Wage subsidies would encourage more people to work.
Cas 15 --- Senior Fellow at the Manhattan Institute.
Oren, 8-19-2015, "A Better Wage Hike," US News & World Report, https://www.usnews.com/opinion/economic-intelligence/2015/08/19/wage-subsidies-are-better-than-raising-the-minimum-wage
For these reasons, economists tend to dislike minimum wage increases and argue instead for expanding the Earned Income Tax Credit, known as the EITC. Low-income households receive this credit when they file their taxes at the end of the year, getting additional money from the government for each dollar earned up to a limit. For instance, a single mother with two children who earns $18,000 (equivalent to 30 hours per week for 50 weeks at $12 per hour) receives an EITC of more than $5,000 that lifts her family above the poverty line. The EITC solves the minimum wage's critical problems: It encourages more people to work instead of shutting some out of jobs and it uses tax dollars so the cost is distributed in the same way as for other government programs. But while the EITC looks great on the blackboard, it cannot deliver that well in practice. Recipients tend to be only vaguely aware of how the program works and what they could receive, which means it cannot provide much of an incentive to start working. They receive one huge payment long after their work year is over, which makes covering day-to-day necessities difficult. And because different workers receive different credits depending on the size of their family and how much they work, the labor market skews in favor of some at the expense of others.
An ideal policy would look to workers like an increased minimum wage (more pay for every hour worked) but to the labor market and broader society like an expanded EITC (a government subsidy to support the low-income worker). A wage subsidy would do just that. A wage subsidy adds dollars-per-hour to the worker's wage, on a sliding scale that pays the highest subsidy for the lowest wage and phases out to no subsidy as the wage increases. A worker earning $8 per hour might, for instance, receive an additional $2 per hour in his paycheck. And he would receive that for every hour worked, no matter how many hours he worked or how much he eventually earned. For him, the policy appears like the minimum wage has been raised to $10 per hour. But for his employer and co-workers and customers the cost is still $8 per hour. Other workers unwilling to take a job at $8 per hour but willing to at $10 per hour would join the labor force as well. A wage subsidy sounds expensive, but in reality it is money that America already spends on the EITC and on a host of other anti-poverty programs that cost a combined $1 trillion per year. Using more of that money to put wages into the pockets of low-income workers would be a far better way to promote work, support low-income households and combat poverty.