals to get these policies enacted — if they work, then other states will be imitative. If not, then the country at-large is spared the consequences of a wrong-headed social policy.


  5. We’ve had the EITC since the 70s, and it’s been expanded a time or two. I’m not opposed to doing more of it (or increasing the minimum wage, or both), but neither do I think that’s going to fix things.

    I’m more and more convinced this is all about international trade, and we’ve dug ourselves a ~30 years deep hole.

    1. International trade CREATES more wealth than it destroys. Unfortunately, the vast majority of that extra wealthy goes to the owners and not the workers. Simple redistributive policies would take care of this in a trice, but since the wealthy interests who control our politics don’t want any, we don’t get any. Fixing democracy should take care of this. Getting money out of politics would be a great first step.

  6. If you do wage subsidies right (ha!) you can reduce the marginal cost of hiring addition people, which would be a great thing in the US. For at least the past 40 years, pretty much all policy has been to maximize the marginal cost of new hires (with the exception of punitive “training wage” type stuff and downward pressure on the minimum wage)

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