Monday, July 24, 2017

Pushing the String

The Democrats have awakened to the fact that they lost the last two elections and want to do something about it by proposing a plan for the economy that would appeal to voters. From what I've heard so far I'm not terribly impressed. There are some good ideas (infrastructure spending), some not quite terrible ideas (raising the minimum wage), but I've yet to see any really good ideas.

I think that the idea that workers should make at least $15/hr is not a bad one, but the minimum wage proposal also has a major disadvantage - it increases the cost of employment. That's unlikely to be a good deal in the age of robotics. Here is an alternative - have the government directly subsidize low wages. For example: If an employer pays $10/hr, the subsidy would be $5/hr. For 8$/hr, the subsidy only $3/hr, to discourage lowballing.

Another idea. Replace employment taxes with a VAT or income tax. Not only do they increase the costs of hiring people but they are regressive and present a large paperwork burden.

Finally, institute Medicare for all. Health insurance is a major factor in employment decisions, making employers less likely to hire and potential employees less likely to take jobs without health care benefits.

Most of these ideas would cost money, taxpayer money. I don't have a problem with that. I think that many of them would also improve productivity.