How to End Low Wage Work—Forever

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About This Episode

How do you solve a problem like the disconnect between “wages employers are willing to pay” and “wages employees need to survive”? If you’re my guest this week, the answer is: a wage subsidy. 

Today on the show, I speak with Ben Glasner, an economist with a PhD in public policy and management in search of answers for how to build a fairer economy, about the benefit proposal that he says has two very critical things most proposals of this nature lack: efficient targeting and bipartisan support. We discuss:

• The significance of the fact that 21 million Americans earn less than $16 per hour, and two-thirds of those workers are women
• Why other attempts at incentivizing job creation are expensive ($100,000–$200,000 per job) and poorly targeted
• The target wage and proposed funding structure that Ben and his coauthor believe will minimize or eliminate fraud and make small business hiring more competitive

This episode was produced by Katie Gatti Tassin. Audio engineering by Nick Torres. Devin Emery is the President of Morning Brew.

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Mentioned in this Episode

• “How to End Low Wage Work Forever” by Ben Glasner and Adam Ozimek

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Transcript

Katie: I saw this article—titled “How to End Low Wage Work Forever”—shared in Nick Maggiulli’s newsletter, Of Dollars and Data, and it had that classic, meaty long-read energy that I always set aside to digest on a rainy day. 

The problem of low wage work in the United States is a frustrating one, in part because it seems so easily solvable—just raise the wages. I wanted to talk to an economist—the type of person who, frustratingly, evades the easy answers that I, a podcaster, love—about how they think elegant policy design with bipartisan support could solve this nationwide challenge that impacts tens of millions of Americans.

Today’s guest is Ben Glasner, an economist with the Economic Innovation Group. He got a PhD in public policy and management in search of answers for how we could build a fairer and more inclusive economy, which led him to a post-doc at Columbia’s Center on Poverty and Social Policy. 

Over the weekend as I was listening back to the first cut of this interview, I stumbled across an analysis from Michael Green, the Chief Strategist at Simplify Asset Management, that felt perfectly aligned with this subject—I shared it in today’s newsletter; subscribe if you aren’t already, because I always put the best stuff I find in there. It was about how the parameters used for calculating the poverty line itself, originally based on the cost of food spending in 1963, explains why even supposedly “middle class” incomes in the US don’t feel sufficient for the costs of participating in a modern economy. To spoil the ending, Green believes if we adjusted the poverty rate calculation developed in 1963 to reflect the way the average cost of living has changed, a “sufficiency income” would be over $100,000 for a family of four—far above the median wage. That analysis is in the back of my head as I think about the target wages we discussed in this episode, which are based off of—you guessed it—current measures for poverty and median wages.

Regardless, the mechanism Ben is proposing—the wage subsidy—was new to me, so enjoy this thought-provoking conversation.

Ben, welcome to the Money with Katie Show.

Ben Glasner: Thank you so much for having me. I’m really excited to be here.

Katie: Oh my gosh, it’s my pleasure. Well, okay, so before we get into the specifics, I would love to start with you just describing your approach to economics. Like what is your baseline perspective or governing philosophy that guides you in your profession?

Ben Glasner: I love this question, especially because there’s just such a wide variety of answers to this. So for me, I think I kind of take two key approaches or two components to it. One is that I think markets are a very, very useful tool. They’re a fantastic way of doing lots of different things, but functionally, they are still a tool.

And I think as soon as we lose sight of that fact, we end up missing some key important things. There are a great way for lots of different independent actors with independent preferences and independent views of the world to all come together and try and organize scarce resources and try and find ways to make things work the same time.

The second part is that policy is really [00:01:00] very important. So when we think about the ways that we have this tool set in front of us, how do we apply it and how do we think about the best way to get the most use out of it, I think is really the second key part. And I think a lot of times we lose sight of both of those things in conjunction with one another.

But I’ve also done a little bit of snooping on you and your podcast, and I have listened to a small amount, so I’d be really interested.

Katie: Oh, I’m so curious to know what you think.

Ben Glasner: We can dive in, but I wanted to actually give you this answer to say the same thing, pose the question back. ’cause I think we might be able to find some fun stuff.

Maybe some frictions on the sides to kinda like dig into. Oh, good.

Katie: Okay. Fun. I love friction. Well, not really, but I, uh, I’m trying to love friction. The way that I would sum it up is, I actually completely agree with everything that you just said. I have found a lot of interesting material in the, the, the side of economics that looks at it through the lens of class relations and power differentials.

Mm-hmm [00:02:00] Power dynamics. And you know, I think, um, last week on the show we had on a, a Marxist history professor, which was quite fun.

Ben Glasner: That’s gotta be fun.

Katie: It really was. And so I think that there are. Pieces of my journey where I don’t quite feel like I align a hundred percent with any one particular school of thought, but I find value in a lot of different areas, and I think that the.

This isn’t a hard science and I think that sometimes that keeps us stuck or limits our options and and limits what people are willing to try.

Ben Glasner: That makes a ton of sense, and I think if we’ve got the same baseline, we’re gonna have a ton of really fun stuff to dive into. One of the thing that I’d add to that realistically is thinking about if we start off with the idea that it’s tools and policy matters, it’s that idea of kind of the sentiment of disconnect from policy making I think exists today, particularly when we’re talking about.

Young people looking at the world, what can they do? How do we engage with it? How can we [00:03:00] solve problems? I think there’s a lot of fatalism currently in policy making, particularly as we find people who are a little bit on the market side of things and policy side of things, trying to find ways we can interweave kind of the social zeitgeist with a fuel to make change.

And I think it’s really easy to fall into fatalism of saying, well, nothing can do anything. Everything is bad, all things are horrible. How do we make things better? And I think that there’s still a lot of really good space to make big changes that can actually help people’s lives. So I really would love to kind of talk about where we can find that space and where we can make some of the lessons we’ve learned in economics apply to even those people who feel a little bit disconnected from it.

Katie: So feel free to take this question wherever you want to.

Ben Glasner: Yeah.

Katie: What is the state of wage labor in America right now?

Ben Glasner: I would say the state of wage labor is better than it has ever been, and still nowhere close to how good it could have been. Huh. I think. The reality of today is that when we look at the wages of the typical worker, it’s at an all time high.

If we just [00:04:00] survey thousands and thousands of people, look at the administrative data, look at the household data and say, how much are you making per hour per week? People are making more today, even after adjusting for cost of living. Hmm. But the actual peak that we’re at right now has come in big ebbs and flows.

There’s been long periods of stagnation and short bursts of progress that has led to huge losses in long run wage gains that we could have gotten with slightly different policy decision making. So I’m gonna go with the S and also the general sense. The fact that me saying it’s an all time high is surprising and it should be.

I think we have a lot of, a sense of things are worse than they’ve ever been, or things haven’t changed, or we haven’t seen progress. That’s not a surprising feeling because we have lots and lots of things in the world that make us feel that way. But when we start to break down. Distinctions about where it’s at.

I think it’ll come through a little bit more clearly as to what the typical worker today is doing better. Even if we have really serious pockets of [00:05:00] hardship that haven’t actually seen the progress that we would love to have seen make,

Katie: I am not surprised that median wages are at or near the top. I mean, I think that I’ve seen those charts on the Fred website to know that that’s the case.

I think where where you got my hmm was when adjusting for the cost of living, and I think that the main piece that makes people feel like things are worse is housing. Because it’s such a proportionally significant component of the normal household budget that when that starts to feel tight, everything else downstream of that feels impossible to manage.

I’m curious if you can say a little bit more. About things being better than ever, even inclusive of cost, of living considerations.

Ben Glasner: Yeah. This is always the fun one to dive into and it gives me the opportunity to get really wonkish with this. So. Well, I see

Katie: you have a whiteboard behind you. So I’m expecting wonk. I am fully [00:06:00] anticipating wonk.

Ben Glasner: So there’s a few ways that we think about cost of living. I think a lot of the times we just throw it out there saying, just for inflation, and people are kind of left in the dark about what’s happening, how we’re coming to this. Are people just saying it’s good enough?

