Home Economic Cash transfers are better than price controls – Marginal REVOLUTION

Cash transfers are better than price controls – Marginal REVOLUTION

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Really, and yes there is a trade-off at the relevant margin.  That is the theme of my latest Bloomberg column, here is one excerpt:

Or consider Treasury Secretary Janet Yellen. She supports the proposed hike, as she noted in her confirmation hearing last week, yet in 2014 she endorsed the view that a minimum wage hike would lead to significant job loss. Maybe now she knows better, but if the 2014 Janet Yellen could have been so fooled, then perhaps this debate is not so settled.

Why then push so hard for a policy with such murky outcomes? It would raise the wages of many workers, destroy the jobs of some low-skilled workers, and perhaps lower the hours and thus pay of many other workers.

The burden of the minimum wage is unclear as well. Perhaps it leads to higher retail prices, although many proponents suggest it comes largely out of business profits. This too is unclear, and again raises questions about the wisdom of pushing so hard for such a non-transparent set of reallocations and transfers.

In contrast, consider the plan for cash grants to families with children. Under one proposed plan, these grants would be between $3,000 and $3,600 a year, depending on the age of the child.

The benefits here are obvious and transparent, namely that families are better off when they have more money. Perhaps some families would use that money in self-destructive ways, but this basic view — that more money increases the chance for better outcomes — is not really contested.

And please — most policies are not self-financing!  So you should do more of the better policy, rather than pushing for both.