Bernie Sanders, the most popular politician in America, recently announced a strategy for reducing inequality by going after employers. His Stop BEZOS bill would make employers pay the cost of government subsidies received by their employees with low incomes such as SNAP, Medicaid, and others. “Corporate welfare,” according to Sanders, does little more than publicly subsidize profits for companies like Amazon that can afford to pay their workers more.
Despite being the most popular politician in America, Sanders’ colleagues don’t always treat him that way. His BEZOS proposal was immediately criticized from all sides. Even liberals argued that this idea would discourage employers from hiring people on public assistance. Perhaps another idea worthy of consideration is reforming another form of corporate welfare, the Earned Income Tax Credit.
The Earned Income Tax Credit (EITC) is a textbook example of a welfare program that “encourages work.” It’s literally in my textbook. The old neoclassical economic (and not-so-subtly racist and classist) logic goes like this: giving people cash with no work requirement breeds laziness and dependence because there’s no incentive to work. These people, molded in our mind’s eye by Reagan’s “welfare queens,” mooch off of our hard work because we let them. The EITC is different because it has a work requirement. Recipients of the EITC get the assistance they need, but only if they work. Two problems solved – helping the poor and incentivizing them to work. It’s no surprise then, that the EITC is a popular program across the broad range of centrists sitting in Congress.
However, the EITC punishes people who can’t work, or can’t find work. It publicly subsidizes wages for low income workers, instead of simply raising the minimum wage for employers, and acts to lower wages. Additionally, one dollar spent on the EITC only raises wages by about 70 cents, with the remainder scooped up by employers. As Joshua Mound suggests in this article, reforming the EITC might not be an easy strategy, but would more directly address corporations whose employees rely on welfare programs. I would also say that minimum wage increases could also be effective.