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In case that doesn't make sense here is a more succinct explanlation:
"But if the minimum wage increase is a tax on low-wage employers, then the tax credit is a pretty hefty subsidy. By increasing the supply of low-wage labor, some of its benefits accrue to employers in the form of lower pretax wage offers. Rothstein finds this subsidy to amount to 27 cents of each EITC dollar, lowering pretax wages of both EITC recipients and non-recipients (with the latter, of course, getting no offset from the credit)."
Oh, it makes sense. But it doesn't answer the question. The concept of "market wages" impounds all factors in the market, including the EITC. So the question again is, what companies are paying less than the market wage?
isn't that the pot calling the kettle black. The market rate isn't the market rate because of the safety net, people are able to work for less than the market rate because they can survive with government entitlements, which btw is the whole point of the thread. The only way you would have a true market rate for low wage workers is if they abolish entitlements for anyone who is employed, eventually people couldn't afford to work for those artificially lowered rates and employers would be forced to pay more, the issue is how do we get there humanely that transition would be awful for lots of families.
And another one joins the "don't understand" club.
Minimum wage creates a situation where no-skill workers are paid MORE than the market wage, not less.
Because as he explained taxpayers are subsidizing employers. Why not make companies who pay below poverty level wages to anyone over 21 repay the government for all of the SNAP benefits, medicaid, and EITC that those employees receive. If those benefits weren't offered no one except 16 year old kids would take those jobs.
I have yet to hear any 'free market' folks railing about "why do we subsidize employees with welfare benefits when all it does is allow companies to pay less than market rate wages" That is a gross distortion of the way a 'free market' works. In a less schizoid political environment maybe that is a discussion we could have.
Nope, not happening. There is NO subsidy from taxpayers to employers who pay low wages.
Oh, it makes sense. But it doesn't answer the question. The concept of "market wages" impounds all factors in the market, including the EITC. So the question again is, what companies are paying less than the market wage?
To answer that, you have to formulate a hypothesis on whether the current minimum wage without government entitlements is a 'market rate' and that is difficult. My gut feeling is that it's less than a market rate, but there is not a good deal of data to prove it either way. One study I read claimed that the pool of available workers for minimum wage jobs is increased by 8% due to just EITC. It's further complicated because there are workers who don't even know they are entitled to any government benefits so their behavior would be unaffected, and there are others who are very rational and probably do the math on available benefits before they accept a job.
But more significantly why are we handing out up to 6k a year to low income wage earners? Personally I think it has more to do with placating a work force which might otherwise create 'problems' for employers such as demonstrating or starting a large unionization movement than it does with any altruistic intent. I would love to be a fly on the wall and find out which lobbyists are pushing for increases in EITC.
The only solution I can see is to transition low wage workers off of entitlement programs slowly, so as to do the least possible harm to the individuals involved, and at the same time start watching the supply of labor and the effect on wages as those entitlements end.
So, after all that I have to admit I can't honestly answer your question..and probably would not be able to unless I saw the effect of ending the entitlements, something that I am quite sure will not happen during my lifetime.
Nope, not happening. There is NO subsidy from taxpayers to employers who pay low wages.
according to this study taxpayers do subsidize low wages, and that most spending on public assistance goes not to the unemployed but to members of working families.
Quote:
Nearly three-quarters of the people helped by programs geared to the poor are members of a family headed by a worker, according to a new study by the Berkeley Center for Labor Research and Education at the University of California. As a result, taxpayers are providing not only support to the poor but also, in effect, a huge subsidy for employers of low-wage workers, from giants like McDonald’s and Walmart to mom-and-pop businesses. This is a hidden cost of low-wage work,” said Ken Jacobs, chairman of the Berkeley center and a co-author of the report, which is scheduled for release on Monday.
Taxpayers pick up the difference, he said, between what employers pay and what is required to cover what most Americans consider essential living costs. The report estimates that state and federal governments spend more than $150 billion a year on four key antipoverty programs used by working families: Medicaid, Temporary Assistance for Needy Families, food stamps and the earned-income tax credit, which is specifically aimed at working families.http://www.nytimes.com/2015/04/13/bu...yway.html?_r=0
and it is useful to consider the downward push on wages by Walmart, if they reduce wages for other local businesses, and the taxpayer has to pick up the tab for that by spending more on the worker's government benefits, then I think it's fair to say that we are subsidizing Walmart: http://laborcenter.berkeley.edu/pdf/...ard_push07.pdf
And another one joins the "don't understand" club.
