Monday, September 1, 2014

Your Bonus Annual Labor Daze Post

Kevin Williamson of the National Review spends about 2,500 words trying to convince people that raising the minimum wage and giving workers more collective bargaining power to raise wages won't actually raise wages and give workers power to collectively raise wages in today's other example of conservatives being utterly clueless about economic issues.

The Left sees inequality as a cause of economic facts, not an effect of them. As EPI sees things, inequality is an independent actor, a motive force in world affairs: It is not only a “determinant” of economic conditions but “by far the most important determinant”; it has, under its own steam, “blocked living standards growth for the vast majority”; and it is “the key driver behind stagnant wages for workers at the bottom.” This is a deeply weird view of how the world actually works: The Left thinks that inequality is not a mere measure of relative incomes or wealth but something that does things in the world, something that acts — and not only acts but acts decisively, determining Americans’ economic prospects. This sort of flatly preposterous analysis is the unfortunate effect of mistaking the map for the territory and the model for the thing modeled, the kind of magical thinking that causes people to believe that Superman could turn back time by reversing the rotation of the Earth.

That leads to the sort of silly writing exemplified above, but it also leads to bad policy ideas. EPI is about as respectable an economic-policy outfit as the Left has to offer, but its preferred policy responses to wage stagnation are basically primitive: raising minimum wages, as though long-term prosperity could be brought about by congressional fiat; passing paid-sick-leave laws; and changing corporate governance and financial regulation in ways that would impede or discourage income growth among corporate managers and financial professionals, who along with the occasional professional athlete and movie star make up the top 1 percent. There is more magical thinking in that, too: There is no big bucket of “national income,” and $100,000 in forgone pay for a CEO or private-equity investors does not mean that there is an extra $100,000 sitting around available to be used as income for somebody else. We talk about the “distribution” of income, but that is a purely statistical idea. There is no distributor of income, and income cannot simply be moved from one pocket to another like wampum.

Similar magical thinking infects the Left’s ideas about unions. Unions are in decline practically everywhere in the private sector, in no small part because the thuggish, corrupt, rapacious leadership of U.S. industrial unions helped to diminish or outright destroy the industries they once were associated with. Unions live on mainly in government work. But that is good enough for EPI to conclude that a renaissance of unionization is desirable: “This policy choice is clear when one looks at the evidence. . . . Unionization has held up much better in the public sector, where employers have less ability to fight organizing drives.” What else might distinguish public-sector employers from, say, General Motors? The main thing is a complete lack of competitors and, most important, the ability to command revenue from the public at gunpoint via taxation. This is not true of, say, McDonald’s.

The notion that income inequality in America has gotten so awful (especially among African-Americans and Latinos) that it's actually damaging our economy rather than being a symptom of a damaged one is debateable.  The notion that US corporations are making record profits despite the "highest corporate tax rate in the developed world" is not.  It's an economic fact, because the effective tax rate is far lower than 35%, and it's because many of the largest US corporations do not pay any corporate taxes at all.

Somehow, the corporate profits that McDonald's makes can never be re-invested in worker wages.  But remember, raising the minimum wage, paid sick leave like every other developed country has, and limiting CEO pay is "magical thinking" while lowering corporate taxes that corporations don't actually pay is "serious economic reform".

Happy Labor Day, indeed.

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