Inderscience Publishers

Problems with wage subsidies: Phelps's economic discipline and undisciplined economics

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This paper discusses problems with wage subsidy proposals, specifically focusing on the proposal in Rewarding Work by Edmund Phelps. It shows that the book uses one price theory to argue that the whole benefit of a wage subsidy will go to workers (rather than firms or consumers), but it uses an opposing price theory to argue against the Earned Income Tax Credit, unions and public jobs. These and other inconsistencies in the book make it a weak argument for its conclusions.

Keywords: wage subsidies, basic income, redistribution, green economics, rewarding work, economic discipline, undisciplined economics, Edmund Phelps, price theory

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