Minimum Wage vs Earned Income Tax Credit.

2007-08-08T23:38:00.001-07:00

There has been a lot of discussion recently about the Minimum Wage in the U.S.
Few would argue that it is easy to support yourself, let alone a family at $5.85/hr. The problem with a lot of the debate is people on both sides have the same goal: reducing poverty. Raising the minimum wage would help a lot of people, but it can just as easily hurt them. Essentially, here is the debate:

Arguments for the minum wage increase

Workers need a minimum amount of income from their work to survive and pay the bills.
Businesses have less power to abuse the labor market.
It forces businesses to share some of the vast wealth with the people that help produce it.

In summary, the minimum wage isn't enough to live on.

Arguments against a minimum wage increase

There is strong evidence that minimum wage dramatically increases unemployment among teenagers, women and minorities.
Employees demand more value for more wages so they will be less likely to hire low skilled, unexperienced workers.
Encourages companies to send more jobs overseas where there is cheaper labor.
The minimum wage can drive some small companies out of business.
Most of the people earning minimum wage aren't the primary breadwinner of a family, they are youth, students and spouses supplementing family income.
Only around 1% of those in the workforce earn the minimum wage, so raising it will only help a small percentage of people.

In other words, the reason people oppose the minimum wage isn't because they like it when people are poor, it's because they believe there are more effective ways of addressing poverty. In fact, minimum wage increases can hurt low skilled, low pay workers by creating more unemployment and a more competitive job market.

How can we help the poor without raising the minimum wage?
Expand the earned income tax credit. The basic idea is Uncle Sam gives back a percentage of federal taxes and withholding to the poor. Poor families are given credit for every child, but single and childless couples under the poverty threshold are also eligible. This raises their income without putting the burden on businesses. The main problem is up to 25% of those eligible for it don't know about it so they don't claim it.

What should be done?

Increase the percentage of refundable income for EITC
Add an EITC questionaire to the 1040 and EZ to automatically determine eligibility instead of making people claim it.

"The EITC is the largest poverty reduction program in the United States. Almost 21 million American families received more than $36 billion in refunds through the EITC in 2004. These EITC dollars had a significant impact on the lives and communities of the nation’s lowest paid working people, lifting more than 5 million of these families above the federal poverty line.[citation needed]

Further, economists suggest that every increased dollar received by low and moderate-income families has a multiplier effect of between 1.5 to 2 times the original amount, in terms of its impact on the local economy and how much money is spent in and around the communities where these families live. Using the conservative estimate that for every $1 in EITC funds received, $1.50 ends up being spent locally, would mean that low income neighborhoods are effectively gaining as much as $18.4 billion."
see http://en.wikipedia.org/wiki/Earned_income_tax_credit#Structure

What else does our nation already do about poverty?
The 2006 federal budet was 2.9 trillion dollars.
Of that around 55% (+1.6 trillion) was spend in social programs whose goals are largely wealth redistribution.

Specificly:
608 Billion - Social Security
386 bilion - Medicare
325 billion - income security (dept labor)
202 billion - Medicaid
~36 billion - Earned Income Tax Credit
35.201 billion - housing and urban development
12.329 billion - Administration for children and families
5.638 billion - Food and Nutritions Service (WIC/food stamps)
2.561 billion - Unemployment insurance
4.933 billion - Carrer Advancement Accounts
.693 billion - Maternal and Child Health (DHS)

Granted, not all of these programs benefit only the poor, but at more than half our budget, clearly a lot of money is going to help the poor and disadvantaged. Raising the minimum wage could only help a few people, and would just as likely hurt them through job loss. Raising the EITC is a better approach because it targets low-income families without hurting businesses.

References

Neutral
http://www.balancedpolitics.org/minimum_wage.htm

Against Minimum Wage
http://www.house.gov/jec/cost-gov/regs/minimum/against/against.htm
http://www.heritage.org/Research/Economy/wm1186.cfm
http://www.cato.org/pubs/regulation/reg18n1c.html

For Minimum Wage
http://www.epinet.org/content.cfm/issueguides_minwage_minwagefacts

Federal Budget
Federal Budget http://www.thebudgetgraph.com/poster/

Earned Income Tax Credit
http://www.irs.gov/individuals/article/0,,id=96406,00.html
http://en.wikipedia.org/wiki/Earned_income_tax_credit#Structure

Rant Stupid short blog posts

2007-07-23T04:00:00.001-07:00

A lot of advice saying that articles for the web need to be really short.
That advice sucks.
I don't think I'm alone when I summarily "close tab" on any article under 500 words.
If your article has anything of value to say it's going to take a lot longer to get it across.
Yes, it's not a good idea to have a 2000 word blob of text, but there's where white space, headers and lists come in.
Stop spamming social news with short articles that don't even have a point.

Green Capitalism > Carbon offsets.

2007-04-26T10:17:00.000-07:00

The best environmentalism is the type that earns you money.
Al Gore and a lot of well-meaning individuals encourage the use of carbon offsets.
However, carbon offsets are ineffective because 1) they have no oversight 2) they do not reduce emissions and 3) they fail to leverage the power of capital.

A great example of green capitalism is the Danish Island of Samso.
The island is carbon negative and they make money doing it.
They used private investments with government subsidies to build off-short and land windmilll farms. They export 75% of their electricity.

Where does Samso go right where offsets and the U.S. go wrong?
1) When you spend an offset, the money is gone. You get continuous returns on an environmental investment which you can spend for more investments
2) Government subsidies are targeted toward effective environmental technologies. For example, corn based ethanol takes so much energy to produce, you only net 25% energy for each crop. Once a windmill turbine is built, it requires no energy to operate, so everything it produces is all net energy.
3) They turned environmentalism into a competition. People love to win, and once you've got momentum, new ideas are continually flowing.
4) They pooled public resources to make expensive technologies affordable to common people. For example, solar panels are too expensive for a lot of people to have for their home, so they use them for their district heating plants.

What should the U.S. do differently?
1) Immediately end all subsidies for corn-based ethanol. It is a waste of capital, will never be efficient and is a red herring.
2) Target subisidies/loans for building green power infrastructure which is 100% renewable (solar, wind, tidal).
3) Take all the money being used for carbon offset and invest it. Don't just use green power, own it.

Source

whyareyoureadingablog

Minimum Wage vs Earned Income Tax Credit.

*Rant* Stupid short blog posts

Green Capitalism > Carbon offsets.

Rant Stupid short blog posts