And then we wave our hands and say it’s at all times high. What actually happens is we take surveys regularly of people across the country and ask them, what are you spending your money on? How much split is going to different pots? And then we use that to create a bundle of goods or a sense for like, how are people spending over time?

We then use that spending real data and then look at the cost of different products and try and assess over time how the cost of living has shifted both within goods and across them. So when I think about the cost of housing being truly at all time highs, it is very expensive to think about entering into buying a home.

It’s very expensive to save for a down payment. It’s very hard to accumulate that much capital. That is all completely real. No one is saying that isn’t. The case, but there’s other things [00:07:00] that we’re also spending significantly amounts less on the cost of food as a share of your total income has gone down dramatically over time.

The cost of services of durable goods, things that we’re spending money on in some buckets has gotten cheaper relative to our income versus other pockets that have gotten more expensive. Things like housing and healthcare drive up the cost of living predominantly relative to other things, and they also are hugely salient.

They feel very important, and so we don’t wanna think about it as the cost of living isn’t important or that we shouldn’t be thinking about why housing is driving up the cost or why housing is driving up. Things like anxiety about my finances. We aren’t trying to ignore any of that in any of the cost of living literature.

It’s just a matter that we can bundle all that together and say, you’re probably still doing better. Relative to wage that you’re earning than someone in the past. But had we had better housing policy, better healthcare policy, we’d be doing even better than we are right now. And also massively reduce the anxiety about costs.

[00:08:00] But the reality of the way it’s experienced is still important. We don’t want to disconnect ourselves from the fact that if people are saying they are struggling, we can’t just say, well, no, no, no. The data is telling me you’re not so ignore it. It’s much more about if you’re telling me you’re struggling and the data is telling me this other story here, why is that?

What are the things that we can be doing to solve it? And how do we think about that informing policy making as a whole?

Katie: Do you have a operating theory of where that disconnect is coming from?

Ben Glasner: So there’s a few theories on this. I think vibe session is usually the term that we hear a lot thrown around.

But outside of that, there’s also a few, uh, old heads. Uh, we’ve talked to a few people. We actually got Paul Krugman to do a guest essay for us on a recent analysis of the American worker over an extended period of time.

Katie: Oh, that’s great.

Ben Glasner: And one of his theories, and I’ve talked to a few of my behavioral economist friends about the same thing, is the sitcom ification of our perspective of the past.

So I think a lot of people try and imagine, well, how good was it way back when? Why do I not feel the [00:09:00] same? And you’ll hear excuses like Friends was in a rent control apartment, or home alone had a family that just happened to fall into it. But like people see these images of the past and they think of themselves as, why don’t I achieve the same thing Hollywood is telling me life was like back then.

Hmm. And when we’ve talked to other scholars who’ve looked at this from the historical perspective or an ethnographic perspective, a lot of the time it’s that we didn’t show the image of what life was like back then. We showed the image of what we wanted to present ourselves as. If we think about things like the classic American picket fence household of the fifties and forties, well we aren’t looking at segregated American House.

In that scenario, we aren’t looking at the experience of a woman who was trying to raise a family on her own, who couldn’t access the labor market. We’re looking at, here is the image we want to present to the world of where we are at. And I think a lot of the sentiment we have right now is we’ve bought into that image.

We believed that things were easier back then because that’s the image that we have presented to ourselves, which is just a perpetuation of some of the myths of our economy. And I think it’s really important to take [00:10:00] serious looks at what that myth is, why it was presented to us, and why we’re still consuming it, and not let that dilute our understanding of the economy.

Today. We have real problems. We should actually address the reality of it.

Katie: There is a little bit of a paradox there. I think that you summed it up well when you said it’s better than it’s ever been technically, and also could be so much better. So if we’re drilling down on one particular group, the, the paper that originally brought you and your work to my attention was about low wage work in the United States, and you and your co-author point out that roughly 21 million American workers earn less than $16 per hour.

Two thirds of those workers are women and that among men in their prime working years, so this is ages 25 to 54, that nearly 10 million of them or 14% of them don’t have jobs. Something that jumped out to me about this is that the, the working class in the [00:11:00] United States, as it’s discussed politically, usually calls to mind white men who were pushed out of the manufacturing sector from offshoring.

This is something that we talked about at length in last week’s episode, so for that reason, it feels significant to me to read a statistic like two thirds of these workers are actually women. What do you make of that?

Ben Glasner: I think it is one of the most important myths that we have to break down when we talk about low wage labor and work in the middle class.

And that stat kind of does two really important things for me. On one level, it is purely descriptive. It’s just a count based on descriptions of where people are working, where they’re falling, but. When we think about the fact that low wage labor is disproportionately done by women, especially in caregiving education and service roles, think like home health aides, childcare workers, yeah.

Restaurant and retail staff. Those jobs are absolutely essential to the functioning of our economy. But historically, American political narratives and kind of sentimental [00:12:00] narratives have treated as a second best relative to the idealized blue collar labor market. So when we think about more than 20 million workers who earn kind of at that lower threshold, people under $16 an hour, that’s a low wage workforce.

We’re actually talking about not some mental image that many still carry around from the legacy of the fifties, sixties and seventies. On the second point of it, though, political shorthand for the working class, Neos is still very often just men in hard hats doing factory floor work.

Ben Glasner: And as convenient as that mythos is.

The reality is that that was never even really the typical or average job that was being held. It’s something where like even back to the fifties, the majority of US workers were employed in the surface sector.

Katie: Oh, interesting. Even back then,

Ben Glasner: even back in the fifties. Yeah. So the share has been increasing even since then.

So from 1950 to 1980, there’s been a continued shift towards services, and it was mainly driven by a steep decline in agriculture back in the fifties to [00:13:00] eighties. So we’re thinking about this as agrarian workers shifting into urban service spaces. So manufacturing was still pumping away during that time, but then since the eighties, the drive towards services and driving, then manufacturing now.

Losing out to service sector employment. So we’ve got a couple transitions of structural change in where we’re working, how we’re experiencing the labor force, but this idea that there was a time where the average typical median worker was just on a factory floor, and that that was inclusive of not just white men.

It’s a myth and it’s something that’s worthwhile, really interrogating. So I think that when we hear something like two thirds of low wage workers are women, it’s surprising then the context that the idealized working class are men on factory floors. It’s not surprising, given the context of where and how we’ve traditionally valued weight work that women have found themselves kind of pressed into.

Katie: I’m gonna float this one live, but as we’re talking about the service workers and the [00:14:00] depression or stagnation of wages at the lower end of the spectrum, I’m gonna make the classic correlation causation mistake here and say, is it possible that a lot of that wage suppression is due to the fact that a lot of these jobs are feminized and tend to pay less because of occupational segregation?

Ben Glasner: So I’ll say that it is possible, and there’s a lot of great work by economists who are far smarter than I am, as well as sociologists who are far smarter than I am, ethnographers who are far smarter than I am looking into occupational segregation at the local experiential level. And I think that when we think about why it is that women have found themselves traditionally pushed into industries that are lower wage, I think it’s impossible to break away from the path dependency of our historical narrative around that.

So one of the things that I. Kind of wanna highlight about this is that we have had a long history of labor regulation and attempted labor support can take it back to the 1930s, push towards the Fair [00:15:00] Labor Standards Act. But the reality is that that Fair Labor Standards Act at the 1930s is massively different than the one we have today.

Over the course of 70 odd years, we saw it consistently expanded, not just in a minimum wage level or occupational safety regulations, but also just in the types of jobs that were covered by it. So today, when we think about the Fair Labor Standard Act, we think anyone with a W2 who’s just working in a job has access to minimum wage protections, for example.

But in the past, traditional service jobs weren’t even included in it.

In fact, of the types of jobs that were excluded from the Fair Labor Standards Act, our initial foray into regulating a minimum return to work, the jobs that were excluded were traditionally ones done by women, by black workers, and in particular black women.

