Referencing a contribution by Ezra Klein to an ongoing conversation about Wal-Mart, its business model and the social, political, and economic consequences of that model, Reihan Salam states, or, perhaps, sketches, the case for wage subsidies:
Hence the case for wage subsidies. Wal-Mart shouldn't be held responsible for solving all our social ills. On the center-left, there really are (at least) two distinct approaches to Wal-Mart: in cities like Chicago, politicians target big-box stores per se, as though Wal-Mart were a black-hatted corporate villain that exists in a vacuum. (McDonald's also plays this role.) Then there are those who very sensibly advocate comprehensive national policies that would impact all of us. My bias is clear. The right policies are those that use revenues raised by broad-based taxes to fund a basic minimum: a decent wage and health care.
At first brush, this is baffling. In the final analysis, it remains baffling. I suspect I will still find it baffling even after I have digested Salam and Douthat's argument for wage subsidies in their forthcoming book. For manifestly, the proposed wage subsidies are intended as a solution to the problem of the substandard wages and benefits provided by Wal-Mart - and many other corporations these days - and equally manifestly, a standard line of conservative analysis would rightly portray such a subsidy as a de facto subsidy of Wal-Mart's scrooge-like wage policies. Wal-Mart will be enabled to continue its low-wage, low cost policies, which are profitable, but impose significant externalities on a society unwilling to countenance Dickensian conditions among the poor and lower-middle; and the costs of those externalities will be borne by you and me, dear readers. The plutocrats will reap their earthly rewards, while we will pay to mitigate the penury of their employees. Or, they could simply pay higher wages, and pass the costs along to us as consumers of goods and services, and eliminate the government middlemen, which would be less convoluted. As I say, baffling.
Nevertheless, more remains to be said, for the very consideration of any sort of wage subsidy signifies something, something that receives altogether too little consideration in American political discourse. It signifies that we believe - rightly - that the deliverances of market discipline cannot be equated with justice. Now, it might be argued that these subsidies are necessary as a utilitarian measure, a purchasing of social peace, lest the masses revolt against the capitalist system - and this aspect is always present in these social-democratic policy debates. Certainly the New Deal may be portrayed in these terms, at least in part. But this only forces the regression of the question to a deeper level: if subsidies are the price of social tranquility, on what grounds would the masses conceivably revolt? Why, they would revolt because they believed they were receiving a raw deal from the economic system, that is, that they were being treated unfairly - which is, in the parlance of the age, to state that they were being treated unjustly. And the American political system would disburse the subsidies because the American people, generally, would regard Dickensian or quasi-Dickensian conditions among the working poor and lower-middle as - wait for it! - unjust, and unbecoming of America.
So, this very proposal presupposes that market outcomes are often orthogonal to justice, and may even be rankly unjust. Injustice, though, however systemic it may be, is only made concrete in the actions of identifiable persons towards other identifiable persons. Which is to say that it is Wal-Mart that perpetrates definable, specific injustices against certain persons.
Why, therefore, is it the case that I must pay for the rectification of Wal-Mart's injustices, as these are defined by my society? After all, I haven't hired anyone for a substandard wage, and then scheduled his work hours so as to keep him just below the threshold that would qualify him for health benefits. Ah - there is the rub: the conviction that the system of predatory global capitalism, forever seeking profits through innovations in labour arbitrage, has some benefits to bestow upon us, and is, in some sense, inevitable (ah, that doctrine of fatality! Paganism lives!); the only thing that remains to us is to mitigate those externalities through public policy, a postmodern version of bread and circuses for the propertyless masses.
What's the point if the proposal itself implicitly concedes the injustice of the system, and concedes, moreover, the incapacity of a purely positive system - which is what the economics profession conceives the system of global trade as being - to deliver substantively desirable outcomes?