It is generally accepted the globalization has improved the average standards of living all over the world. But there are also those who think the globalization has been bad because most of the benefits have chosen to those who were already rich. The income inequality has been growing in the U.S. which may also explain the popularity of recent campaigns of Bernie Sanders and Donald Trump. One of the possible suggestions has been to raise the minimum wage levels in the U.S. but this suggestion has also been met with resistance. The opponents of raising the minimum wage levels argue it will increase business costs and force them to lay off workers. Many businesses may also move jobs overseas. Thus, there is a need for a solution that addresses the concerns of all parties and the best solution may be the Earned Income Tax Credit (Buffet). The Earned Income Tax Credit will not raise business costs while also improving the income of many low salary workers.
The supporters of raising the minimum wage argue the current minimum wage levels are too low. They point to the evidence such as the fact that Walmart pay such low wages to its workers that the workers have no choice but to rely on the public welfare system to survive. It has been estimated that the Walmart’s low salaries cost the U.S. taxpayers $6.2 billion in food stamps, subsidized housing, and healthcare etc. (O’Connor) The Earned Income Tax Credit will also increase the incomes of such low salary workers and may help the U.S. taxpayers save lot of money. The Earned Income Tax Credit will do so by enabling the workers to keep more of the income that they would otherwise have paid in taxes.
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The opponents of the higher minimum wage levels will also find the Earned Income Tax Credit an acceptable solution. The Earned Income Tax Credit will not raise the business costs, thus, it should not force businesses to lay off workers or choose outsourcing. In addition, it may even benefit the businesses because the workers will have higher incomes as a result of Earned Income Tax Credit. This means they may also increase the demand for goods and services produced by the businesses.
One of the greatest benefits of the Earned Income Tax Credit is that it may also appeal to those who oppose other forms of welfare that may reduce the incentive to work. The Earned Income Tax Credit only allows the individuals to reduce tax on the income that have earned by working. In other words, those who are not working will not qualify for the Earned Income Tax Credit. This is also an effective solution because it is aimed at the low income groups that would benefit more from greater disposable income as compared to the high income groups. The low income groups tend to spend more of the additional income which supports economic activities while high income groups tend to save more of additional income which may be a good habit but it doesn’t support the economic activities.
An effective solution takes into account the concerns of all parties and the Earned Income Tax Credit is a reasonable compromise between the opponents and the supporters of raising the minimum wage levels. It helps the low income groups enjoy higher disposable income while it also doesn’t put any additional burden on the companies. This could help lower income inequality in America as well as reduce the opposition to the globalization and public policies that promote free trade.
- Buffet, Warren. Better Than Raising the Minimum Wage. 21 May 2015. 18 October 2016 http://www.wsj.com
- O’Connor, Clare. Report: Walmart Workers Cost Taxpayers $6.2 Billion In Public Assistance. 15 April 2014. 18 October 2016 http://www.forbes.com