We want to think really critically about the fact that yes, more women are working in low wage jobs. There are lots of things in society. I don’t think we need to kind of pretend like there aren’t, that might be pushing women into that type of work. But we [00:16:00] also have failed that type of work generally from a policymaking standpoint, or at least from the historical legacy of it.

If I wanna be more generous to other perspectives. ’cause they might not be here to voice their own support or opinion on it, but,

Katie: oh, that’s so charitable of you.

Ben Glasner: I’m trying to be nice on this one. But the reality is, is that we have lots of factors here and we can throw out the fact that like, you can’t separate the patriarchy out of women’s wages in the us

Katie: I, I wanna get into the meat of the paper and I think before we do that, I have this broader question about.

Low wage work as it exists today, the type of wages that people can get, the disconnect, if I were to boil it down as simply as possible is like the wages that people need to live are higher than what a lot of this work will pay. And this might feel like a stupidly simple question. Considering you laid out your thesis very clearly for us of like markets are a tool.

Policy needs to step in where that tool is not sufficient. [00:17:00] Why aren’t markets solving this problem? Why isn’t some sort of sustainable equilibrium being met on its own?

Ben Glasner: It’s a great question on it, particularly because it gets at the heart of what are we trying to ask a market to do? I would love to be able to say that we have a great answer for why markets don’t provide our dream scenario of livable wages for all types of work.

But the reality is once kind of we let them operate, they generally tend to just be. Buyers and sellers, finding their middle ground where they can collaborate to create a transaction that makes both people better off or a transaction doesn’t happen because no agreement is reached. When we’re social planners or when we’re policy makers, or when people are just invested in, how are workers doing?

That might not be a satisfying answer, and that’s a space where we might wanna think about, well, what do we have to do to try and help smooth the gears out and get these things to actually happen, what we might dream of?

Katie: That’s partially [00:18:00] why I have found work or theory that attempts to look at these things through the lens of power and who holds power.

So satisfying, because I think that these, these. Theories will often point to the fact that like, why might someone be willing to be paid a lower wage than is appropriate? What would put them in that position? Or when somebody who has a lot of power over the labor market by nature of how much capital they have.

Teasing apart markets as a very blunt mechanism for pricing and, and allocating scarce resources from like the social goals of. A labor market does feel important.

Ben Glasner: It’s great to introduce power into the way that we think about marketplaces now in a traditional Econ 1 0 1, which I think a lot of economists love to both like punch at and also use consistently.

We don’t like to talk about power, not because it’s not something that any of us are aware of [00:19:00] or something that I’m hoping we’re all aware of exists in the world, but more so it’s just that it’s, it’s a complicating factor, and we oftentimes save it for later and later and later after you build more economic intuition, you take a few more courses, and then they introduce some of these more complex ideas.

When we think about power in the context of a labor market, we often are talking about a monopsony. So monopsony in this scenario, or oli sy is the equivalent on the other side of a mono monopoly or oligopoly, where it’s just one buyer of a particular good. In this case. We’d imagine a monopsony is a scenario where we have like a classic company town.

There’s one person who’s running a firm. They have all the capital in the town, and they’re employing everyone there, and they have a huge disproportionate amount of power to try and exert over. The workers in the town traditionally thought of as a way of depressing wages. Mm-hmm. They all are here. They all still need to eat.

I can count on the fact that since they don’t have any other options, I can pay them less. And this idea of market power distorting and kind of underpaying or providing a type of market outcome [00:20:00] that we’re not satisfied with is not new in the world of economics. It’s something that I think a lot of the times about unions, the way that we think about worker power to try and combat market power, if there’s gonna be one buyer of the good organizing so that there is one seller and having a united front to try and counteract that.

We also have lots of policies that try and do this. Minimum wages are another way of trying to resolve a monopsony scenario. We have lots of ways to try and deal with these types of issues, but. When we think about other solutions to this, there’s other ways. I would say that a monopsony is not an efficient market scenario.

It’s not competitive. It’s not gonna produce the results that your classical economist is gonna love to talk about. So there’s middle grounds of compromise on how do we solve these things that we know are problems, even if we might have different ways of thinking about what the problem source is.

Katie: You say that the ways legislation has tried to address this problem, this problem being low wage work in the past have been poorly targeted, expensive, or, and I think [00:21:00] this is the hardest one, this is the complicated one had basically unintended second and third order effects that then undermined other policy initiatives.

So I’m curious if you can lay out a landscape for us of what has been tried already and why those things didn’t work.

Ben Glasner: So let’s start off by just defining poorly targeted. It’s really specific to an objective oriented policymaking. When we think about targeting a program, say we’re thinking about how do we fight poverty?

We should be measuring that program on its ability to target resources, to reduce poverty. There’s lots of programs out there that have. Very loosely targeted goals, but very directly targeted, advertised political narratives. So for example, if I’m gonna say, let’s target poverty, and I’m gonna use a minimum wage to do that, the reality is that if you’re accessing a minimum wage, it means you have a job, or at least have access to the labor market in that way, and you’re working.

The rough part about minimum wages when it comes to trying to do anti-poverty targeting, for example, is that [00:22:00] minimum wages are generally worked by people who have a job. So they have some incomes, they’re non-zero, and most of the benefits actually don’t go to people below the poverty line. Lots of minimum wage earners are teens, younger, young adults, early career professionals, and attached to a family where there is another earner that pushes them above the poverty line.

So minimum wages are well targeted to do wage boosting among people who have jobs at the low end. They’re poorly targeted for anti-poverty. So we can have policies that do multiple things that are well targeted in some ways and poorly targeted in others. And we end up with this world where we’re interacting policies of many different types with many different targeting structures that sometimes counteract each other.

Hmm. So my favorite example of this is we have minimum wages on one side, which again, raise the wage floor. For workers. So if you have a job and you’re working less, it gives you a raise so long as you’re able to maintain that job in the same hours of work. On the other side, we have something like the earned income tax credit, which is an income targeted program, [00:23:00] not about wage, just about how much you’re earning, and it’s intended to induce more labor supply.

So if we end up in a world where you are increasing the amount you earn for every dollar you earn of income, it adds a little bit on top when you file your taxes. So between the two, they sound like on the kind of like first impression, they would work together, increase the returns to work on one side and increase the returns to work on the other.

The rough part is earned income tax credit induces more supply of labor into a marketplace. Minimum wages increase a price floor, and as you shift the supply out. If you have the same number of buyers, you’d expect price of labor to go down ’cause there’s more people in the marketplace trying to work. So you end up with one that’s trying to push labor supply out, driving price of labor down, and another that’s increasing the price floor, which can end up displacing people who might otherwise have wanted to work.

This ends up in a weird spot where you end up having the two that on the face of it, should be working together in theory working against each other. It’s not that they necessarily have huge negative [00:24:00] consequences towards one another, but that the targeting of the two policies ends up out of alignment.

We wanna think critically about every single thing that we put on top of each other ’cause they aren’t the two, only two policies that we work with.

Katie: I think that there’s something to be said too for like, it is my understanding that the tax breaks that are offered to savers to save in a 401k, we know that that reduces the revenue that the government is getting because any dollar you’re putting in your traditional 401k.

Is a dollar where that income to the government is going to be deferred. This is everything I write about in Chapter six of Rich Girl Nation, how you can get this tax break and invest more money. But

Ben Glasner: great plug.

Katie: It’s my understanding that like those incentives don’t actually incentivize saving all that effectively.

I would wonder if and surmise that the earned income tax credit probably works a little similarly, where I’m not sure that these incentives are clear enough to the people receiving them that it is actually affecting [00:25:00] behavior.

Ben Glasner: That’s one of the most important points, and I’m glad that you picked up on it immediately, is that the saliency about these policies does have huge impacts for how much we can expect real behavioral shifts.

So for the income, earned income tax credit, or other tax credits, oftentimes that’s viewed as you get one lump sum at the end of the year, depending on the amount of income you’ve earned. And in the case of the earned income tax credit, also what your family composition is. The idea is that I might be going into work every single day thinking about, well, how much am I gonna be paid?

