How The Democrats Plan To Create Jobs

John C. Goodman
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Posted: Nov 02, 2014 12:01 AM
How The Democrats Plan To Create Jobs

Conventional wisdom says that Democrats wanted to campaign this year on jobs and the economy. They were supposedly thrown off message by ISIS and the Ebola scare. But if voters re-focus on jobs and the economy, do the Democrats have a credible plan to offer them? I tried to find out.

To begin with, the Democrats have a terrible record to defend. As former US Senor Phil Gramm and Mike Solon wrote in the Wall Street Journal the other day:

“The Obama recovery is the weakest in postwar history. If the Obama recovery had been as strong as the average of the previous ten postwar recoveries, 13.9 million more Americans would be working today and the average real per capita income of every man woman and child in America would be $6,308 higher.”

And remember, early on the Democrats not only controlled the White House and the House of Representatives, they had a filibuster-proof Senate. They could have passed any economic agenda they wanted.

So looking back, what do they wish they had done that they didn’t do? Or, going forward, what do they want to do in the future that they didn’t do in the past?

To answer these questions, I went to the web site of the Democratic National Committee. There I discovered under “Jobs and the Economy” that the two most prominent agenda items were raising the minimum wage and giving women equal pay for equal work. These are also the two issues mentioned most frequently by Democrats on TV talk shows. What do economists have to say about them?

Minimum wage. It used to be that a heavy majority of economists were opposed to minimum wage laws. A New York Times editorial in 1987 reflected that consensus when it called for the complete abolition of the minimum wage (See David Henderson’s description.) Today the profession is more evenly divided – in part because recent studies have cast doubt on the job destroying effects of small increases in the minimum wage. But there is one argument no economist is making. No one is saying that an increase in the minimum wage will create jobs. Making labor more expensive is not the way to encourage employers to use more of it. And for that matter, no one is saying that an increase in the minimum wage will boost economic growth either. At least no economist.

My opposition to the minimum wage law is based not so much on economics as on a more fundamental social problem. The law has a disproportionate impact on low-income minority youth. One commonly repeated estimate is that 10 percent of the work force got their first job at McDonalds. The estimate hints at a very fundamental truth: no one gets a second or third job until after he gets his first job.

People have to start somewhere. And it really doesn’t matter very much what wage teenagers are paid. What’s more important is that they learn to show up for work on time, follow orders and be respectful. If they don’t learn those habits, they will be unemployable forever.

A lot of young people aren’t getting to that first rung of the ladder. More than one in five back youths between the ages of 16 and 24 are neither working nor in school. And as Taco Bell and other fast food outlets substitute mobile ordering apps and other labor saving devices in response to the higher cost of teenage labor, more of them will be in that predicament.

Equal Pay for Equal Work. A lengthy essay by DNC Chairwoman Debbie Wasserman Schultz bemoans the fact that women on average make 77 percent of what men make and implies that this is the result of labor market discrimination. Nowhere does she acknowledge discrimination based on gender has been illegal under federal law for 50 years! And nowhere does she acknowledge that economists have studied men/women earning differences for decades and found that discrimination plays a negligible role. For example, June O’Neill, an economist who used to direct the Congressional Budget Office, and her husband Dave O’Neill have produced a comprehensive review of the literature. In my review of their book, I wrote:

“As for the wages of men and women, the O’Neill’s find no evidence that anti-discrimination policies have made a difference, including the actions of the Equal Employment Opportunities Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP)…”

“In addition to years of schooling and test scores, men and women differ in the amount of work they do. Men are more likely to work full-time; and among full time workers, men work 8%-10% more hours than women. Also, men typically accumulate more continuous work experience and therefore acquire higher productivity in the labor market. The gender gap shrinks to only 3½ % when adjustments are made for work experience, career breaks and part-time work.”

So what would more legislation accomplish? It would lead to more lawsuits, more legal fees and more court costs. Would that encourage employers to hire more women? You decide.