A living wage fixes everything. Taken in the aggregate, higher wages can lead to greater unemployment. The Congressional Budget Office estimates [3] that an increase in the minimum wage from $7.25 to $10.10 would lead to 500,000 fewer jobs. Although they may have ignored second- and third-order consequences like spending multipliers and aggregate demand, the CBO's conclusions can't be entirely dismissed. The operative principle, after all, is the law of supply and demand -- when the price of a commodity increases, usage declines. So while a living wage fixes poverty in one place, it may pop up someplace else.
What We All Ignore
At least 5% of our workforce will be permanently unemployed. That's right -- we have an economy that taxes the employment of labor and subsidizes the employment of capital, so it's inevitable. Corporations most often use subsidized capital for making their operations more labor-efficient, which means taking the labor out of their products [4]. And because an extra 15% tax (Social Security and Medicare) applies when they are hiring, businesses are double-motivated to cut their use of labor. Some of the resulting unemployed stay that way for a long time, and others find work pretty soon -- the economy doesn't care. But who are we to vilify the unemployed as lazy when we created an unemployed class with our public policies?
Poverty is contagious -- you get it from your parents. The most reliable predictor of your socioeconomic position is that of your parents [5]. Let's distinguish between situational poverty and generational poverty. Situational poverty may result from illness, unemployment, or the death of a loved one. Generational poverty is more stubborn, and is often associated with cultural norms that accept the structural inevitability of poverty itself. Limited income, no wealth, poor healthcare, and substandard educational opportunities can destroy self-reliance. Incarceration rates often typical of poor communities can cut off current income and curtail opportunities for a lifetime and raise the probability of poverty for generations to come.
Upward mobility doesn't go as high as it once did. Economic mobility -- the probability of a person in the bottom quintile to move to a higher quintile -- hasn't changed very much over the past fifty years. But here's the thing: moving from the 5th quintile to the 4th or 3rd quintile doesn't offer quite the boost it once did. As the top 1% have gobbled up most of the income and wealth gains in recent decades, families continue to struggle even if they manage to improve their economic position. That's because America's median income -- even if you can raise yourself out of poverty -- isn't as cushy as it once was.
Poverty and economic inequality are related, but different. America has poverty, but if we can accept perpetual safety-net transfers to the poor, it's probably not our biggest economic problem. The biggest? That would be the continued concentration [6] of income, wealth, and power among corporations and the very rich. Look to the top, rather than the bottom, for the real threat. By all of several metrics [6], America's economic concentration is approaching levels not seen for nearly a century. And it's destructive. Historically, such economic concentration has been arrested only by catastrophic war, financial collapse, or bloody rebellion. Have we already stepped over the brink?
I hope my friends and relatives who identify themselves as conservative and who think I'm a raving liberal will read this. Looking carefully at their beliefs and positions forces me to adjust my own worldview just a tick. We really need to abandon some of the labels we stick on each other. After all, they do get in the way of sharing our beliefs with friends and relatives. And we learn the most valuable things in life from those we love and respect.
[1] click here
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