By my wage, not how much am I gonna get in a tax credit in 12 months. Right? And the impact that it can have sure has been shown when it was first introduced in the nineties, that it induced more extensive marginal participation. And that is more women entering into the labor force. It had extensive marginal effects on women and particularly single mothers.

It brought them into the labor force by saying, your take home pay at the end of the year is gonna be higher by X amount. And more women were able to say, okay, well this is gonna have a bigger effect for me in particular. So I [00:26:00] entered in and then had some saliency issues at the same time. There’s a huge difference in saliency between saying you will get a check at the end of the year and your wage will be higher today and you will see a higher paycheck every single week that you get a paycheck.

And that difference in saliency is gonna be one of the big drivers behind why we might actually think a lot of our current policies to induce more labor supply are actually under. Performing. They aren’t doing as much as we might have hoped they would otherwise be able to do.

Katie: And you point out how expensive some of these initiatives are for incentivizing job creation.

You list in this paper. A couple examples. You know, it looked to me like we were in the ballpark of between a hundred to $200,000 per job, or in the case of steel tariffs. This one was stunning. $900,000 per job. And so by comparison, your proposal, which we’ll dig into, looks really cheap. Can you help me wrap my head around why these [00:27:00] other approaches are so expensive?

Ben Glasner: Yeah. And this is exactly where my gut around markets and price effects really comes through.

Katie: Okay.

Ben Glasner: So when we think about things like, I love a gut instinct.

Katie: Oh yeah. It’s, I’m like, I don’t want the data. Just tell me what you feel. What’s the vibe on this?

Ben Glasner: When I think good economics, I think feelings and thoughts. It makes me feel icky to do price controls and tariffs.

So let’s not, um, but the reality is, is that when we think about things like tariffs, let’s dive into that. ’cause that was kind of the top line. Biggest one is that it’s not that good. Actors might not still be attracted to the idea of a tariff or specifically a steel tariff because there’s lots of reasons we might care about steel workers and their industries.

Not only the fact that they’re human beings and we want humans to be good and okay and have a life, but also that there’s national security concerns. There’s industrial narratives, and there’s also that mixed bag of social norms around steel workers and how we have identity around our work and how [00:28:00] we think about that.

The reason why it gets so expensive to save or pursue steel jobs through tariffs is that you end up increasing the costs to tons and tons of other goods. Tariffs are taxes on imports, and so when you tax imports for intermediary goods, you end up making it more expensive to produce everything else reliant on those same goods.

Something like a steel tariff to try and preserve a US steel jobs becomes extremely expensive for every steel job you make because you’re actually stealing resources from other American firms that were reliant on prices from imports being low, that increases their costs and it ends up making it harder for them to hire and retain work, and it starts to hurt the economy in other ways.

So we end up stealing from one hand to support another. And it just so happens that tariffs are one of the most expensive ways we can really think of to steal from one, to support a job in an industry we care about. And again, that’s not because we think that people are saying, oh, I intentionally want to undercut other American jobs.

There’s good [00:29:00] reasons why people think about this and wanna pursue it. It’s just those are policies that really have big, long run costs and second order effects. I would much rather take that energy to support American workers and put it into policies that have less significant costs per job saved.

Katie: Right. So let’s talk about the solution that you and your co-author write about, which is called a wage Subsidy. So this comes from a Nobel Prize winning economist named Edmund Phelps. And Edmund proposed this wage subsidy in 1994. So one of the things that you point to as encouraging about this idea is that it has something very rare, which is bipartisan support. What is a wage subsidy and why do you think that it has support across the spectrum?

Ben Glasner: So wage subsidy for the general context. Big picture folks. Shout out to my man Phelps. Uh, he laid it out in a very specific way. [00:30:00] He was thinking about it as a low wage employment subsidy, so the government would pay a per worker subsidy of firms for each low wage employee they hire or retain with the explicit goal of both raising pay for those workers and also reducing unemployment among the low wage labor market or workers who might be at risk of volatile fluctuations.

This all came at a time in the nineties when we were undergoing a huge amount of welfare reform and a large focus on how do we support people, support families, and do it without distorting the labor market. It’s an entire thesis of information about the political norms and motivations during this time, which I don’t want to drag us into now, but more of the story is there was lots of people who really cared about increasing the returns to work and also not giving money to people who are not working.

Lots of mythos in there, but let’s not get sidetracked on that front.

Katie: Bill Clinton has entered the chat.

Ben Glasner: Bill Clinton has absolutely entered the chat and so has a large Republican coalition and so [00:31:00] what we wanna think about on our side though is kind of push the idea away from targeting it as an employment subsidy and shifted directly to how can we boost the paychecks of individuals.

Before we dive into the really big, like meaty details of the program, I wanna think about why it has some, seen some bipartisan support. So when we think about what types of programs, we’ve seen lots of bipartisan support for things that we keep coming back to the well on. I think the child tax credit is the best example.

This is a program that came also about in the nineties, similar timeline. Also a Clinton era scenario. And it’s one that every single administrative resident since Clinton and since it went into effect, has doubled up on and put more time, energy, and money and expanded it. And it’s been done with bipartisan support.

One of the reasons why is it’s tied to income. You don’t get it if you don’t make money, and if your family doesn’t have money, you aren’t getting any other than a very brief. Beautiful period when the expanded child tax credit went into effect in 2021. Shout out to CTC fans, but it’s a program that [00:32:00] targets primarily middle income Americans, very pro-family ’cause it’s about how many kids you have and it has a little bit of everything for both.

Center left far, left center, right. Far right in that you can say it’s good for kids. Kids, particularly low income kids generate a ton of long run benefits if you can get them access to resources early in life, it’s targeted towards trying to support family income. It also benefits through a tax credit for middle income families and there’s, for the people who want a little tism stuff, it’s about having more kids.

Like if you have another kid, you get more CTCs. So like there’s that for that side of things.

Katie: That’s hysterical.

Ben Glasner: Yeah, it’s, it’s a program that’s seen bipartisan support because it has a little bit of everything. The wage subsidy as it’s been outlined in the past is also about if you work, then you get it.

It’s explicitly conditional on work. It boosts the earnings of low income individuals or specifically low wage individuals. And it’s trying to do something like saying we’re increasing the returns to work, but not distorting market incentives. So you can [00:33:00] still pick out like a little bit of everything across the distribution of people interested in it.

It’s. One of the things that helps people come back to it as a bipartisan idea, but it’s also something that hasn’t been really galvanized into either political camp. No one’s been able to stake a flag and say, this is ours,

Katie: our thing. Mm-hmm. Exactly. So

Ben Glasner: it still has a lot of open space for people to come in and say, well, you haven’t claimed it.

I haven’t claimed it. We think it can do good stuff. Let’s just like really quietly see if we can talk about this without anyone getting too heated. And no one gets super political about it for a second and just say, is this a good idea?

Katie: I wanna get into the details of how something like this would work and tease apart some of the differences between a wage subsidy and a minimum wage.

So you have your own proposal for the best way to implement something like this, what you think this could look like. And I wanna drill down into some of the major components. So let’s start with the target wage. So it’s my understanding that you think the target wage should be $16 per hour. I assume that that’s like, you know, you’re setting that [00:34:00] federally.

Why $16?

Ben Glasner: So there’s a few reasons why we target $16 specifically, and let’s start off by just saying, a target wage is gonna be the wage that we wanna move wages in the loan end of the distribution towards. So $16 an hour represents 80% of the national median, hourly wage among hourly workers according to data in 2024 when we first started drafting this.

Okay? That value has gone up slightly over time, but 16 is kind of where we’re starting there. And has a couple convenient factors. One, it’s close to the fight for 15 socially normalized idea of a $15 minimum wage. Mm. I would say it’s for the sake of the fight for 15 fans out there. 15 is now shifting to a fight for 20 for the name.

The name still needs to be changed a little bit ’cause fighting 15 worked well. So 16 is billion than 15. Gotta love that for our proposal. But the other thing is minimum wages also traditionally are targeted and passed by political actors, people who are interested in creating an outcome and not having a big negative effect.

