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TOP UP — How to help the lowest wage earners
Avraam J. Dectis
May 18, 2021 — updated
A. The Problem
A great deal of attention has been given to the issue of inequality. Inequality can be summarized as large percentage of the population having inadequate income and inadequate income growth.
This essay describes a tool that can be used to help the sub median wage earner live a more civilized existence and, possibly, gain the income needed for further self-improvement.
B. Top Up: A tool to buttress the sub median Wage Earner.
The mechanism is simple and elegant.
For every hour that a sub median wage earner worked, they would accrue a small subsidy that would push them toward the median wage, but not over it.
The goal is to skew a few percent of GDP to the sub median wage earners.
The effect would be hugely beneficial to those sub median wage earners and also boost demand by a few percent of GDP.
For example, suppose the median wage was 20 and the minimum wage was 8. A top up might consist of giving everyone sub median an additional 3 plus 50% of what they earn over the minimum — with the total not exceeding the median.
The minimum wage worker would get 8 plus 3 per hour. The worker earning 14 would get 14 plus 3 plus 3 per hour.
A top up would provide an incentive to take the unattractive jobs as well as increase the likelihood of a civilized standard of living for everyone. It would also increase the supply of quality labor and make USA based employment more attractive.
Top up also addresses political concerns because only those working get topped up.
C. Effects of Top Up
Several effects can be expected from a Top Up Policy.
1) The submedian wage earner will have more money, allowing them to live a more civilized life. This supports quality of life and social cohesion.
2) Demand will increase, since sub median wage earners are not great savers. Demand may increase by an amount similar to the total Top Up. The multiplier effect would diminish the net cost of the Top Up. This would increase GDP. This helps businesses and…
