The Case Against Collective Bargaining

Helping Low Wage Workers

June 24, 2022

Introduction

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So what happens when the market wage is so low that employees can barely surviving on it? Assuming that these are employees in a certain location in a certain industry where the number of workers far exceed the number of jobs available, the government could step in and do things like bring in new industry, train workers for better jobs, or help move families to locations where there is stronger demand.

But there are also things the government could do to make it easier for people to survive on low wage jobs:

  • Eliminate the payroll tax. Currently, Social Security is funded by a tax on wages. 7.65% is paid by the employee and 7.65% by the employer. (Actually, 6.20% of that 7.65% is for Social Security and 1.45% is for Medicare.) Eliminating this tax and funding Social Security from the income tax would dramatically shift the burden to the rich, who then would have to pay on all of their income rather than just wages up to the limit of $118,500. Low income families whose only income is from wages and who now pay little or no income tax would, in effect, get a 7.65% increase in take-home pay.

  • States could replace sales taxes with income taxes. States like Michigan that have both could simply increase the income tax rate. States like Florida that don't have an income tax would either have to implement one or come with some other revenue source. Florida likes its sales tax because so much of it is paid by non-resident snow birds and vacationers; maybe they could charge an entry fee at the border.

  • Stop allowing businesses to deduct advertising costs as a business expense. That will not only reduce the amount of annoying ads we have to put up with, but reduce the amount of advertising expense that gets passed on to customers in the price of goods and services. It will also increase tax revenues.

  • Eliminate the corporate income tax and make up the lost revenue by taxing dividends and capital gains at the same rate as ordinary income. An increase in the individual income tax rate will likely be required, also. For corporations, taxes are just another business expense that gets passed on to the customer.

  • Provide free, universal health care, like most civilized countries do. That would not only remove a huge financial burden on low wage workers, but keep them healthy.

By making low wages survivable, U.S. businesses will be able to reduce prices and better compete with foreign companies, keeping more jobs in the U.S.A.