When the cream of the French left gathered last week to listen to Ségolène Royal's 100-point manifesto, the works of Milton Friedman were probably far from their minds. Social justice and greater equality, they may argue, are anathema to the market-based beliefs held by Friedman's followers. Yet if these people really wanted to help those languishing at the bottom of society, they would advocate not the Socialist presidential candidate's huge, 20 per cent increase in the minimum wage but moregovernment-funded wage subsidies. This is a truly Friedmanite idea.
The concept of a negative income tax, outlined in his 1962 book Capitalism and Freedom, is attractively simple: everyone receives a fixed minimum income from the state, which is then withdrawn at a rate of 50 cents of each dollar earned. Such a system has many advantages over other welfare models: it is easy to administer, based only on income and paid in cash. When the essence of Friedman's idea is combined with a requirement to work a certain number of hours, the scheme becomes what is known as a wage subsidy. Many economists have advocated subsidies of this sort, including the latest Nobel laureate, Edmund Phelps.
