Bastardized language: subsidy

I’d like to be a stickler for the correct use of ‘loophole’, ‘subsidy’ and a few other terms.   Today, ‘subsidy’ is available.

http://www.minnpost.com/politics-policy/2014/03/how-taxpayers-subsidize-low-wage-workers

The safety net does not ‘subsidize’ the minimum wage.  They aren’t related.  The safety net is the safety net and the minimum wage is the minimum wage.

The safety net does not create an environment that depresses prevailing wages for certain jobs to the minimum wage such that Walmarts and McD can exploit this segment of the labor market by lowballing non-skilled applicants so that when they take these jobs local social services are over consumed by comparison.  Is there really a study that shows it?  A study with:

  1. Comparison group where absence of expanded safety net keeps prevailing wage higher for some jobs
  2. Comparison group where absence of expanded safety net and resulting high prevailing wage for unskilled workers keeps social service costs lower for localities

No, and no.  1 doesn’t exist.  I’ll assert there’s not a labor market out there where this is true.   And 2 can’t exist without 1.  The best assumption is that presence of low wage jobs replaces spending on the non-working poor with spending on the working poor, which is cheaper per recipient.

But cut to the larger premise here.  To use ‘subsidy’ the way Dornfeld does is to assume that employers are obligated to pay a wage that sustains employees without them using social services, ever.  And that if they don’t pay this wage, those employers are shirking, exploiting, and being subsidized.

Whether we wish minimum wages are higher or not, that’s not true.  It’s not a valid premise, but one that is apparently floated with superficial credibility by including the politically charged word ‘subsidy’.

You know who taxpayers actually do subsidize?  Poor people in general, particularly those who don’t work.  Poor people’s incomes are subsidized by transfer payments from middle class and upper class earners.    What’s the difference?

It used to be a public policy goal that the safety net would be elastic enough to not discourage poor people from taking entry level jobs and working.   This would be an apparent success, but also a reason to move the goalposts.

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2 thoughts on “Bastardized language: subsidy

  1. pm1956

    Hmmmm. I think that you are on to something.

    I acknowledge that I feel uncomfortable in that full time workers at Walmart (one example) need foodstamps to get by, and this seems like we are subsidizing Walmart…but what are the alternatives? Should we not be subsidizing them? Should they go hungry?

    The obvious retort is that they should be paid a “living wage”. But if Walmart is in compliance with all relevant minimum wage laws, and is paying market wages…is Walmart doing anything wrong by telling its workers who qualify for food stamps to get foodstamps? Of course not! Just as Walmart is not doing anything wrong by helping them qualify for ACA health care subsidies or Medicare/Medicaid, TANF, etc.

    Yes, we are subsidising poor people, and there is nothing wrong with doing that. That is what a social safety net is all about. And it is a good thing that people work, generally, rather than do nothing. Ours is a society that creates images of self worth based on employment, and employment generally means a better self image, and that is generally good.

    Further, many of those safety net programs are specifically designed so that there is not a hard and fast line between being subsidised and working–there is supposed to be a gray area between being totally financially dependent on government programs and totally financially independent because of a wage/job. The transition should be gradual, not abrupt.

    I think that the real thrust of the article is an animus towards Walmart and similar companies. Really, the problem here is the economic hangover from the financial crash (as manifested in the job market), and not the behavior of Walmart. The solution is economic recovery and higher employment.

    Reply
    1. Erik Petersen Post author

      This is a high water mark, I am going to do a happy dance.

      Here here. I am not entirely recalcitrant. But I think there’s an insincere argument here that amounts to a lie, and I don’t like that.

      Reply

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