Now, I don’t think anyone’s gonna argue that if we instituted a [00:35:00] $200 minimum wage, there wouldn’t be any disemployment effects. But there’s somewhere in between that we would say political actors probably look at and say, well, maybe if I do this, it won’t be so big of a deal, or this will be enough of a margin that it’s workable.

And that usually ends up being about 40 to 60% of national median wages, or in this case of local minimum wages, state or city median wages. So that 40 to 60 range is what minimum wages usually are targeted at. With a wage subsidy, it’s not gonna have the same potential disemployment effects that a minimum wage would have.

So you can go higher than that. So we get to choose a target wage that’s above and beyond what the traditional minimum wage would target at the national level.

Katie: Huh. So it’s typically a minimum wage when they are designing that sort of policy. ’cause the minimum wage in San Francisco is different than in Tupelo, Mississippi. They’re trying to target 40 to 60% of the median in any given area.

Ben Glasner: So that’s what seems like ends up happening, even if it’s not [00:36:00] explicit within a policymaker’s mind at the time. We’ve seen that, that’s usually be, is the range that we end up seeing minimum wage placed in.

Katie: So 40 to 60% of the, of the median is what?

Tends to work out as the minimum. And so your thinking is you can go higher, strive for 80% of the median with this target wage.

Ben Glasner: So when we think about a wage subsidy, what we’re talking about is a way of trying to just top up some of the earnings of a low wage worker that they’re getting from their employer to some level that we’re interested in trying to get them towards.

We break this down into a couple of pieces we want to talk about first, what are target wages? What are we trying to move a worker towards, and then how much of the gap are we trying to top up? So if someone was making $7 an hour and we wanted to get them towards, say, $16 an hour, there’s gonna be potential to just say, let’s cover the entire gap.

Let’s get them that full difference between seven and 16. Doesn’t matter how much, and let’s just give them that full [00:37:00] amount. Or we can say, let’s cover some portion of that gap and move them up. The distribution. If we just covered the full gap, then functioning would be lifting the wage floor up for every single worker to the left of our target wage, up to the target wage itself, doing a full fill in if we cover some share of the gap.

Then that ends up producing something where we still have an upward soaping curve in wages where some of the portion is filled. And as you move up the wage distribution, you get closer and closer to the target wage until eventually the subsidy disappears. It shrinks as you move up the wage distribution.

Katie: The idea is that the government is going to cover some of that difference, that the market is not covering itself. And it’s my understanding that you suggest, again, an 80% is kind of the sweet spot here, 80% of the difference. Mm-hmm. Between the employer supplied wage and this set target wage. And I’m curious if you can talk us through how you’re thinking about the economic incentives there.

Why is covering [00:38:00] 80% preferable to covering a hundred percent?

Ben Glasner: Oh, absolutely. I’m gonna take a sip of coffee because this is my language.

Katie: Let’s go caffeinate.

Ben Glasner: So incentives gotta caffeinate for incentives. When we think about the way labor markets work, we often wanna think about people responding to the signals they see in the marketplace.

We’re talking about wages, that’s the most salient signal we can think of for why a person have used one job is better than the other, first and foremost. So by topping up portions of the wage distribution, we can say we’re increasing the returns to work for some jobs above and beyond what they would’ve naturally looked like.

So that’s seven $25 an hour Job now looks better ’cause there is an additional wage subsidy layered on top of it, and it compresses the wage distribution so that there’s more jobs in kind of the same relatively similar bin of work all competing against each other for the same pool of workers on the other set of this.

It also means that there are more jobs in more places that can overcome reservation wages. So how much I [00:39:00] need to see in the labor market to make myself consider whether or not I should or shouldn’t take up a job. Like I might be saying to myself, given my childcare constraints, given my education standards, given the idea that I have a school or a job or a hobby or just of social life I care about, I’m not gonna take any job for less than $14.

And if I look around, I say, well, there’s only one place that’s paying me more than that and it’s subway. I guess that’s my only option. If we have a wage subsidy and compress the wage distribution for that low end, suddenly there’s subway and then there’s also the mom and pop book shop down the street that couldn’t afford to pay me the same type of wage, but now could when I add the wage subsidy on top of it.

So. What we’re doing is compressing the wage distribution, increasing the number of firms who are potentially gonna compete for the same pool of workers, and closing the gap between reservation wages and employer supplied wages. And firms now have a little bit more wiggle room in what they can actually provide as a wage while still being able to attract the same type of labor because they might be able to offer things that aren’t on the wage side of things that mom and pop [00:40:00] might not have been able to compete with Subway for wages, but maybe they’re all able to offer more hours worked.

They might offer a better path towards a career that someone’s interested in, and they might be able to offer just a better management system.

Katie: Hmm, 80% of the median is the target. And then you’re gonna, you’re gonna fill the gap that, you know, equates to about 80% of the difference between whatever that job is offering and that target wage.

So two follow up questions that I have. The first is, I can imagine someone hearing that and going, well, why is this better than a minimum wage? Why not just make the minimum wage $16?

Ben Glasner: So a minimum wage is a price floor, right? So what this means is that no work can be done for less than that value. Mm-hmm.

So in the case of our mom and pop shop, they weren’t able to offer that high wage to begin with. They simply are not gonna be able to hire someone now.

So we’re seeing less of a demand and labor in the available range. You end up reducing the number of firms who [00:41:00] compete with each other, and we can end up in that ity scenario we were talking about earlier.

So a minimum wage itself, while generally the literature seems to show that. When there’s politically intelligent and targeted minimum wages of certain levels of increases have small, maybe some small negative effects on the periphery, particularly around not people who have jobs, but people who are looking for work.

That minimum wage increase is not gonna accomplish the same goals for a collapsed wage distribution with a large demand for labor across a large number of firms. So that’s one reason not to just pursue the minimum wage on that standpoint. The other one is that it doesn’t just change which types of work is being offered.

It also generally has systematic effects on the types of workers who are gonna have an access to that labor market. Oftentimes when we think about work, we do have a social construction of ableism. We think about the idea that if these are workers, they should be returning the same amount of work.

And if you don’t meet that standard either as a firm or as an employee, then I guess you have to find something else to do or get good [00:42:00] is the framework. But there’s people who are simply gonna have. Larger barriers of entry and that can reduce their ability to access these types of labor markets.

Creating a world where we can say. It’s easy for a firm to hire you regardless of your skills or abilities. So you can onboard, get experience, and also overcome some systematic barriers that you might be facing is a hugely beneficial thing. And if we just say increase the cost to hire, we exclude those people who might not be able to make that threshold.

Katie: I wanna come back to that. My other follow up question is, it seems to me if I’m an employer mm-hmm. And I know that I can get some help on hitting a higher wage, I might offer even lower wages. How do you respond to that potential of essentially private firms offloading more of the cost onto the government?

I would imagine that’s probably the pushback that you hear the most, but I’m curious if that assumption is true. [00:43:00]

Ben Glasner: Yeah, it is absolutely a first order concern, and it’s one that we should have. My usual response to this, and this is mostly for the labor econ crowd that I’m most of the time talking to, is we can’t forget about competition.

So let’s say the wage speed doesn’t go into effect. We’re imagining that there’s enough market power right now for the person to sway and down weight the wages that they’re offering. Okay? Why aren’t they currently, what’s preventing them from going down? ’cause not everyone makes the federal or state minimum.

What’s preventing that is generally the idea that there’s competition for that work. We believe productivity, at least in most scenarios, has some impact on wages, because if you’re really productive and people are underpaying you, another firm can come in and compete for you and you can go somewhere else.

You’ll go to that better offer because you know what you’re worth if we put the wage subsidy in place. The way we’re designing it is it goes straight to the paycheck of the employee, not a subsidy to the firm. This is the difference with the, between our proposal and Phelps. So since the firm never sees [00:44:00] it, it just goes to the paycheck of the worker.

Hmm. The only way that they could succeed in cutting down that wage or kind of racing to the bottom would be by underpaying relative to what another firm might value that work or add. So if you were getting paid $10 an hour and suddenly the firm that sees the wage subsidy go into place says, oh, I can actually pay you nine, you’ll still get more.

