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The Case for the Wage Subsidy

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The Case for the Wage Subsidy

National Review Online November 16, 2018
EconomicsEmployment

Americans across the political spectrum should focus on how best to spend government money already slated to go out the door.

Editor’s Note: This article is adapted from Oren Cass’s new book, The Once and Future Worker: A Vision for the Renewal of Work in America.

The controversial subsidies that New York and Washington offered Amazon to attract its “HQ2” are not some novel approach to economic development. Last year, Wisconsin offered a larger package of incentives to entice electronics supplier Foxconn, assembler of iPhones, to build a $10 billion manufacturing facility in Wisconsin. Annual payroll for 13,000 workers would exceed $700 million, and Wisconsin expected the plant to generate annual state and local tax revenue of $181 million and lead to the creation of 20,000 additional jobs. Critics panned the deal as corporate welfare, to which Governor Scott Walker fired back, “That’s fine, but I think they can go suck lemons.”

Such subsidies defy conventional analysis. Are they liberal? Conservative? Free-market? Statist? Pro-business? Pro-worker? Under the strain of a global economy pulling from one side and a social safety net pulling from the other, the meanings of these terms are colliding. If other countries offer such packages to attract manufacturers, does the U.S. government promote a “free market” by refusing to go that route — or by doing the same? The free-market supporter might prefer an undistorted market, but by endorsing free trade with mercantilist economies, he has already allowed the distortions of foreign governments into the United States. For the unemployed Wisconsinite, “smaller government” is poor consolation when a firm chooses to hire workers in some other country because their government provides it a subsidy while his would not.

 

Wisconsin got things half right — paying for jobs makes sense. Work has enormous social value for the individuals who engage in it and for the formation and stability of their families, the opportunities of their children, and the vibrancy of their communities. Ideally, the labor market would settle in a place where productive, family-supporting work was available to all people in all places. But nothing in the theory of economics guarantees such an outcome, so, where the labor market delivers an inadequate result, policymakers should seek to alter the conditions in which that market operates.

Continue reading the entire piece here at National Review Online

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Oren Cass is a senior fellow at the Manhattan Institute and author of the new book “The Once and Future Worker.” Follow him on Twitter here.

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