Arnold Kling  

Working Poor

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Complex System, Poorly Enforce... Flynn Effect...

The plight of low-skilled has received notice in several recent books. See Jane Galt's post, for example. Now, Russ Roberts weighs in.


Waiters and waitresses, a janitor to push the improved vacuum cleaner or power waxer, the cleaning service that comes once a week. That may be true, but there's nothing inherently demeaning about those jobs. What's demeaning in some dimension, or at least sad, is the idea of a 50 year-old mother or father of four doing that job and being barely able to put food on the table for the two kids. What's sad is doing a job like that for 60 years with no change in what you do or what you get paid. And that phenomenon will disappear as we get more productive due to better education.

...here and now, the problem of what to do about the current 50 year-old in a menial job is a tougher question. It's usually too late for better education. Raising the minimum wage could end up putting the person out of work altogether, a fate even worse than a low-paying job. Would a poor person today find comfort in the fact that his or her children are likely to have a much better life as long as they stay in a decent school?


For Discussion. Some economists have recommended that the government provide wage supplements for low-skilled workers. What makes this a better idea than raising the minimum wage?


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CATEGORIES: Income Distribution



COMMENTS (8 to date)
William Woodruff writes:

Have we not tried this remedy already ? Were the results not disasterous enough ? What is the saying about those who do no not learn history and being doomed to repeat it ?

I advocate instead truly opening American farmers to global competition, which would increase the purchasing power of the less fortunate members of our society.

Ronnie Horesh writes:

Another option would be for government to spend some cash on safer streets, public service broadcasting, efficient health care and other public goods, so that people on low wages and their kids can live a civilised, decent life.

Robert writes:

A 50 year old working poor person needs supplements to support a family. So the issue can be transformed into one of how much we want to support the family. Germany pays citizens kindergelt to offset the cost of having children. If we want children to be raised by hard-working parents, then we can reward them by subsidizing their childrearing costs. This gets us out of the business of offering wage subsidies for kids on their way up via an inceased minimum wage. Though I am in favor of a nominal increase. $206/week does not go far.

Lawrance George Lux writes:

Wage supplements are better than Minimum Wage increases, but does not consider the stratification of Wages. One-Quarter of Labor has the ability to demand Wage increases, while the rest cannot without threatened Job loss. We need to establish natural market ties to bind the two Wage scales together. lgl

Austin writes:

Wage supplements are basically paying people to stay in bad jobs. It reduces the incentive for them to try to get ahead.

Shouldn't the goal to be to create incentive for people to get better jobs? I've never understood why we should create incentives for people to get jobs, no matter how bad they are.

It's like in Oregon. To get people to have jobs, they require all gas stations to have someone to fill your tank for you. Sure, it gives employment to thousands of people. However, those thousands of people could be working some where. Some of them might be attendents at nursing homes, or other area where they could actually help society.

Sometimes these government solutions just make it worse for everyone.

shamus writes:

The first $15,000 in wage income should not be subject to FICA tax. Extending the wage cap for FICA could pay for this change. Lowering the cost of labor to employers would encourage them to hire more workers. Cuts in wage taxes would be more effective than wage supplements because no government administration would be required.

Yenko writes:

Government wage supplements are no more than welfare handouts, and they would most likely have the same effects...namely fostering dependence on the supplements and increasing the taxes of those who must pay for them. After all, the money has to come from somewhere. Here's a novel idea: Let's get rid of income taxes altogether, thereby allowing everyone to keep the money they earn.

Boonton writes:
Have we not tried this remedy already ? Were the results not disasterous enough ? What is the saying about those who do no not learn history and being doomed to repeat it ?

No we never tried it. Nixon proposed it once in the form of a negative income tax but it never went anywhere. It does exist in partial form today as the Earned Income Tax Credit. That has been widely praised for pulling people out of poverty while at the same time keeping the incentives towards people getting jobs and working.

In the future you should not chide people for forgetting their history if you are going to do it yourself! :)

Wage supplements are basically paying people to stay in bad jobs. It reduces the incentive for them to try to get ahead.

Shouldn't the goal to be to create incentive for people to get better jobs? I've never understood why we should create incentives for people to get jobs, no matter how bad they are.

People often say it is easier to get a job if you already have one than if you're out of work and its true to a degree. Getting people into the workforce is a good first step. How much incentive do people need to find a better job? Isn't a better job itself an incentive????

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