Minimum wage creates a situation where no-skill workers are paid MORE than the market wage, not less.
Unless the meaning of the word "understand" has changed, pretty sure I got a good grasp. What part of the safety net subsidizing wages eludes you, or are sticking to your beliefs because they are your beliefs.
according to this study taxpayers do subsidize low wages, and that most spending on public assistance goes not to the unemployed but to members of working families.
Quote:
Nearly three-quarters of the people helped by programs geared to the poor are members of a family headed by a worker, according to a new study by the Berkeley Center for Labor Research and Education at the University of California. As a result, taxpayers are providing not only support to the poor but also, in effect, a huge subsidy for employers of low-wage workers, from giants like McDonald’s and Walmart to mom-and-pop businesses. This is a hidden cost of low-wage work,” said Ken Jacobs, chairman of the Berkeley center and a co-author of the report, which is scheduled for release on Monday.
Taxpayers pick up the difference, he said, between what employers pay and what is required to cover what most Americans consider essential living costs. The report estimates that state and federal governments spend more than $150 billion a year on four key antipoverty programs used by working families: Medicaid, Temporary Assistance for Needy Families, food stamps and the earned-income tax credit, which is specifically aimed at working families.http://www.nytimes.com/2015/04/13/bu...yway.html?_r=0
and it is useful to consider the downward push on wages by Walmart, if they reduce wages for other local businesses, and the taxpayer has to pick up the tab for that by spending more on the worker's government benefits, then I think it's fair to say that we are subsidizing Walmart: http://laborcenter.berkeley.edu/pdf/...ard_push07.pdf
The part in purple is happening, but that doesn't result in the part in green.
I've explained this before in other threads, but it needs to be repeated.
Society has determined that there needs to be a minimum level safety net for people. For the sake of discussion, let's assume it is $30,000/year. Remember, this is societally determined, and it has nothing to do with the market value of no-skill labor.
When Joe no-skill chooses to not work, the government will provide him with that $30,000/year safety net. Paid for 100% by the taxpayers.
Now let's change the situation a bit. Joe takes a job that pays minimum wage. For the sake of discussion, let's assume that this translates to $15,000/year.
In Joe's location, the minimum wage is higher than the market value of no-skill labor. Absent the minimum wage, Joe would be earning less than $15,000/year. However, he enjoys the benefit of the government mandated price floor, and is paid more than he would be otherwise.
As a result of Joe working and earning $15,000 year, society says, "Oh, poor Joe! He is earning less than our determined safety net level of $30,000/year. We have to give him $15,000 to make up the difference."
So Joe enjoys the taxpayers largesse with $15,000 of free money from the taxpayers, as well as the $15,000 that he earns from his no-skill job.
Now, if you've followed this simple example this far, it should be easy for you to understand where this will lead.
1) Joe is paid MORE than the market value of his labor, due to the minimum wage law. Now pay close attention here, because this is important. It is impossible for the taxpayer to subsidize the cost of Joe's labor, because he already earning MORE than the market value of his labor. The additional funds provided to Joe by the taxpayers doesn't subsidize Wal-Mart at all. It simply provides Joe with the balance of the safety net that society has determined is owed to Joe.
2) Remember that $30,000/year safety net that society has determined must be there? If Joe doesn't work at all, the taxpayers fund 100% of that safety net. Now that Joe is working full time at minimum wage, the taxpayers only fund 50% of the safety net. By providing a job to Joe, Wal-Mart SAVES the taxpayers $15,000/year.
The silly talking point of taxpayers subsidizing the labor costs of employers that pay minimum wage really needs to stop, as it is just not true.
Unless the meaning of the word "understand" has changed, pretty sure I got a good grasp. What part of the safety net subsidizing wages eludes you, or are sticking to your beliefs because they are your beliefs.
Check out the prior post.
It's pretty clear that your "grasp" is tenuous at best.
YES they play with Jack n Jill's MONEY!! I understand retirement- I worked for a HUGE insurance broker that was global- there is so much money wasted and kept at the top --all could retire and buy a house in Fl if they regulated just a tad better just a TAD--most Americans being played by the people you think are there for you-
Yes, they are being played. I've not seen one proposal from any politician on either side that will reign in the players without harming Jack's and Jill's retirement funding. Therein lies the dilemma...
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