What ails the working class — and how to treat it
Editor’s Note: The following piece appears in This Way Up: New Thinking About Poverty and Economic Mobility, a collection of essays published by the American Enterprise Institute. It is adapted here with permission.
Conservatives are coming to a consensus about how to fight poverty and restore upward mobility.
It’s not one problem — there are several problems, or several dimensions. There’s multi-generational poverty — persistently poor communities, urban and rural — and there’s working-class economic anxiety. Stubborn poverty requires emergency surgery. That’s what we need to go at right away because that’s who’s hurting the most. But I don’t see these things as mutually exclusive. We need to address them all.
A lot of working-class anxieties start with economic growth — the much slower economic growth we’ve had in recent years. Our own domestic policies have been a big cause of that. The regulatory state hurts jobs, especially for small businesses and in the manufacturing sector. Our tax policy has made us extremely uncompetitive. And together, this has taken a big toll on working-class communities.
I live in Janesville, Wis., on the same block where I grew up. Janesville’s big employer until 2009 was General Motors (GM). GM sustained the town for nearly 90 years, and many of the people I went to high school with went to work at GM after we graduated. You could get a very good job in the plant and do very well and have a good life — and your kids could do the same.
But then in 2009, it ended. We lost the plant — just like that. Janesville used to make Tahoes and Suburbans. Now they’re made in Texas. And there wasn’t really anything to replace those jobs. Some of the guys I went to high school with had enough seniority in the union that they could move within the GM system — get a job in Saint Louis or Kokomo, Ind., or somewhere else where the company is still making cars. But lots of others didn’t have that option.
One buddy of mine is now the night guy at a QuikTrip convenience store. He went from GM — a skilled-trades job with a six-figure income and great benefits — to working as a night manager at a QuikTrip.
It wasn’t his fault. He didn’t have any other opportunities. And that’s just one example. You see that lack of opportunity throughout the Rust Belt — and of course it’s causing great anxiety.
What do we do about it? I look first at our tax laws.
Consider Johnson Controls. It’s the biggest company in Wisconsin, but it’s becoming an Irish company. It’s moving its headquarters to Ireland — because Ireland has a 12.5 percent tax rate. Same with Miller. We still brew the beer in Milwaukee, but those headquarters too are now overseas — in Belgium.
We’re losing our base. We’re losing our companies. We’re losing our competitiveness. It’s about our tax laws, and it’s about the regulations that make it so much harder to create new jobs to replace the old jobs being lost.
Then there’s the skills gap. A lot of working-class people who were doing well are now doing much, much worse because the jobs in their area are changing and they don’t have the skills to adjust.
Manufacturing is recovering in some places — not GM, but smaller, local manufacturing businesses with maybe 50 to 150 jobs. And you can still make a good living in manufacturing. High-skilled custom welders, for example, make a very good living. But companies in Wisconsin can’t find enough custom welders. People’s skills have atrophied. They don’t have the skills to fill the new jobs. And in too many cases, our education system isn’t equipped to help them acquire the skills they need.
And the point is these things add up. Our tax policy is driving companies overseas. Bad domestic policy is making it harder to create new jobs. We’re not helping people learn the skills to adjust. No wonder people feel they have no prospects.
The answer has to be a multi-front policy war. The best way to restore upward mobility is with economic growth — American competitiveness, manufacturing, restoring jobs, and closing the skills gap. We need to start with regulatory relief, and we need to get tax policy right. Economic growth won’t fix everything, but it can and will solve a lot of problems, including for the working class in places like Janesville.
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