Since the 1970s a gulf has opened between the pay of low-paid workers and the pay of the middle class. No longer able to earn a decent wage in respectable work, many have left the labor force, and the job attachment of those remaining has weakened, also reducing employment. For Edmund Phelps, this is a failure of political economy whose ill effects have spread widely and are undermining the free-enterprise system itself. His solution is a graduated schedule of tax-subsidies to enterprises for every low-wage worker they employ. As firms hire more of these workers, the labor market would tighten, driving up their pay levels as well as their employment.
"Edmund Phelps has proposed a radical scheme to subsidize low-wage labour in the United States ... [Workers'] pay and employment prospects would be transformed ... The modern welfare state is working very badly, and Mr. Phelp's scheme is intended in due course not to add to it, but to replace it." - Clive Crook, Economist.
"[Phelps] takes the view that many Americans have been driven out of working life, and deprived of all the physical and psychological succor that work provides, simply because their wages are too low, especially 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 case with forensic clarity." - Peter David, Wall Street Journal.
"The beauty of Rewarding Work is, well, its beauty. It is a superbly worked-out argument: clear, pithy, brief, and derived from first principles." - David Warsh, Boston Globe.
"The Chancellor has put forward the idea of a working family tax credit ... The most drect assault is always the best. If the problem is low wages and inadequate incentives to work, the solution must be wage subsidies ... [Phelps] offers a compelling argument for a tapered subsidy to low-wage employment." - Martin Wolf, Financial Times.
"[Phelps] plan, laid out in ... Rewarding Work, has drawn rave notices from both conservatives and liberals, making it the most interesting idea in years ... Something like [this] idea ... may be the only way to achieve a lasting political consensus for the open markets and technical advances that, in the long run, benefit us all." - Mathew Miller, Washington Post.