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July 09, 2004

Framing the minimum wage debate

Steven E. Landsburg's Wages of Sin frames the minimum wage debate as follows.

1) The rationale for raising the minimum wage is to transfer wealth to the lowest paid workers.
2) All taxpayers share the burden of wealth transfers funded out of general revenue, such as the Earned Income Tax Credit (EITC).
3) Raising the minimum wage would be a wealth transfer funded exclusively by the employers of minimum wage workers, and that's not fair.

Therefore, Landsburg argues, if we want to transfer wealth, we should expand programs like the EITC which are funded out of general revenue, instead of singling out employers for an insidious tax.

Here's an alternative way to frame the issue:

1) Business owners profit by exploiting minimum wage employees.
2) Wealth transfers are necessary because the current minimum wage can't provide the necessities of life. (Landsburg tacitly accepts this premise.)
3) The bottom line is the same whether the government gives up revenue through a tax credit, or gets the revenue only to pay it back in wealth transfers
4) By funding wealth transfers from general revenue, tax payers subsidize business owners who refuse to pay their employees a living wage.

Therefore, we should insist that business owners pay the real cost of labour, instead of making the lowest-paid employees a burden on society.

One argument for public subsidy of cheap labour is that raising minimum wage would cause unemployment. But Landsburg devotes the first half of his article to debunking this argument.

I'm not arguing against the EITC. Here, Brad DeLong offers a number of compelling arguments for raising the minimum wage and expanding the EITC.

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Comments

Every one knows that employment is abuse any way. And no matter what philosophy you take, right left, extremist ect. its all bullshit and it will all fail. Geez all of crap-merica is based on stealing any way (native peoples) 2000 people die in the world trad...I mean world greed center and it is the worst thing that ever happened to man, but 90 million dead Indians..... Oh well minimum what????

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