There’s been a lot of talk lately about the minimum wage, now that New York and California have increased it to $15 (over the next few years).
This is a literal, not a rhetorical or loaded question: what stands in the way of keeping the minimum wage where it is, but (where mathematically possible) decreasing payroll taxes on minimum wage workers by the equivalent of the proposed increase in the minimum wage? I encountered the proposal decades ago in an op-ed piece in The Washington Post by James Glassman, but have heard almost nothing about it since.
I have no idea whether or not the minimum wage gives rise to a significant unemployment effect for low wage workers, but if there is one, you’d avoid it by this method–while engineering a “pay raise” for the very people who’d benefit from an increase in the minimum wage. Yes, you’d lose some payroll tax revenue, but if we’re talking about minimum wage workers, so what? How much revenue do they generate? And why would there be an imperative to take it from them anyway? They’re the wage earners who can least afford it.
One objection I can think of is procedural: while minimum wages are set at the state level, payroll taxes involve federal fiscal policy. But I wonder how conclusive that is. Anyway, the explanation can’t possibly be that unless we tax minimum wage workers, fiscal catastrophe will ensue. Can it?
I don’t have a worked-out view on this; just puzzled why it’s not part of the discussion or on the table as far as policy options.