I am tired of seeing a certain argument against the minimum wage that makes absolutely no sense. According to this argument — which Christina Romer is now guilty of making — we should not increase the minimum wage because increasing the Earned Income Tax Credit is an even better way to improve the lot of low-income workers. There are a variety of potential problems with this argument, but the most obvious and certain problem with it is that increasing the Earned Income Tax Credit and increasing the minimum wage are not competing policies. We can do both.
When I say we can do both, I mean that in a very technical policy debate way. We can do both in the sense that there is absolutely no trade-off between the two policies. This is rarely the case in policy discussions about helping low-income people because helping low-income people almost always means that the government will be spending money in one form or another. Such policies always generate trade-offs with other spending policies because any given dollar spent on one program could be spent on another. So saying that spending policy X is better for the poor than spending policy Y is a totally legitimate argument. It successfully argues that we should dedicate our scarce dollars into doing X instead of Y.
But increasing the minimum wage does not involve any government spending. The government just declares that minimum-wage employers must pay higher wages. So there is no competition or trade-off between increasing the minimum wage and increasing the Earned Income Tax Credit. As such, the relative benefits of the Earned Income Tax Credit over the minimum wage are entirely irrelevant. An argument that relies upon those relative benefits to reach a conclusion is automatically a bad argument. If increasing the minimum wage is good policy, then we should do it. If increasing the Earned Income Tax Credit is a better policy, then we should do it. If increasing the minimum wage does not trade-off with increasing the Earned Income Tax Credit, then we should do both.