Minimum Wage Increase vs. EITC Is a False Choice

Opponents of a minimum wage increase argue, among other things, that it’s not an effective anti-poverty tool.

Most minimum wage workers don’t live in households below the poverty line, says Michael Saltsman at the Employment Policies Institute — a think tank funded by the restaurant industry and other low-wage employers.

Besides, minimum wage workers tend to be young, he says. This is true, but as I’ve earlier noted, intended to mislead us into thinking that they’re mostly teenagers who work just to earn a little running around money.

At the same time, Saltsman argues that a minimum wage increase will harm these young workers because they’ll lose those entry-level jobs that put them on the bottom rung of a wage ladder they’d climb if employers could just pay them little enough at the start.

He doesn’t stop there, however, as some who are fond of this meme do.

The better alternative, he says, is an expansion of the Earned Income Tax Credit. He’s far from alone in this view — and joined by some who’ve no vested interest in supporting low-wage business donors.

Washington Post columnist Charles Lane, for example, asserts that the EITC is a “more efficient, better targeted alternative” to a minimum wage increase — more efficient, I infer, because more of the money would flow to poor families.

And if “poverty reduction, income equality and maximal employment can be thought of as public goods,” we should all “purchase” them through a tax-code subsidy.

Like Lane, economist Edward Glaeser believes that we should all pay for measures to alleviate poverty and “make work more attractive for the poor” — through either an enhanced EITC or a brand new federally-funded program.

Blogger Evan Soltas favors the EITC too, noting that economists generally agree on its value as an anti-poverty measure.

We’ve got good evidence for the anti-poverty impacts of the tax reductions and refunds the EITC provides.

According to the Center on Budget and Policy Priorities, an analysis of Census Bureau data shows that the tax credit helped lift 9.4 million people above the poverty threshold in 2011.

So does it follow that we should scrap the proposed minimum wage increase and expand the EITC instead?

The puzzle is why we’re asked to choose. Do we, for example, ask whether we should provide job training or a tax benefit for people who find work as a result?

As CBPP President Robert Greenstein argues, we need both a minimum wage increase and a stronger EITC “to lift working families’ incomes to an adequate level.”

Every expert I’ve read agrees that we can’t, at this point, convert the minimum wage to a genuine living wage without truly risking job losses. As I’ve already indicated, job losses caused by a modest increase are a whole other matter.

On the other hand, making up for low wages through the EITC alone would cost the federal government more than what policymakers “would likely countenance,” Greenstein says.

Understatement. We should recall that Republicans didn’t want to extend the expanded version of the EITC that was originally part of the Recovery Act — even though it reduced a potential deterrent to marriage.

Would they now expand it to give childless workers more than a pittance — enough so that, at the very least, those who are single wouldn’t owe any federal income tax if they earned the minimum wage?

In short, we should be very wary of the notion that some unspecified improvements in the EITC trump the President’s proposed minimum wage increase.

We know that certain businesses interests might prefer it because, as Rortybomb blogger Mike Konczal says, the EITC partially subsidizes employers by enabling them to pay rock-bottom wages.

But the either/or framing is, in many cases, just a way to seem concerned about working people in poverty while helping to ensure they remain as poor as they are.

In others it’s a failure to grasp — or perhaps care about — the real-world political consequences.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s