WHY WOULD THE EMPLOYER INCREASE THE WAGE RATE...:

Oren Cass ran domestic policy for Mitt Romney's 2012 campaign -- and has a serious, developed proposal to help the working poor.

Cass, now a senior fellow at the Manhattan Institute, on Tuesday published a plan to replace the Earned Income Tax Credit -- the big tax break the federal government uses to support the working poor -- with a wage subsidy. That would, according to him, help childless workers who are currently left out of the safety net, discourage work less than traditional social programs, and provide low-income families with more regular financial support. It's the best response conservatives have produced yet to Fight for $15 and other left-wing movements to boost pay for working people. [...]

Cass's big idea is to replace the Earned Income Tax Credit -- the big tax break the federal government uses to support the working poor -- with a wage subsidy. The difference between the two ideas is subtle, but important. The EITC is paid in a lump sum as part of tax refunds every spring; it's calculated as a function of a household's total earnings throughout the previous year, and is primarily geared toward families with children, offering little to childless workers. Wage subsidies would be paid to individual workers, not to households, and through their regular paychecks as opposed to one big check every year; and, because the subsidy is administered on the individual level, it'd offer just as much to childless workers as to workers with families.

Here's how it would work. The government would set a target hourly wage; this could either be the same everywhere, or vary locally based on state and local labor market conditions. One option Cass floats would be to set the target wage at 60 percent of the median wage in an area. So if the average worker in a region is making $20 an hour ($40,000 a year if working full-time), then the target wage would be $12. The government would then commit to paying half the difference between an employee's market wage and the target wage. For example, imagine the target wage is $12, and an employer is paying a worker $8 an hour -- $2 is half the difference, so the government would add $2 an hour to the employee's paycheck. Once an employee is making the target wage, government support ceases, which keeps costs under control. [...]

"The real distinction between the EITC and the wage subsidy is that the EITC phases out as your income increases, and the wage subsidy phases out as your wage rate increases," Cass tells me. 

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