David Neumark, director of the Economic Self-Sufficiency Policy Research Institute at the University of California, Irvine, proposes taxpayers directly fund half of any minimum wage increase with a high-wage tax credit (HWTC). He offers three advantages of his proposal in today’s Wall Street Journal:
First, by offsetting part of the cost of higher minimum wages, it would reduce employers’ incentives to substitute away from low-skilled workers in favor of higher-skilled ones and machines….
Second, it would transform the minimum wage into a more sensible redistributive policy….
Third, the HWTC would encourage better decision making about alternative policies to combat inequality….
Others have suggested government wage supplements as a substitute for the entire minimum wage. Newark’s is the first proposal I’ve seen that uses government to supplement the minimum wage.
