Changing the business environment is important, but it is also important to provide opportunities for self-improvement for low-income households, by offering more easily accessed channels of educational advancement and incentives to savings.
And good luck with that. The Obama administration may be genuine in its concern for the poor, but it has shown itself willing to subordinate that concern to political demands. One of the surest paths from low income to higher income is education, and one of the administration’s first acts in office was to declare war on a popular school-choice program in Washington, D.C., that benefited families that were overwhelmingly low-income and black. It did so at the behest of its union allies in the public sector, which resent being forced to compete for funds, preferring instead that the federal government shunt them directly into their coffers. No surprise, then, that beyond raising the minimum wage, the president also proposed raising spending on preschool programs, even though study after study shows that these are exceedingly poor investments that bring little or no return in the form of long-term educational improvement. But they do create jobs for members of the public-sector unions that fund and staff Democratic campaigns. Likewise, the administration’s eagerness to accommodate illegal immigrants and to continue the influx of low-skilled labor from abroad promises to put further pressure on the wages of those Americans who can least afford to bear it.
And while the economic situation of low-income workers is and should be a focus of our policy debate, it is at least equally disturbing and in the long term probably far more consequential that incomes and household wealth are stagnating not only at the low end but at the median as well. The president’s half-baked “middle-out” economic rhetoric is attached to no economic agenda that will strengthen the position of the vast majority of middle-class Americans. Denouncing malefactors of great wealth in the nation’s banks and boardrooms is a politically convenient way of masking the fact that the broad middle is facing serious economic challenges that have little to do with machinations on Wall Street and a great deal to do with incompetence in Washington.
Turning around the American job market means turning around the American economy in toto, which is no small thing. It requires putting the federal government, the states, and the cities on sustainable financial footing in order to create a predictable fiscal environment that encourages long-term investments. It requires deep and broad regulatory reform and a more sensible tax system, one that treats taxpayers in a more evenhanded fashion and imposes dramatically lower compliance costs. And, especially in the case of low-income young people who all too often go on to become low-skilled workers, it means radical reform of our sclerotic education system, which is one of the least effective and most dysfunctional institutions in American public life. Unhappily, the Obama administration and its Democratic allies in Congress stand in the way of reforming the schools, the tax code, and the regulatory agencies. Our most successful industries, especially the energy industry, are constantly in their crosshairs. Even highly regarded firms of a progressive bent, such as Apple, find themselves in the role of whipping boy because they do not always conduct their business in the way that their friends in Washington wish them to. The minimum-wage bill is but one manifestation of Washington’s belief that it can manage the economy on a fly-by-wire basis.
We’ve learned from the fiasco of Obamacare that passing a law purporting to make insurance more affordable and more accessible does not necessarily make insurance more affordable and more accessible, and that most of the promises attached to that so-called reform project either turned out to be unachievable in the face of economic reality or were cynical misrepresentations from the beginning. Likewise, you can pass a bill purporting to raise wages, but it will not necessarily result in higher wages. It is as likely to result in higher unemployment among lower-skilled workers, stagnation, and labor downsizing.
But as poor a policy initiative as the minimum-wage proposal is, what is perhaps worst about it is the political opportunity cost: While we’re having another emotionally charged debate about this third-tier issue, the real long-term problems facing our economy go unmentioned and unaddressed.