Some basic economics: If you want less of something, tax it. If you want more of something, subsidize it.
Many are concerned about falling employment rates, particularly among men. Applying the logic of economic theory to this concern suggests subsidizing employment for this group.
https://twitter.com/MichaelRStrain/status/1047903032007122944
The federal government (and many state governments) already offer employment subsidies, primarily to low-income, working parents with kids in the home. For single men who don’t have dependent children in the home (as is often the case) the maximum federal subsidy is around $500 — not enough to have much of an effect on their decision whether to work.
MDRC, a research organization that runs large-scale demonstrations to evaluate policies, partnered with New York City to see if a bonus of up to $2,000 given at tax time to low-income working adults without dependent children would reduce their poverty rate and increase their rate of employment.
In theory, subsidizing employment should increase it. Does this theory work in practice?
Severe poverty went down among participants, and child-support payments increased. Discouragingly, among men overall, employment did not increase. But among men who had been incarcerated or who were noncustodial parents ordered to pay child support, this demonstration project increased employment rates by a substantial 10 percent in the final year of the program.
MDRC’s test suggests that earnings subsidies offer a path for men who face particularly strong barriers to employment to get jobs, creating a ladder of opportunity for them.
I discuss this in more depth in my latest Bloomberg column.
And there are broader implications:
As technology marches forward, workers with more skills — who can use technology to be more productive — will see their wages continue to increase, and lower-skilled workers will see their relative wages stagnate or fall. Low wages keep lesser-skilled individuals out of the labor market. The trends of the past several decades could continue, and even accelerate.
Americans will be under stronger pressure to decide on principle whether employment in itself is a good thing – and if so, how vigorously public policy should encourage it. Are we comfortable with the federal government providing, say, half of the financial rewards from working? Or more? What if that is what’s necessary to attract a large share of people without a college degree into the workforce?
Check out my column here. Whether you agree, your comments are very welcome.