Rewarding Work: How to Restore Participation and Self-Support to Free Enterprise

Rewarding Work: How to Restore Participation and Self-Support to Free Enterprise

by Edmund S. Phelps
     
 

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For two hundred years, the economic engine of capitalism helped make the United States a nation where almost anyone willing to take initiative, work hard, and save money could lead a comfortable life, raise a family, and assume an active role in the community. Since the 1970s, however, a gulf has opened between the wages of low-paid workers and those of the middle

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Overview

For two hundred years, the economic engine of capitalism helped make the United States a nation where almost anyone willing to take initiative, work hard, and save money could lead a comfortable life, raise a family, and assume an active role in the community. Since the 1970s, however, a gulf has opened between the wages of low-paid workers and those of the middle class. With this decline in their reward, workers' job attachment has weakened, thus reducing employment. The entitlements of the welfare state have magnified the effect. The effects in turn on crime rates, drug abuse, and other indicators of social breakdown are costly for everyone.

Edmund Phelps underscores the importance of earning a respectable wage to foster self-worth and responsibility. He shows that earning such a wage has been increasingly hard for those at the low end of the wage distribution as productivity has come to rely more on knowledge and skills and less on brawn and hard work. A crucial task for our economic and political system, Phelps asserts, is to devise methods to help less productive workers draw a reasonable wage, thereby reintegrating them into the economic mainstream. Phelps's solution is a graduated schedule of subsidies to enterprises for every low-wage worker they employ. As firms hired more of these workers, the labor market would tighten and pay levels would rise. Ultimately the program would be largely self-financing, because its cost would be offset by reductions in the cost of welfare, crime, and medical care—as well as by formerly unemployed workers who would then pay taxes.

Rewarding Work is an essay on what could be called economic engineering—in this case, the engineering of wage structures to help low-wage American workers achieve self-sufficiency and self-respect.

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Editorial Reviews

Peter David
[Phelps] takes the view that many Americans have been driven out of working lifeand deprived of all the physical and psychological succor that work providessimply because their wages are too lowespcially when the amount they are able to earn is compared with the amount they can 'earn' in payments and kind via the welfare system by doing no work at all...Phelps makes his economic case with forensic clarity. —Wall Street Journal
Booknews
Phelps (political economy, Columbia U.) presents an analysis of the US working class and middle-class developing a plan to raise wages and lower crime levels. It sounds good 7#151; in theory — a species of trickle-down involving tax subsidies to firms who would hire more "non-skilled" workers, tightening the labor market and making pay levels rise. The author argues that the program cost would be offset by reductions in welfare and crime, and taxes paid by unemployed workers. The thesis, familiar, classist, and full of holes, contributes to the library of economic adjustments made by academics and politicians who don't have much experience with reality.

Product Details

ISBN-13:
9780674094956
Publisher:
Harvard University Press
Publication date:
04/28/1997
Pages:
208
Product dimensions:
6.43(w) x 9.52(h) x 0.79(d)

Meet the Author

Edmund S. Phelps is McVickar Professor of Political Economy at Columbia University and winner of the 2006 Nobel Prize in Economics.

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