Studies show there are three things you can do that will almost guarantee you will never live in poverty: (1) finish high school, (2) get a full time job and (3) get married, but wait until you are 21 and don’t have children until you are married. Do these three things and it’s very unlikely you will be poor. If you are, you won’t be poor for very long.
So how does public policy affect these choices? Inner city schools dominated by powerful teacher unions are not meeting the needs of poor minority students. The welfare state (185 federal/state means test programs) is designed from top to bottom to encourage single motherhood and penalize marriage. And virtually every public policy you can think of is making it more expensive to hire workers.
It is this last set of policies that I find most perplexing. In times past, the Democratic Party was the party of full employment. It wasn’t that long ago that The New York Times endorsed a zero minimum wage. Prominent Democrats once endorsed the idea of enterprise zones – places where there would be fewer regulations and lower taxes, so that job producing businesses would flourish. And although it originated in a Republican administration, Democrats have traditionally supported the Earned Income Tax Credit – under which low-income workers get a bigger tax “refund,” the more they work and the more they earn.
But these days we are witnessing backsliding. It’s as though the talking heads for the Democratic Party have not only forgotten what they learned in Econ 101, they positively reject it all. Hardly a week goes by without someone calling for a higher minimum wage on the editorial pages of The New York Times. In fact a recent Times editorial implied that employers have a duty to substitute for the welfare state. That is, if a Wal-Mart employee signs up for Medicaid or Food Stamps, that’s Wal-Mart’s fault!
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The appetite for pricing people out of a job on the left is becoming insatiable – from minimum wages to paid maternity leave to paid sick leave to paid vacations to extending overtime pay to white collar workers to mandated employee benefits galore. Then there is ObamaCare.
Let’s be clear about what economic studies show. Equal pay for equal work laws have not reduced the men/women wage gap. Anti-discrimination laws and affirmative action requirements have not reduced the black/white wage gap. (Those gaps have narrowed, but not because of any law.) Minimum wage laws have not increased the income of low-income families. And employee benefit mandates are not paid for by employers or consumers or the tooth fairy – they are paid for by lower wages and a reduction in other benefits for the very workers these laws are supposed to help. Even health and safety regulations appear not to matter. There seems to be no evidence that OSHA has led to fewer worker accidents or deaths.
That doesn’t mean that government intervention in the labor market is benign. Every intervention raises the employer’s costs and discourages more hiring. As for ObamaCare, University of Chicago economist Casey Mulligan estimates that this one piece of legislation is leading to 4 million fewer full-time equivalent jobs.
As I wrote in a recent column at Forbes, summer jobs were often the first jobs for millions of teenagers in years past. They were the place where young men and women learned essential skills that let them climb the ladder of economic opportunity. After all, if you don’t get to the first rung, you are unlikely to achieve rung two or three. Yet last year, less than half of teenagers seeking a job were able to find one. Many aren’t even looking. According to the Bureau of Labor Statistics, the July 2014 participation rate for 16 to 24-year-olds was 17.0 percentage points below the peak rate for that month 15 years ago (77.5%).
Here is what everyone needs to understand. It doesn’t matter what teenagers earn in their first job. Whatever they earn, they will likely spend on fun and frolic. But the skills they learn – showing up for work on time, following orders, being respectful – are skills that will pay off for a lifetime.
Meanwhile, employers are substituting capital for labor – including greater use of robots – just about everywhere in the labor market. For example, there is now a 14-arm, automated harvester that can wheel through rows of strawberry plants, distinguish the ripe from the unripe and pick the berries from the green leaves surrounding them. At $100,000, the robot is not cheap.
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