Re: Short response to Mr. Sastri

[Charu datt <charu@ix.netcom.com>]

Manoj Padki wrote:

> The point is that you are making individual business owners (often small
&
> marginal businesses) pay someone more than the employee "earns". This has
> the effect of pushing marginal businesses over the edge, which is not a
> good
> policy. IMO the best way of achieving your goal is the Earned Income Tax
> Credit, where people making under a certain limit pay a "negative" income
> tax (i.e. get money back). This has the effect of spreading the cost of
> your
> "social" goal over the whole of society (where it properly belongs).




If a business can't make enough of a profit to
pay a living wage to the workers,
it has to be subsidised by external inputs. If we choose
to cut wages below subsistence, the subsidy is coming
from the wage earner- (s)he is putting in more than (s)he
gets back. An device such as the Earned Income Tax
Credit, in this context, amounts to a subsidizing the
business by society as a whole- the busineness takes work
paying less than what it costs to sustain the worker
and the balance of sustenance is paid by society.

There may frequently be good reasons for society
to subsidize certain [business] activities, but let's be
clear about what is happening.

The only instance, I can think of, that justifies paying less
than it costs to sustain living costs is
if there is some kind of supplemental payoff. For example,
if pay is supplemented by stock options or profit-sharing.
A more commonplace example [in the US] is restaurant
wait-persons: they are paid below the legal minimum wage
on the expectation that their wages are supplemented by tips.

-Charu


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