Politics, Moderate



Feel-good ideas that need a hardheaded examination

Catherine Rampell on

WASHINGTON -- Extracting more money from evil, exploitative capitalists has become a rallying cry for much of the grass-roots left. In the meantime, though, it's largely ignoring other important policies for lifting Americans out of poverty.

In a recent column, I urged progressives to more seriously grapple with the cumulative effects of policies that make workers more expensive to hire. More than doubling the federal minimum wage to $15, for example, would risk pricing a lot of people out of work. Especially in low-cost-of-living areas such as Mississippi, where half of all jobs pay less than $14.22.

In other words, well-intended, feel-good policies can sometimes backfire, hurting the people you're trying to help.

This humble suggestion generated a lot (like, a lot) of hate mail, along with a good follow-up question: What, then, should progressives who want to help the working poor devote their energy to?

Regarding the minimum wage, there are useful tools available to help set pay according to local costs of living. MIT's Living Wage Calculator is used by some public officials and companies to determine reasonable wage floors. (The average living wage for a single person in Mississippi, for instance, is $10.30.)

More important, lots of the other anti-poverty tools deserve more love from the left -- in particular what might be called "post-tax" policies.

"Pre-tax" policies -- such as the minimum wage, overtime and fringe-benefit requirements -- help increase workers' paychecks, with employers (and sometimes workers themselves) generally footing the bill.

"Post-tax" policies, by contrast, involve redistribution of income and wealth through the tax code and social safety net. Think: the earned-income tax credit (EITC), food stamps, housing vouchers, health insurance subsidies. They are about boosting living standards on the back-end, with the taxpayers paying.

Relative to other rich countries, the United States relies very little on these post-tax tools.

If you look at America's income inequality before taxes and transfers, it's not great -- but it's still about on par with France, Germany and Finland. If you look at income distribution after taking into account tax and transfer payments, we suddenly become the second-most-unequal developed economy in the world, behind Mexico.


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