Maybe you've noticed that globalization and technological change have made things tough for lower-skilled workers in advanced economies. We've had a big election about that, and the "it really sucks!" candidate won. So what do we do about it now?
Well, a really cool thing would be if low-skilled workers could get a bigger paycheck. The left's idea is to raise the minimum wage, which seems like something from the mind of a comic-book villain. If you wanted to give employers the best incentive to replace marginal workers with robots, you couldn't have come up with a better policy. The minimum wage distorts the labor market in countless ways.
Unfortunately, the right's answer to the problem of stagnating working-class wages is too often a big blank. Sometimes this reflects a blinkered focus on America's most productive class. But sometimes this is part of a laudable view that the best way to help the working class is to ensure the best conditions for the kind of broad economic growth that will improve economic conditions for all. That's why conservatives want to encourage investment, through things like corporate and capital-gains tax cuts and deregulation.
As a conservative, I agree that these are good ideas, but I think the problem of stagnating working-class wages is big enough, and the changes wrought by globalization and automation deep enough, that the working class needs targeted help. In fact, many conservatives have been screaming this from the rooftops for years and were ignored until Trump took the rightly-earned grievances of the GOP's working-class base against the party establishment's deafness and rode them to the nomination.
Thankfully, there's a policy that gives us the best of both worlds. It's called wage subsidies, and it's very simple: The government simply tops off the paychecks of lower-earning Americans. This is a policy with sterling conservative credentials, and a great track record. In fact, we already have a version of it, called the Earned Income Tax Credit, passed under President Reagan. But the EITC is complicated to administer (many families that are eligible don't claim it) and it's become too small.
I point this all out because one of the biggest promoters of wage subsidies in Congress is Sen. Marco Rubio (R-Fla.). The former Republican presidential candidate already introduced a wage subsidy bill in 2014, but this week he has done something cleverer, introducing a wage subsidies bill for Puerto Rico. (Rubio sits on the Congressional Task Force on Economic Growth in Puerto Rico.)
In Puerto Rico, where the median wage is $9.61 per hour, workers earning less than $10 per hour would receive a raise, up to a maximum of $2.50 per hour. And employers could end up paying as low as $5 per hour, thus reducing the cost of hiring new workers.
As it happens, wage subsidies are a particularly good idea for Puerto Rico. For the island's low-wage economy, federal programs such as the minimum wage and welfare are particularly destructive.
But Rubio is also sending a clear political message by introducing this bill now. It's hard to read it as anything but an "Ahem!" to the incoming Trump administration, which claims to want to put workers at the heart of its agenda, but doesn't seem to have any idea on how to go about it.
Wage subsidies are an excellent policy for the working class. They don't just reach the extremely laudable goal of making honest work pay a fair, living wage, they also reduce the cost of hiring to employers, making low-skill work more competitive in a globalized world. And by making work pay more, they also discourage the use of welfare, a big conservative goal.
And it hardly bears mentioning now that working-class Americans form the heart of the Republican coalition, so this is one of those policies that happens to be both a political and a policy winner.
Kudos to Marco Rubio. And please, Trump administration, pay attention.
