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Designing Inclusion: Tools to Raise Low-end Pay and Employment in Private Enterprise

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Edmund Phelps is the very best eocnomist to tackle employment as a problem to be solved. In this very short book, Phelps puts in policy making language the findings that have made him famous and earn a Noble Prize.

The problem is clear: how to improve the lot of low wage earners. Low wages, though they may seem economically efficient, carry along heavy social externalities, such as malnutrition, poor education, poor health, etc. Phelps explores the economic alternatives to improve the lives of low wage earners. He carries the reader through his thinking, presenting ample evidence and reasoning so that the reader arrives at his well thought out conclusion.

Just as an advance of the book (in order not to leave one in suspense), his main conclusion is that a subsidy for companies to hire workers at a certain wage (a minimum social wage) is the best way to stimulate profit seeking companies to adjust wages to that level. A small subsidy is generally sufficient to achieve a good improvement in wages.