Here are a number of potential approaches, and my responses to them:
1. Raise the minimum wage: This approach is popular among Democrats because it doesn’t involve any government spending and is therefore more difficult to deride as “free stuff.” It imposes the cost of the welfare state on employers and consumers rather than taxpayers.
While there are studies which indicate that minimum wage increases do not necessarily reduce employment, these are inevitably tied to specific economic conditions. I don’t think you can automatically assume that increasing the minimum wage will never have a negative impact on employment, and it is my opinion that the cost of societal choices like this should be borne by everyone, not just employers and consumers. There is definitely a case for some measure of increase, particularly since the value of the minimum wage has been eroded by inflation over the last decade or so, but this is a blunt instrument that should be used carefully and sparingly, and with an eye to local circumstances.
2. Wage subsidies through the tax system: In my opinion, this is a better approach from an economic perspective, but it is more difficult politically, because it looks more like unpopular “free stuff” to both taxpayers and recipients, and it drives up the deficit.
3. Protectionism: By all plausible accounts, this is the most inefficient way imaginable of driving up wages.
4. Minimum income stipends: I think this is where we are headed in the long run, but the public is not ready for it yet.
5. Make labor more valuable by shifting the cost of the welfare state from employers and employees to all taxpayers: I will advocate for this in a future post.