An Alternative To Raising The Minimum Wage, Ctd

Contra Barro, Noah Millman believes that raising the minimum wage is superior to increasing the EITC. Among other arguments:

[A] hike in the minimum wage creates incentives to improve productivity, while a hike in the EITC has the opposite effect. A hike in the EITC makes it more possible for employees to continue to work, and survive, at very low wages. Because of the low wage, the employer has little incentive to invest in the worker – indeed, any investment is likely to “pay off” by seeing the worker leave for a higher-paying job. By contrast, a hike in the minimum wage creates a dilemma for employers: either they need to get more value out of their employee, or their profits will decline. That creates an incentive to invest in the employee, in order to derive value that justifies the higher wage. And, in fact, there’s empirical evidence that hikes in the minimum wage can reduce turnover and drive productivity improvements at the bottom of the wage scale.