Rewarding Work

Economist Edmund Phelps argues that a decent paycheck is central to how people feel about themselves and how seriously they take their obligations. He traces why this has grown harder for workers at the bottom of the pay scale: as the economy increasingly rewards knowledge and technical skill over physical strength and sheer effort, those with fewer such skills find it difficult to earn a living wage.

Phelps contends that one of the most pressing challenges for economic and political institutions is finding ways to help less productive workers earn a reasonable income so they can rejoin the mainstream economy. His proposal is a sliding scale of tax subsidies paid to employers for each low-wage worker they hire. As companies took on more of these workers, the labor market would become tighter and wages would climb.

According to Phelps, the program could largely pay for itself. Savings in welfare spending, crime, and health care costs would offset much of the expense, and the taxes paid by people who were previously out of work would add further revenue. The book approaches the problem as a kind of economic engineering, designing wage structures that help low-paid American workers become self-sufficient and regain their self-respect.