A Conservative Anti-Poverty Program
Why subsidizing wages is the best way to help lower-income Americans — and their communities.
For most of America, it’s been the economic recovery that wasn’t. The most prosperous fifth of the nation’s ZIP codes account for all job growth since 2007, according to the Economic Innovation Group’s Distressed Communities Index; the rest of the country has experienced a net employment loss. Just five counties account for the entire gain in business establishments; the rest of the country has fewer than before the recession hit.
We need to spread prosperity more widely, but we have little experience doing that well. Government efforts to spur development in a particular place tend to falter, with resources steered by the political process toward boondoggles that do little to buttress a region’s economic vitality. Most support ends up coming from our safety net’s transfer payments, which help to meet people’s immediate needs but perversely weaken the labor market in the process.
There’s a better way, one with bipartisan pedigree, mechanisms for implementation in place and funding available. It’s called a “wage subsidy.”
The principle behind a wage subsidy is simple enough: If society recognizes the value of work and truly wants to promote it, we should be prepared to help pay for it. When you subsidize something, you get more of it. Subsidizing work makes jobs pay more than they otherwise would, attracting people from the sidelines into the labor force. Some of the subsidy’s value accrues to employers, too, who will find it more attractive to create jobs for less-skilled workers. The result is higher employment levels at higher wages, with enormous benefits for not only struggling households, but also struggling communities.
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Oren Cass is a senior fellow at the Manhattan Institute and author of the new book “The Once and Future Worker.” Follow him on Twitter here.
This piece originally appeared in POLITICO