If I were king

This is going to be one of those days when I say something wonkish and dry, and you wish I'd go eat eight cheeseburgers.

It wouldn't be particularly helpful for me to come to the conclusion that entry-level wages are too low and then offer no solutions for how to increase them, or who should pay to increase them.  So I'm going to tell you some of my (evolving) policy thoughts. Essentially, what would I do if I were king?

But I'm getting ahead of myself.  First, do I think they're too low?
I'm not going to rehash all the ways that it's difficult to live on this salary even as a single person.  I've already done that and I don't think anybody doubts that it's difficult.  Whether they're too low depends partly on who earns the minimum wage. If it were all middle-class kids doing weekend and summer jobs, and servers who earn additional tips, I think we would be less concerned. It isn't, as I explained earlier.

There are many workers who get stuck on minimum wage, like McDonalds worker Tyree Johnson who has been earning the minimum wage for 20 years.  My concern is that the ideal society should provide full social and economic mobility.  As I opined earlier, a wage that is too low to allow skills training and financial mobility is too low for honest work, and I worry that the current wage is below this critical level.

That sounds wonderful, and is an easy position to take if you don't have to be concerned with details.

So let's put the details in numbered list form!  And my suggested solutions to each point follow in an equivalent numbered list. Obvs.

1.  Poverty Trap. The current minimum wage (and entry-level wages more generally) can condemn workers to a lifetime of unskilled labor. Having no money, getting no sleep and lacking free time makes it very difficult for people to get training or to train themselves.

2. Mixed incentives. Let's assume we all agree that the provision of job training to entry-level workers is crucial to allow economic mobility.  Individual companies have less incentive to provide this than society as a whole. A company can typically hire workers at any skill level it needs.

3.  No one-size-fits-all solution. Different states have different rules about exemptions from minimum wage rules. In California, for example, a restaurant has to pay workers who receive tips at least a minimum wage salary. In other states, a "tip credit" system allows employees to pay less than minimum wage.  A large increase in a mandated minimum wage could have a significant effect on a given industry, such as San Francisco restaurants.

4. Somebody has to pay. Raising wages isn't free. Who is going to pay? Employers? The government?


My recommended solutions:

1. Skills training. Provide financial incentives to companies that provide job skill training to entry-level workers.

2. Tax credits. The incentive should take the form of tax credits linked to training program for low skill workers. This socialises the economic cost.

3. Do not increase the minimum wage.  Instead provide tax credits for companies that pay entry-level workers a living wage.  This has the effect of raising wages but reducing the direct economic impact on corporations. There is no free lunch: the cost will be borne by taxpayers. Additionally, maintain existing exemptions for apprentices, newspaper delivers, seasonal workers and the like.

4. Cut loopholes. The tax credit for training and the corporate salary credit will need to be funded. I haven't done the analysis, but I'd like to see how much revenue can be saved by closing the loophole that allows companies to deduct the costs of moving production overseas (in more politically polarising phraseology: the tax breaks for shipping jobs overseas). This could fill the hole.

These are my current thoughts. Bear in mind that they're still in their infancy. And I would love to hear from you if you have better ideas!