I’d like to be a stickler for the correct use of ‘loophole’, ‘subsidy’ and a few other terms. Today, ‘subsidy’ is available.
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:
- Comparison group where absence of expanded safety net keeps prevailing wage higher for some jobs
- 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.