If we must target wages for poverty reduction, wage subsidies > minimum wages

If we agree that poverty and welfare reduction are valuable goals that government should enact and that we want to supplement wages as a result, then this quick four minute video provides a simple explanation as to why wage subsidies are drastically superior to minimum wage policies. I would add that much of the muddle that we make of poverty reduction – whether it be food purchasing programs or healthcare financing, and all of those programs’ attendant bureaucracy, could be made much more efficient and effective through a wage subsidy. Plus, we could actually target poverty directly while supporting jobs and in turn reducing the rest of the inefficient welfare state.

Of course, those in government always prefer the minimum wage – it gives voters the impression that they did something to reduce poverty while shoving the consequences off of the government liabilities and accounting books, the problem being that it is less effective, drives down employment, and/or increases prices to consumers. In general, Marginal Revolution’s economics videos are always brief but insightful.

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