Well, the firm next door says, oh, you’re only paying them nine. I would happily pay nine 50 because they’re worth 10. And then you can start competing off of that.

Katie: Interesting. Okay.

Ben Glasner: Yeah, and that’s just on the wage side. Now, since we’ve started collapsing the wage distribution, so mom and Pop can compete against Subway in this scenario, they’re also not just saying, I’m gonna compete on wages.

They have to compete on. Our sustainability and security on health insurance, on retirement, all these non wage benefits that people generally have a hard time accessing and that we’ve put a ton of time and energy trying to get these firms to offer these workers now becomes an access that they can compete against in some degree.

We [00:45:00] also have to expect that this is a trade off that we’re already engaging in the earned income tax credit, SNAP, CTC. We’re already flooding these types of firms with this type of social support, but they’re all very indirect. If we’re willing to engage with it there, I think we should be willing to take it head on and say, we believe there’s a minimum return to work, or at least we should be increasing the return to work for this portion of the distribution and we should tackle it head on.

Katie: Well, I’m glad you brought that up because I think that what this concept reminded me of and had me mulling over is the number of Fortune 100 companies who employ thousands of people who earn so little that they do receive SNAP and the earned income tax credit and are on Medicaid. And in some ways it’s hard not to look at those things as handouts for corporations like that.

The corporations are ultimately the ones that are benefiting most from these programs because it allows them to pay such low wages. And so you’ve brought up the mom and pop example here. How do you think that this would impact or be designed [00:46:00] differently for a multinational corporation than a small local business?

And is your thinking that because these multinationals are still able to pay more than small businesses in many cases, that it will ultimately be a boon for. Small business sector or is there something else going on here?

Ben Glasner: So I think the impulse is right. I think the reality, especially given the wage level that we’re targeting with something like our proposal at $16 an hour, we’re below the current federal, or not federal, but current voluntary minimum wages.

Firms like Amazon and Walmart, the types of hourly returns to work that these companies are offering are already superseding much of this, especially in areas that are more urban and have higher prevailing wages than you might find in rural Mississippi or Alabama or Texas, or my home state in upstate rural New York.

Like the, the reality is, is that much of the work that is happening, yes, there are workers who are on those programs, and I [00:47:00] wanna just shout out, that’s not a reason for us to try and shrink those programs in any capacity. It’s more of a story of like, we need to have robust safety net to help people as they ebb and flow through these types of labor arrangements.

Right? But the idea that a wage subsidy is gonna be. Patting the books of our largest, biggest firms I think is a little bit unfounded, particularly ’cause the competition aspect is still gonna be there. I would view this much more as every dollar that is induced through some amount of work also comes with that dollar that’s coming from the employer.

They’re helping cut the cost of supporting people that you wouldn’t have had any help cutting the cost of otherwise. So if someone was coming back with some set income that is purely based on government transfers, anything we can do to induce some of that to also come from the bill of an employer, I think is a benefit.

’cause that person still needs to, that person still needs to be housed. If we can induce more of that from competition and work, that’s good for the total fiscal scenario.

Katie: When you state explicitly in the paper, you know, we are not waiting into this [00:48:00] debate about whether the minimum wage itself should be higher or whether it will have negative effects on employment if it is raised, and I’m a little curious if that was just a decision.

You made because you wanted the paper to stay focused on the wage subsidy and not get pulled off sides. But I’m, I’m curious why that felt like something that you didn’t wanna engage with. Economists try to shy away from making moral judgements or to make this about power, but when companies are consistently posting higher profits that accrue primarily to their executives and shareholders, do you feel that that undermines the case for a government subsidization of wages overall?

Ben Glasner: This question takes me back to quite a bit of like, almost PTSD to my grad school days specifically because, oh my god, I’m so sorry. Oh, no, no, it’s, it’s, it is exactly. I would like to say that this is what I trained for with like some type of a montage sequence. Um, I went to grad school in Seattle during the Seattle [00:49:00] minimum wage expansion with my.

A particular department having a bunch of funding to research the Seattle minimum wage. I also had a job market paper that was looking at how minimum wages interact with platform work like Uber, Lyft. Oh sure. And that was tons of fun on the job market where I don’t think there’s anything that gets kind of economists more riled up than minimum wage papers.

It was like throwing blood in the water at every single time I had to give the job talk and I’d be like, I just want a job. Please someone hire me. And they’re just riled and getting excited. So when I think about minimum wages, there was definitely an intentional decision not to let the wage subsidy draft get pulled into the discourse on minimum wages explicitly.

’cause we think of it as a different policy and it is, at the same time, I think it’s completely reasonable to think about, well how does it interact with the world where we already have minimum wages across states and localities and at the federal level that is highly politically involved, very controversial, across different groups and also is very important to lots of people.

It’s, it’s a very salient thing. So. One of the things I’ll flag is that a lot of the [00:50:00] minimum wage literature generally points towards either muted or net neutral effects. Some negatives particularly are wrong job searchers or people who might be slightly displaced or new entrant into labor markets. But we don’t see something like a minimum wage goes up by a dollar and suddenly firms start firing every single one of their employees.

There’s a little bit of organizational restructuring, so like. A restaurant might go from saying, having a waiting staff to doing just like bench order so you order and then pick up your own and take it to your table and self bus, things like that. That’s a little bit of a push that we see in some literature, but the thing that I think is most important about this is that when we talk about a wage subsidy versus a minimum wage, or kind of the idea of subsidizing wages of these types of firms, is that the places that are gonna see the biggest benefit from something like a wage subsidy are not the large multinational corporations centered in our biggest cities.

What’s gonna see or what we’re gonna see from something like this, since it’s a national. Program is those labor markets that have been lagging [00:51:00] behind, left behind by our general economy, and that are filled with some of our most marginally attached workers. See the biggest benefit, it’s the places where more people are making eight or $9 an hour.

That would see huge inflows of generous and impactful support than a minimum wage can’t do if you increase the minimum wage to $15 an hour. Right now, no new job appears in rural Mississippi. A wage subsidy, suddenly increasing the return to work, nearly doubling it for these low wage workers, that’s a huge increase in the amount of money that’s both entering into that place and how much more people might be enticed to work in those places.

We don’t wanna think about labor as purely about employees. We also need employers to have jobs available and to make those jobs pay well enough. And some places truly have just been left behind by our economy, and we need to find ways to try and restart or jumpstart those places again. That was another sigh.

Katie: No, no, no. I’m, I’m sighing ’cause I’m like, I, I think that that is the most, I guess I’m just [00:52:00] putting my marketing hat on and I’m going, I think that’s gonna be the biggest narrative battle, but I think that. I think that explaining it in the way that you just did, kind of unlocked something for me. And, and particularly because of your point about like in Amazon, in, you know, long Island or wherever those warehouses are, outside of

Ben Glasner: wherever, they have massively populate.

Katie: You know what’s so funny is I grew up in a town that had a huge Amazon warehouse that it was, you know, oh really? Like a mile from my house. And this was in the two, like mid two thousands, early two thousands. And so for a while, every Amazon package that I got in college had my hometown on it. ’cause it all went through the same distribution center.

So yeah, the, you know, the Amazon warehouse in town that was just like, that’s, that’s just, you know, par for the course.

Ben Glasner: I’m gonna totally derail this for half a second. Were you ever thinking about working there?

Katie: I actually had to do, um, here’s a fun story for the podcast. Um, I got in some [00:53:00] trouble when I was 17.

Okay. And I had to do community service and for some reason the community service was packing boxes in this Amazon No. Warehouse. No. So I had to do our, yeah, I mean, I was like, in retrospect, I’m like, how did Bezos pull that one off?

Ben Glasner: Talk about labor subsidies.

Katie: Yeah. Really? You’ve got a bunch of like 17 year olds in there packing boxes.

