One of the ideas catching fire among Democrats is a sweeping federal jobs guarantee. It’s an approach that’s as misguided as it is expensive. At an estimated cost of $543 billion, it wouldn’t just target the unemployed, but might also pull tens of millions out of the private sector. It would be far more efficient to target job-creation incentives to these areas, where the labor market is weakest, and to structure the incentives to build job-related skills that would contribute to, rather than detract from, sustained private sector growth.
San Diego Union-Tribune | November 9, 2018 | Joseph J. Sabia
Policymakers must appreciate that the full cost of war includes those paid by our brave men and women after the war ends. A deeper understanding of these costs might lead us to forego some conflicts. And when war is unavoidable, we should do more to aid at-risk veterans reintegrate into the labor force and achieve the independence and dignity associated with earning a living. We are indebted to their service, both on the battlefield and in the war they continue to fight at home.
Wall Street Journal | August 22, 2018 | David Neumark
Minimum wages reduce employment of low-skilled workers, yet political support for minimum-wage increases is so strong that they seem inevitable. What to do? I have developed a proposal for a high-wage tax credit. The HWTC preserves the direct benefits of higher minimum wages—namely, higher wages for low-wage workers—while mitigating the harm. When the government increases the minimum wage, the HWTC would provide a tax credit of 50% of the difference between the prior minimum wage and the new minimum wage for each hour of labor employed. It would phase out at wages above the new minimum wage and as wage inflation erodes the value of the new minimum wage.
Wall Street Journal | April 11, 2018 | David Neumark
President Trump issued an executive order Tuesday encouraging federal agencies to adopt more-stringent work requirements for various welfare programs. What can Congress do to encourage work? Two possibilities are increasing the minimum wage and expanding the earned-income tax credit. My recent research shows that these two policies can have very different, and perhaps unintended, effects on the ability to become economically self-sufficient over time.
Wall Street Journal | September 25, 2017 | David Neumark
Does the minimum wage destroy jobs? The debate over that question often reduces to dueling economic studies. One side cites analyses showing that employers respond to a wage floor by cutting hours or jobs. The other side pulls out studies saying the minimum wage is a free lunch for workers. To really understand what’s going on, you need to get under the hood.
The earned income tax credit stands out as the most effective pro-work, anti-poverty policy the United States has devised. California is among 27 states that offer an additional state EITC on top of the federal credit. However, due to its unusual structure and the new statewide minimum wage increase, its effectiveness will soon be undermined as people work fewer and fewer hours to qualify for large EITC payments. An increase in the minimum wage should be matched by an increase in how much families can earn and still qualify for the Cal EITC. Assembly Bill 225 sets forth just that.
The job losses from a $15 minimum wage mean that it will not alleviate poverty, but will simply redistribute poverty. While poor workers who keep their jobs may be lifted out of poverty by a $15 minimum wage, other near-poor workers who lose their jobs or have their hours cut will be plunged into poverty. The misery just gets shuffled around.
Standard economic theory holds that when the costs of low-wage workers are raised by a higher minimum wage, employers reduce employment — for two reasons. First, employers suddenly find it economical to replace, say, two minimum-wage workers with one slightly more expensive, presumably more experienced or efficient worker. (One $25-an-hour worker may be a better deal than two $15-an-hour workers.) Second, the rising cost of salaries leads employers to raise prices, which leads to lower demand, meaning they have to lower overhead by reducing head count.