The Earned Income Tax Credit vs The Minimum Wage

I learned something about the minimum wage recently. (Fortunately, not first-hand.) I’m one of those bleeding hearts who believes it should be raised — but who also understands why perhaps it shouldn’t be.

The Clinton administration handled this problem deftly early in its term. For many minimum-wage workers — perhaps even the majority — this is not a household’s primary job, but rather a supplemental job a spouse or teenaged child may have. Not to say the kid may not have it tough slinging fries. But if Mom or Dad earns $34,000 a year — or $80,000 — and junior is slinging fries, how much government assistance is required?

So what the Clinton administration did is push through the Earned Income credit, which many people still don’t even know about. Its premise is simple, and gets more directly at what we liberals are after in the first place: No one who works full-time in America, the thinking goes, should fall below the poverty level.

If an individual or joint tax return shows full-time work resulting in an overall income below the poverty line, not only is no federal income tax due, the Earned Income Credit kicks in and a check will be sent to make up the difference. Or some of it, at least.

This is better than raising the minimum wage, because you only subsidize the people who really need it — those who fall below the poverty line. And the cost of the subsidy is borne by those who can best afford it — those of us who earn enough to pay taxes — whereas a rise in the minimum wage would be borne by everyone, in the form of higher prices.

Of course, the best thing would be to have enough high-paying jobs for everyone, which means having everyone bright enough and sufficiently well-educated to be worth that much in a highly competitive global marketplace. But in the meantime, Clinton’s Earned Income Credit is a sensible solution.

In this election year, some Republicans are looking to do away with or trim the Earned Income Credit. But in a country where the gap between the highest and lowest paid full-time workers is growing obscene, Clinton’s Earned Income Credit is a compassionate but targeted response.

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