But yeah, I did, I did work in that warehouse a little bit. Not paid though. Uh, just to get that off, something off my record. I guess that, I’m just so cynical about these big firms that I, I just imagine like, okay, there’s gonna be some, some room of people in, in Amazon headquarters or whatever, headquarters, Kroger headquarters, another big Cincinnati area company that are going, okay, how can we.

Get a piece of this pie. I think at some point, do we maybe just need to get comfortable with the fact that like, yeah, maybe these corporations are gonna benefit marginally, but like the vast majority of the [00:54:00] benefit is gonna go to these people we’re actually trying to help. And so there are always going to be trade-offs where maybe someone that you don’t really wanna be subsidizing is gonna benefit, but like at the end of the day, that’s the rub.

That’s the trade off you have to make.

Ben Glasner: And I think the trade off story is really important to kind of illustrate the fact that we have to make choices at a certain point. We do. And I think there’s a bit of pragmatic progressivism that is currently missing from a lot of the skepticism around like big employers in particular,

Katie: pragmatic progressivism.

Ben Glasner: That’s the way I think about. If we’re gonna treat markets as a tool and we’re gonna treat policy as important, we have to make trade-offs about the fact that, like what do we wanna prioritize? What are we gonna be giving and what are we gonna be getting in return? And I think finding ways to really massively boost earnings for low wage workers is worth that type of a trade-off, especially when we already are doing so much to try and induce these large firms just to come and show up in places.

I live down the street from Amazon HQ two and I don’t think anyone who is familiar with that discourse was really proud of seeing just how much we were throwing at [00:55:00] massive employers to try and induce them to come to places. And it’s not a unique story. We, we do lots of things that are just kind of semi tertiary, indirect subsidies to try and make someone somewhere move a business to another place when we should just be much more hands off and say, if we’re trying to make more work at a certain wage level, induce it and support it.

We can be more direct and intentional in our choices as a policy maker and do that to the benefit of people.

Katie: So we’ve talked a lot about the earned income tax credit. Mm-hmm. And you do point out that there are some similarities, and I wanna take a beat just to talk about how the earned income tax credit actually works, and why a wage subsidy might be preferable.

Because I think what I’m, where I’m going with this is, I assume the earned income tax credit is a relatively expensive program. And if every dollar that could be used as a wage subsidy goes further, would there be a world where if you [00:56:00] were pitching you’re king for a day, right? Where you’d be like, oh, let’s just reassign all the money that currently goes toward this program and this other bill.

Let’s all put it towards this.

Ben Glasner: So you throw out the hardest question, which is budget allocation. Especially because the EITC is probably one of the most popular anti-poverty or anti working poverty programs in the country. So it’s working. Yeah. Working

Katie: for though, right? To your point, you have to be specifically working for it.

You have to be working. Yep. Yeah.

Ben Glasner: The other thing I’ll flag on this is that, just to put some numbers on it, the IDC is roughly about $70 billion a year. Little bit less.

Katie: Oh, so it’s not that expensive?

Ben Glasner: Well, it depends on who you ask. I’ll take $70 billion, but, well,

Katie: I mean, isn’t the mortgage interest deduction costs like hundreds of billions of dollars a year?

Ben Glasner: I’ll do another one. The deduction we put on retirement support, specifically 401k is hundreds of billions of dollars a year. I think it’s like more than 200 billion.

Katie: Yeah, so I’m, I’m, I guess I’m just thinking in comparison to those things and I’m like, oh

Ben Glasner: yes,

Katie: cheap.

Ben Glasner: Yeah. CTC is also more expensive. It’s in the a hundred to $110 [00:57:00] billion per year, for example.

Katie: Okay.

Ben Glasner: Do you know how much a childless adult can qualify for the max EITC?

Katie: Oh,

Ben Glasner: it’s an annual tax credit,

Katie: 2000.

Ben Glasner: It is $649 in 2025.

Katie: Wait, what?

Ben Glasner: That’s how much a childless adult would get.

Katie: Oh, child. Childless. Childless adult.

Ben Glasner: Yeah. Oh, if you have no kids, $649.

Katie: So you have to have kids. The pronatalists, they’re at it again,

Ben Glasner: if you hit three or more qualified children, that rises to $8,046 as a check.

That’s huge. Massive. Like yes. Kids, that’s lot Money are expensive. Lot. Yeah. But functionally, what we’re saying is our biggest anti working poverty, tax credit, most directly targeted low income individuals a job. If you don’t have kids, you get next to nothing. And that to me feels like a big mixture of family policy and worker policy.

It’s the mixed bag of the two. Yeah. And when you add the CTC on that, you also are seeing scenarios where you only get it if you have income ’cause it’s tax credit [00:58:00] and you also need to make a certain amount. At least at minimum, more than 2,500 a year before you even start accruing the CTC. That combination means that you’re mixing, again, family policy with worker policy.

That’s not necessarily a bad thing. We care about families, we care about work, but it means that we’re mixing our goals. Once again, we’re thinking about multiple different things all at once, and try and take one swing at all of our problems and this creates this huge number of overlapping policies, programs, interests.

And then when we start saying, well, actually we need to shift a little bit to the left, or shift a little bit to the right, becomes this massive, interconnected problem of how do we think about benefits? How do we think about costs? All of it just gets more and more complicated. So if I’m gonna say something like King for a day, first and foremost.

You want to claim and clarify what’s worker policy and what’s family policy? Doing more to try and distinguish between the two and say, I really care about low income adults having enough to support a kid that’s child policy. If that’s what you really care about, make [00:59:00] sure that there is a surplus of labor demand in the market.

Focus on that, target it, draft legislation around that, and trust that you’ll have other swings at other issue areas and try and keep them distinct enough that we’re not constantly stealing from each other. And as we think about policy design and implementation,

Speaker 3: I’m just, I loved your face when I said that’s not expensive.

You’re like, just horror, absolute horror. I’m like, and this is why the, this is why you are the one with the PhD. I’m like 70 billion. We can swing that in our sleep. You know how much a drone costs for a context.

Ben Glasner: Alright, I, I exist in a world where every single day I try and like, here’s a great idea. I then have to think, there’s gonna be someone across the aisle from me saying, why would I spend a single more dollar?

Yes. So when we think about taking big swings at ways to make people’s lives better, you gotta come in saying either what are the pay fors, or more specifically, what is the long run benefits from this stuff?

Katie: I know that you all have. [01:00:00] Essentially budgeted out, estimated what this type of wage subsidy proposal mm-hmm.

Would cost. And earlier in this conversation, I mentioned some numbers that had been assigned to job creation programs in the past, and we were talking hundreds of thousands of dollars. What do you anticipate? The wage subsidy.

Ben Glasner: So under our proposal for a worker today who earned $8 an hour, the wage subsidy cost to a taxpayer would be for, if they were full-time workers, $12,800 per year.

And if they were making $12 an hour through their employer, that cost would fall to $6,400 per year. So we’re talking about massively less than when we’re thinking about the comparison of like tariffs or by American policies in terms of the cost estimate for a full-time worker and a job. And that’s because most of this is happening on the induced supply.

We already have a firm interested in hiring someone, and we already have a worker interested in working in. All we’re doing is just covering the gap between the two, and that [01:01:00] massively reduced the cost of these types of things rather than trying to fight to make something happen that the world or that the economy has already tried to shift away from.

Katie: Thank you for that. Yeah, so I read your papers comments and usually these are a cesspool

Ben Glasner: fun,

Katie: but there were a couple trends in the feedback that I thought, okay, let me, I actually do wanna ask Ben. Directly what he thinks about this one was fraud. Mm-hmm. People are really scared about fraud. Do you think that that’s a reasonable concern, all things considered?

Ben Glasner: I think we should always be worried about how people can take advantage of a program for bad intent. I think it’s very reasonable to say, if we are spending money to try and make something good happen, do we believe something good is gonna happen? Are we trusting that everyone is a good actor?

So I think it’s completely reasonably worried about fraud. I don’t think this is a scenario where it’s gonna be a primary driver of concern, and I think we try and solve it in a couple of ways. The most [01:02:00] concerning one would be simply if we just said, we will cover any of the gap between an employer offered wage and a target wage, whether they were offering a dollar or 20.

