Tuesday, December 26, 2006
Greg Mankiw describes an economic policy to help poor workers:
1. A wage subsidy for unskilled workers, paid for by
2. A tax on employers who hire unskilled workers.
Now, if you think like an economist, you might wonder about the logic of part 2 of this proposal. You might say, "A tax on the hiring of unskilled workers would discourage their employment, offsetting some of the benefits they would get from the wage subsidy. It would be better to finance the wage subsidy with a more general tax, rather than with a tax targeted specifically on employers of unskilled workers."
Of course, that economic policy? The minimum wage.