One answer to low-wage work: Redistributing the gains
The President鈥檚 speech Wednesday on inequality avoided the 鈥淩鈥� word. No politician wants to mention 鈥渞edistribution鈥� because it conjures up images of worthy 鈥渕akers鈥� forced to hand over hard-earned income to undeserving 鈥渢akers.鈥�
But as low-wage work proliferates in America, so-called takers are working as hard if not harder than anyone else, and often at more than one job.
Yet they鈥檙e still not making it because the twin forces of globalization and technological change have reduced their bargaining power and undermined their economic standing 鈥� while bestowing ever greater benefits on a comparative few with the right education and connections (and whose parents are often best able to secure these advantages for them).
Better education and training for those on the losing end is critically important, as will several of the other proposals the President listed. But they will only go so far.聽
The number of losers is growing so quickly, and so much of the economies鈥� winnings are going to a small group at the top 鈥� since the recovery began,聽聽鈥� that some direct redistribution of the gains is necessary.
Without some redistribution, the losers are likely to react in ways that could hurt the economy. They鈥檒l demand protection from global markets they believe are taking away good jobs, and even from certain technological advances that threaten to displace them (rather than smash the machines, as did England鈥檚 19th-century Luddites, they鈥檒l seek regulations that preserve the old jobs).
Without some redistribution, our ever-increasing number of low-wage workers won鈥檛 have enough money to keep the economy going. (This is one reason why the current recovery has been so anemic.)
And without some redistribution, America鈥檚 growing army of low-wage workers may fall prey to demagogues on the right or left who offer convenient scapegoats for their frustrations.
One way we already redistribute is through the聽, a wage subsidy for the working poor, which, at about $60 billion a year, is the nation鈥檚 largest anti-poverty program. It鈥檚 like a reverse income tax 鈥� larger at the bottom of the wage scale (now around $3,000 for incomes around $20,000) and gradually tapering off as incomes rise (vanishing at around $35,000).
The EITC subsidy should be enlarged and extended further up the wage scale before tapering off.聽
How to pay for this? By cutting subsidies and special tax breaks for the oil and gas industries, big agribusiness, military contractors, hedge-fund and private-equity partners, and Wall Street banks. And by capping individual tax deductions (deductions are the economic equivalent of government subsidies) for gold-plated health care plans, lavish business junkets and interest on giant mortgages.
In other words, we can finance much of this redistribution to the working poor by ending unnecessary redistributions to the wealthy.
