Reviving the Working Class Without Building Walls

Reviving the Working Class Without Building Walls

Postby DDEATH » Wed Mar 09, 2016 6:55 am

Reviving the Working Class Without Building Walls

Eduardo Porter ECONOMIC SCENE MARCH 8, 2016

Can the government help Donald Trump’s supporters?

The political system is in shock over the insurrection of the white working class, which has flocked to Mr. Trump’s candidacy.

On the wrong side of globalization and technological change, no longer at home in an increasingly multiethnic America, these voters have eagerly embraced his simple proposal to make things better: walls against the imports and the people they believe have robbed them of a shot at prosperity.

That strategy, if it amounts to that, would visit a disaster of epic proportions upon the world economy. It harks back to the Smoot-Hawley tariffs of the 1930s, which pushed the world into a tit-for-tat trade war in which everybody raised their barriers against everybody else’s imports, entrenching the Depression.

As Lawrence H. Summers, Treasury secretary under President Clinton and former chief economic adviser to President Obama, warned, “Even the possibility of Trump becoming president is dangerous.”

But the raw anxiety of his supporters remains unaddressed.

It is not obvious how to restore the America Mr. Trump’s legions pine for. The nation’s diversity would not go into reverse regardless of how high he built his wall along the nation’s southern border.

Their economic discontent — born of the mismatch between expectations based on an earlier America, where plenty of blue-collar jobs offered a decent standard of living, and the more cutthroat reality they face today — can seem intractable, too.

“It’s not clear what public policy can do for someone who was expecting his income to grow from $50,000 to $80,000 but instead saw it stagnate at $50,000,” said Lawrence Katz, a Harvard economist.

Stumped by the economy’s inability to deliver more decent jobs, policy makers are struggling to come up with solutions.

The routine promise that economic growth will automatically spread prosperity has proved empty, belied by the long slide in the real earnings of all but the best-paid workers.

Any long-term strategy to improve workers’ lot, of course, must include improving their skills. But just kicking the challenge down the road under the fuzzy prescription that all America needs is better education and training — a favorite of policy makers and their economic advisers — is no longer acceptable for workers who have suffered multiple rounds of dislocation over several decades.

Stepping into the vacuum, the technologically endowed of Silicon Valley are talking about a future that bypasses the labor market entirely. They are offering up a universal basic income — financed by taxing rich capitalists and an elite corps of computer programmers tasked with making sure the robots perform meticulously — as the tool to satisfy people’s basic needs without any work involved.

But before we enter the world of science fiction, it’s worth looking at some policies that could improve jobs for most American workers, in the here and now.

For all its strengths, the American job market has some troubling features. Unemployment might be lower than in many other industrialized nations, but the employment rate for prime-age workers has been on a downward trend for 15 years.

What’s more, according to the Organization for Economic Cooperation and Development, the research arm for the most advanced industrialized nations, the United States suffers the highest incidence of low pay among its members. A quarter of workers earn less than two-thirds of the median wage.

Americans also suffer from the steepest earnings inequality and limited income mobility. Workers who start with low wages more often get stuck with them for a very long time. And for American men, mobility has declined over time.

Instead of enhancing these trends, as it now does, government policy could push back. As Professor Katz noted, over the last few decades, about 13 percent of the nation’s gross domestic product was redistributed to the top 1 percent from the rest of the population. “It is not crazy to suggest,” he said, “that some percentage of that could be shared with a broader group.”

The earned-income tax credit — a wage subsidy for low-income workers that has become the nation’s most powerful antipoverty tool — could be expanded to include more workers and phase out at higher incomes. Combined with a higher minimum wage, it could be calibrated to ensure that workers’ earnings totaled, say, at least $15 an hour.

Employers could be subsidized, too, to hire workers from problematic populations, including the long-term unemployed. The government could set itself up as an employer of last resort.

The Obama administration has been quietly deploying a screwdriver or two from this tool kit. New rules proposed by the White House last year would make millions of workers eligible for overtime pay.

The White House also supports increasing the earned-income tax credit for adults without children; so does Speaker Paul Ryan, the Republican leader in the House of Representatives.

In this year’s State of the Union address, President Obama proposed wage insurance, to protect workers who lost their jobs and had to take new ones for less money. He said that Washington should cover half the difference in pay, up to $10,000 over a two-year period.

These proposals represent only a start. They are far from full solutions for the struggling working class.

Yet modest though they may be, they are still highly controversial. Indeed, the most critical question is whether politicians divided by an ideological gulf could agree on any effective labor market strategy.

The idea of direct government employment — a once common practice — has been anathema on the American right since the late 1970s. Strengthening American workers’ collective bargaining power, among the weakest in the rich industrialized world, seems equally fanciful.

Research by Suzanne Mettler and Julianna Koch from Cornell University underscores how any plan to help Mr. Trump’s beleaguered supporters may end up entangled in ideological knots. They found that on closer inspection, many Americans who deny ever benefiting from a government social program actually received far more public support than they realized. And the most strenuous denials come from conservative Republicans.

Many citizens of red states and members of the struggling working class — supporters of Mr. Trump, not to mention Senators Ted Cruz of Texas and Marco Rubio of Florida — oppose programs to benefit “poor people.” Even if the “poor people” these programs would help is them.
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