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In Bernie Sanders vs. Amazon's Jeff Bezos, Only Workers Lose

September 16, 2018 in Economics

By Ryan Bourne

Ryan Bourne

Vermont Sen. Bernie Sanders’ fight against corporate America
over low worker pay has progressed in the Stop Bad Employers by
Zeroing Out Subsidies Act (aka the Stop BEZOS Act), targeted at Amazon and
Walmart. Bernie claims taxpayers subsidize these corporations
because many employees receive government welfare through food
stamps, school meals, rental assistance or federal contributions to
Medicaid. To stop this, his bill would tax companies with 500 employees or more
dollar-for-dollar for the value of benefits received by
workers.

This is an extraordinarily dangerous policy based upon major
economic misunderstandings. In fact, it is difficult to think of a
worse way of helping lower income workers.

However much Sanders insists otherwise, in competitive
industries, workers’ pay and benefits tend to match the value of
the work they’re doing. Firms cannot “underpay,” or else they risk
losing employees to other businesses, while “overpaying” would be
financial suicide. Yet this bill does not raise workers’
productivity, just the cost of hiring welfare recipients. Sanders’
“Corporate Welfare Tax” threatens welfare recipients’ access to
jobs.

Taxing companies who
employ welfare recipients might raise pay rates for some workers,
but its main effect will be to make large numbers of people
unemployable.

The U.S. Census Bureau shows a single-parent household
with two children earning $20,000 per year receives (on average)
$2,100 in food stamps and $770 in school meal support. The federal
government finances about 63 percent of Medicaid spending, too. Add in
housing assistance and it’s not inconceivable that households like
this receive upward of $10,000 in the benefits Sanders singles out.
Under Sanders’ legislation, the cost of employing a single mother
in that situation will rise dramatically, through a combination of
the tax and/or higher wages. She probably would lose her job,
becoming more dependent on federal government benefits as a
result.

Making workers unemployable

Despite Sanders’ professed intentions, his bill risks branding
millions of workers as too expensive to hire. Even though he plans
to outlaw employers asking employees questions about welfare
received, companies will engage in significant profiling to weed
out workers in receipt of large welfare payments.

Working-age people over 45 cost almost twice as much in Medicaid as younger
workers. The tax liability for employees with disabled dependents
could be huge and uncertain, whacking companies years after medical
care is delivered. Given companies hire people to undertake given
tasks, the tax therefore encourages businesses to opt for young
men, those available full-time, the childless or machines.
Part-time work seekers could be particularly hard hit, given
Sanders’ tax charges for dollars received in welfare benefits
irrespective of an employee’s hours.

Sanders stems from …read more

Source: OP-EDS

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