The "Blue-Collar Bonus" Bill
/
Sen. Josh Hawley
In February, 2021, Senator Josh Hawley, a Republican from Missouri, introduced a new legislative proposal into the US Senate. Hawley’s bill is described as a “Blue Collar Bonus,” and would raise the hourly wage rate for workers earning less than $16.50 an hour.
You may recall that “$15 an Hour” is something people on the other side of the political spectrum are demanding. And you may wonder why Hawley is urging a bill to accomplish what the Democrats and liberals want — raising the base wage to an even high level than they demand.
The answer is in the details of how Hawley’s bill would work. The best explanation I’ve found appear in The Week.
Hawley promises government cash for any worker making less than $16.50 per hour, with the federal government paying half the difference between that and their current pay. Large employers making $1 billion or more in annual revenues would have to pay a straight-up $15 per hour minimum wage. Sounds great, right?
Except the outcome is a corporate giveaway masquerading as pro-worker policy, with terrible incentives that will encourage many employers to lower worker pay.
An employer currently paying $15 per hour would have every reason to cut all employees' pay by $1.50/hr down to $13.50/hr. Since the worker is now making $3 per hour less than $16.50, the government would send them a check for $1.50 per hour, restoring their original pay.
Or a worker making $13/hr could have wages reduced to $9.50 per hour and Hawley's plan would send them $3.50/hr cash to give them the equivalent of their original pay.
In both cases, the employer could effectively pocket the whole government subsidy. Mike Konczal, Director of the Roosevelt Institute, estimates that something like two-thirds of Hawley's subsidies would go directly into expanded corporate profits.
Hawley’s proposal seems like it provides a benefit to workers. What it would really do it benefit large employers. It would make the federal government pay part of the wages of people employed by those corporations. And you don’t need me to remind you that the money the federal government would be giving to those corporations would be collected from taxes paid by the workers.
So what appears to be a shift in benefit from employers to workers is, in fact, the opposite.
It is hard to pick up on the details of this bill. Most of the coverage is superficial. Here is the announcement about the bill in Hawley’s Senate website.
Senator Hawley said, "Wages for blue-collar workers have been stagnant for decades. And government made the problem worse by shutting down the economy a year ago. It’s time we give blue-collar workers some respect and a pay raise. This plan would deliver meaningful relief for families and working Americans through higher pay while incentivizing and promoting work."
Here is what Fox Business had to say about it:
Sen. Josh Hawley unveiled a new proposal on Wednesday that would use taxpayer money to increase the income of low-earning Americans, a plan that he's pitching as an alternative to Democrats' $15 minimum wage push.
Under the measure — dubbed the Blue-Collar Bonus — workers earning less than $16.50 per hour would receive a refundable tax credit worth 50% of the difference, paid out in quarterly installments. The wage cap of $16.50, indexed to inflation, could increase over time.
I looked at many other reports on Hawley’s proposal. Several of them delved into the political prospects of the bill becoming law and into how this proposal might serve Hawley’s future political ambitions. But none of them aside from The Week analyzed how the bill would work. None of the others recognized that a bill being promoted as a “Blue-Collar Bonus” is actually a corporate giveaway.
Here is a pretty good summary of the US tax system from the international news service Reuters.
But remember that how the money is collected is only half the story. The other part is how the money is spent by the government. And when you look into that, you discover “corporate welfare” — the government’s habit of shifting money away from moderate-income individual taxpayers and giving it to massive and profitable corporations. Here’s a description of corporate welfare from the conservative Cato Institute:
Business subsidies undermine both capitalism and democracy. Allowing politicians to channel economic resources toward their preferred ends distorts investment and trade. Moreover, turning government into an engine of illicit profit encourages what economists call rent‐seeking. Well‐organized special interests usually triumph over the broader public and national interest.
Explained Mercatus scholar Tad DeHaven, then a budget analyst at the Cato Institute: “Corporate welfare often subsidizes failing and mismanaged businesses and induces firms to spend more time on lobbying rather than on making better products. Instead of correcting market failures, federal subsidies misallocate resources and introduce government failures into the marketplace.”
Yes, that is from a conservative group! Real conservatism does not condone business subsidies. And those corporate subsidies are large. According to one government study a few years ago, government giveaways to corporations are at least as large as the total amount collected from corporations. The government gives back to corporations everything it collects from them — leaving individual taxpayers to support literally everything the government does.
The Hawley proposal provides us with several important points. It shows how politicians are skilled at talking about legislation to make it seem like a good deal even when it isn’t. And it shows that news sources are often pretty slack about analyzing what politicians are really up to.