If that was the case, then sure there would be plenty of people saying, I have. 20 workers come and give me money regardless if they actually showed up. Mm-hmm. Or saying all of these workers worked 40 hours a week, even if someone only showed up once and punched a clock and ran away. I think it’s reasonable to be worried about that.

But because we use a base wage requiring that at least some portion, in our case, we use the federal minimum wage today as the base wage. Some portion of that has to be covered by an employer, and that portion is structurally and systematically less than the amount the wage subsidy is. There’s zero chance for an employer who never sees the payment directly, it goes to the employee’s paycheck to simply capture back any of that.

They have some financial costs, some skin in the game that prevents them from trying to make fake workers, for example. The other side of it is simply, well, if there’s gonna be fake jobs somewhere, maybe someone’s gonna say they’ll do a little bit of work. They’ll do a little bit. Not [01:03:00] since there’s cost to employers, there’s gonna still be an incentive to say, well, are you actually returning work? They’re hiring people who might just on the margin worthwhile. Maybe there’s gonna be a little bit more money going out than we would’ve previously wanted at some jobs that maybe the social planner isn’t super stoked about. Maybe someone’s being hired just to sit down and throw something at someone.

I don’t know. That’s kind of fraudy, but like that’s very unlikely.

Katie: Kind of fraudy.

Ben Glasner: kind of there. Like if someone’s being paid a wage. So wait. Yeah, go ahead.

Katie: So like there would never be a situation based on the way that it’s designed where the subsidy is higher than the base wage that is being paid.

Ben Glasner: Nope. We did the algebra.

Katie: If I’m putting on my fraudster hat, I’m going, all right, well maybe I’ll hire my fake worker, pay him $7.25, let the government cover the rest, and then I’ll tell them, you don’t have to do anything, but just by like participating in this scheme, we can, you know, I’ll give you Yeah.

Some of the money overall. Mm-hmm. [01:04:00]

Ben Glasner: So in that case, for the person, if $7.25 is the base wage, the most that they’re gonna be able to get is not gonna cover the full $7.25. So if they said, you come here, work for me, I will pay you $7.25, the government’s gonna cover the difference with the wage subsidy, and then you give me the entirety of the check back.

That entirety of the check does not cover the full cost of the $7.25 per hour. They’ll still be losing money on that transaction as a result.

Katie: Mm-hmm.

Ben Glasner: Now there’s a world where they’re trying to say like, oh, come work for me specifically, but also you have to pay me from the check that you’re getting some amount.

Maybe there’ll be some types of coercion, maybe power is playing into it to try and induce more wage theft, which is a problem in and of its own. But the reality is that those types of things do already occur in the labor market, and we have regulations set up to pursue those exact types of problems. So I would really prefer someone who’s really concerned about the fraud and that variety to also invest the time and energy into trying to enforce those wage regulations we already impose.

We have that problem already. And I would rather [01:05:00] have the people who are currently being stolen from have more job opportunities so they can leave those bad managers.

Katie: The other trend was inflation. Yes. People worried about inflation. I was thinking about a, a a a, an example that I had read about in the past, in which in situations where minimum wages were raised locally, that landlords would respond to that by raising rents because typically low wage workers are renters.

And so they got into this weird cycle where like the landlords were the ones that ended up actually like absorbing or capturing those gains rather than the workers. I’m sure you’ve thought about this, so I’m, I am curious about the either inflation piece of it or, or essentially like is there a world we are in if we are wanting to raise these wages because we want it to make it easier for people to afford their.

Subsistence goods, we’re talking housing, energy, uh, food, childcare, et cetera, that maybe it would just be more efficient or [01:06:00] effective to find ways to provide those services more cheaply rather than trying to inject more money into the demand side for goods that are still kind of being sold.

Ben Glasner: So number one, we absolutely should be doing more to support supply side infusions.

We want to have more housing, or at least I would like to say, we should have more housing, particularly in the places where people need it so that we can help control, or at least limit the growth in the housing cost in those places where we have such huge centers of employment. Same thing for energy and everything else on that exact front.

On the other side of it though, for the demand side, there’s lots of good reasons to want to have more of the types of things people are buying. Also they need to have the capacity to buy those things. So cash is a hugely flexible thing. We live in a market where cash helps mediate transactions, and that’s a good thing.

It’s nice that I can say, I personally need more childcare, so I would like to spend the new money I’m getting on childcare. And you might personally want to spend [01:07:00] it more on housing ’cause you don’t have a kid and therefore you can do that. And cash allows that flexible transaction across multiple different actors and inducing the scenario where more people have more money and they can spend that money on the things that they care about.

And let the price mechanism work itself out accordingly is how markets are able to make efficient worlds work. When people have different interests, different preferences in different scenarios. That’s not to say that it’s not still a worthwhile goal. Let’s try and say, well, we need more childcare. How do we allow for more workers in that industry?

It’s also nice to be able to say there’s housing available of high quality in the places people wanna live and where jobs are and it’s worth us pursuing that. I don’t think any of those concerns are reasons for us to say I should be afraid of boosting the incomes of low income workers. I think that’s a roundabout way of saying, I actually shouldn’t care about getting them money because the money’s just gonna go to some landlord somewhere else and like might as well just not give them the money to begin with.

That feels kinda like a cruel way of, of avoiding dealing with supply side constraints simply because you’re afraid of demand sized induced inflation.

Katie: I [01:08:00] appreciate that.

Ben Glasner: Yeah,

Katie: and thank you for being here today. That was really fun.

Ben Glasner: Thank you for having me. Really, it was great. I was terrified of where it might go simply because I know that you’re approaching the end of the podcast for, or I won’t say end.

I won’t say end the slight pause. You’re like,

Katie: maybe she’s gonna really just like let the wheels come off this thing. And

Ben Glasner: I thought there was a real chance that I would show up and it would just be, you know what, we’re just having a day. But I’m glad. Oh my God, that so funny. It was a great day. It was great.

This was a fantastic conversation and I’m really glad that you had the space to kind of host me here and we could talk about this.

Katie: Oh, thank you. Gosh. Now, now I’m curious like what points of friction you thought we were gonna get into. And how brave of you to still come.

Ben Glasner: I thought we were gonna do a UBI discourse.

I thought that there was gonna be a question about markets to begin with

Katie: because you think I come down on the side of universal basic income as something that we should have

Ben Glasner: more. The idea of like thinking about how UBI can be advantageous in dealing with these types of shocks.

Katie: I actually am not a UBI fan.

Ben Glasner: Oh really? [01:09:00] Okay then I wasn’t mistaken.

Katie: No. I do think universal basic services though I would die to see a world where like we are able to achieve universal basic services for healthcare, education, childcare. That’s like my pipe dream is like an economy that can use its wealth. For that I worry about UBI ’cause I’m like I, I think that this is just gonna further some of the problems that we already have.

I don’t really see it solving, I’ll say it this way. When I learned that Milton Friedman liked UBI, that to me was like, and that confirmed that my skepticisms were valid.

Ben Glasner: Oh, that’s a hilarious reason to start shifting against UBI. My lesson on most of it is always that we should just take every option seriously and really evaluate it in the context that it’s in. There are tons of great options around, and we should be really self-critical and self-reflecting on what are kind of our gut impulses of why do I want one versus another? Is it any different? And then try it every single time.

Katie: Vibes, baby, just

Ben Glasner: vibes.

Katie: I want the unions ’cause of the vibes.

Ben Glasner: I still have great [01:10:00] vibes from when I was in my union back in grad school.

I am very much a fan of the vibes on those fronts. So for me it’s always just about what’s the problem I’m facing right now. Yeah. And in this exact setting and what’s the best solution I can come up with. And that’s not necessarily, not the bundle of multiple things. They’re all distinctly targeting different aspects of power.

Katie: That is all for this week; we will see you next week. Our show is a production of Morning Brew. This episode was produced by me, Katie Gatti Tassin, with audio engineering and sound design from Nick Torres. Devin Emery is President of Morning Brew.