Hello again California. As promised, here is the follow-up to the recent Golden Blues piece on climate legislation. Today, we discuss the blue elite’s counterproductive attempts to fight inequality.
As has been reported over the last few months, blue thinkers, policy wonks, and activists across the state are building momentum to get cities to raise their minimum wages to $15 per hour. There is even talk of a statewide plan, though that seems less likely to gain traction.
The logic behind raising the wage is simple and straightforward- the giant sucking sound of California’s once-booming aerospace and manufacturing jobs fleeing to friendlier tax climes like Texas and Florida has created a California economy based on “haves” and “have-nots.” The haves are those well-paid, high-skilled workers in the FIRE industries (finance, insurance, and real estate) and especially in the entertainment and tech industries. The have-nots are low-income service workers in everything from food service to healthcare and elderly care. The old middle-class jobs aren’t coming back, and not everyone is skilled enough to be a have; so might as well ease the plight of the have-nots by raising their wages. In fact, says a UC Berkeley study, when the have-nots have more money in their pockets, they’ll spend it and stimulate the economy!
Aside from the fact that this holiday season, most Americans are (rightly) saving rather than spending, the blue logic is quite flawed. I’ll let Chris Thornberg of Beacon Economics speak for me:
“It doesn’t work… Does a higher minimum wage reduce poverty? No. Does it reduce homelessness? No. Does it get more at-risk inner-city youth to work? No. So why are we doing it? We have to find a different plan.”
Raising the minimum wage puts an extra cost on businesses, which are then less likely to create new jobs and more likely to outsource their business to lower-wage climes. There are all sorts of social side effects this artificial joblessness engenders, and none of them are worth experimenting with in today’s economy and social situation.
So what else can we do to reduce poverty? If we’re not going to pursue the well-intentioned policies of the left, what well-intentioned policies can the right put forth that might actually have positive results?
Dan Morain at the Sacramento Bee put out a well-timed profile of Joe Sanberg, a California political activist hard at work lobbying Governor Brown to support an expansion of the Earned-Income Tax Credit (EITC.) The $380 million plan would encourage work by supplementing incomes of low-wage workers directly out of the state government’s pockets, rather than putting the burden on businesses.
So the EITC is motivated by the same humanitarian temperament as support for a minimum wage, but has the practical effect of fighting poverty through the power of the central government without expecting regulation-strapped businesses to do something against their own interests for political purposes. Another fascinating suggestion is providing tax credits for businesses that voluntarily raise their wages to a certain suggested minimum, allowing businesses to be a direct part of the process.
There are two main objections to the EITC, of course- first, it complicates the already Rube-Goldberg-esque tax code, and second, it has to be paid for somehow. These are legitimate concerns, but not so difficult as to be insurmountable- after all, governments can always find some kind of way to pay for stuff, and an EITC is probably the single social-engineering tax conservatives can get behind with full approval of their conscience.
We should not let the blue elites have a monopoly over the fight against inequality. We should be proposing solutions that can fight it better than their clunky ideas ever could- and the EITC is just such an idea.