I have a person arguing that the cutting of tax credits (pretty much the EITC) and increasing minimum wage to $15.33 in the UK is a good idea.

The reduction in tax credits and increase in MW is forecast to make 13 million people (42% of the UK labour force) lose £250 a year, 8.4 million households lose £550, and the 2nd, 3rd and 4th deciles of the household income distribution lose £1340, £980 and £680 a year, respectively, and cost tens of thousands of jobs in the meantime. Tax credits in the UK and the minimum wage target different groups. The change, like you might have guessed, is quite regressive (sorry if I used the word wrong, and I mean it in the sense that the poorest are hit more than the richest) - the 2nd poorest decile will lose over 7% of their income.

He thinks this is due to a combination of

• "people's behaviour will change" - I didn't think people will be enthused about working an extra 100 hours a year and getting no benefit from it

• in-work benefits create "uneconomic work", increasing demand (which is government funded, and concentrated, whatever that means) as the money for the benefits doesn't come from increased productivity and is necessarily more inflationary, thus ending them will reduce living costs

Rather than call this deflation, he calls it a "price correction" that leads to more "organic pricing", and he says the change doesn't matter on a macro level, because, again, people's behaviour will change. I thought that would make it matter on a macro level.

How right/wrong is he? It''s certainly unconventional, and I know people here like to say the EITC is a better method of targeting low wages than the minimum wage.