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A wage subsidy is a payment to workers by the state, made either directly or through their employers. Its purposes are to redistribute income and to obviate the welfare trap attributed to other forms of relief, thereby reducing unemployment. It is most naturally implemented as a modification to the income tax system.
The wage subsidy was proposed by A. C. Pigou in his book The Theory of Unemployment.[1] It was subsequently advocated by American economists Edmund Phelps[2] and Scott Sumner,[3] American policy advisor Oren Cass,[4] and British economist Tony Atkinson under the name of participation income.[5]
The wage subsidy differs from universal basic income (UBI) in being limited in its scope to workers in paid employment, and does not generally seek to take the place of other benefits.
- ^ A. C. Pigou, "The Theory of Unemployment" (1933); see 'subsidies' in the index for mentions in the text.
- ^ Phelps, Edmund S. (1994). "Low-wage employment subsidies versus the welfare state". The American Economic Review. 84 (2): 54–58.
- ^ Sumner, Scott. "You can't redistribute income". www.themoneyillusion.com. Archived from the original on 11 August 2017. Retrieved 11 August 2017.
- ^ Cass, Oren (August 2015). "THE WAGE SUBSIDY -- A Better Way to Help the Poor|Issue Brief 37" (PDF). Manhattan Institute for Policy Research. Retrieved 2020-08-13.
- ^ Anthony B. Atkinson, "Inequality" (2015).
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