Monday, November 21, 2005

Reconciling Growth and the Income Gap

Free marketers like to think that maximizing growth is the tide that lifts all boats, but history has proven otherwise. Over the last several decades as growth has expanded rapidly the gap between rich and poor has widened. Not only has the gap widened, but the boats in the lower waters have not been lifted. Wages at the low end have stagnated in real terms, fringe benefits have disappeared or been reduced, more people are working part time, and most families require two or more breadwinners to make ends meet. If the goals of a society are to ensure that everyone benefits from growth, not just the top half of the income spectrum, some changes must be made in our economic structure.

The first obvious change would be to eliminate taxation on that portion of a family’s income that is required to sustain life and enable work without making choices between such necessities as health care, food, shelter and transportation, that is, a living wage income. The tax reform commission has recommended doing this with a system of tax credits. This would put individuals on an equal footing with businesses which are taxed on their profits, not their revenues.

Eliminating tax inequities alone will probably not be enough to bridge the gap, due to the international drive toward globalization, to reduce labor costs and improve the standard of living of people in undeveloped or developing countries. Globalization to achieve some measure of world wide equity in living standards is a noble goal. But, progress in this direction must not come at the expense of turning all countries into enclaves of peons working for starvation wages with an overclass of professionals, entrepaneurs and managers calling the shots and living in luxury.

The classical struggle between the left and right is between work and welfare. The left sometimes seems to ignore the power of markets to generate the growth that is required to sustain meaningful work and a safety net for the needy. Having a large percentage of the population unemployed and on welfare is not a prescription for long term prosperity. The right, on the hand, seems to subscribe to the theory that as long as government welfare is minimized and growth is sustained everything will come out smelling like a rose. Neither is correct. Both have to learn to compromise and find the best mix of growth incentives and reasonable wages to sustain long term prosperity and a healthy middle class.

One attempt to put a floor under the conditions for work has been the minimum wage. The right has succeeded in keeping the minimum wage lower than a living wage, that is a wage which will pay for all expenses necessary to stay healthy and hold a job, as discussed above as a floor for income taxation. They have done this by making the claim that increasing the minimum wage puts people out of work and on to welfare. But this ignores the fact that people working for less than a living wage have to be subsidized by government welfare in other ways, for example, by earned income credits, food stamps, housing subsidies, Medicaid, etc. Raising the minimum wage to a living wage would eliminate these latter subsidies, while possibly increasing the number of people that become unemployed and enter the full welfare rolls. As far as I have been able to determine, no studies have been done to adequately explain how this tradeoff plays out. There is some wage at which the total cost of both types of welfare is minimized. This needs to be investigated to set the minimum wage where it is most advantageous.

Another approach to keep people off welfare would be to set the minimum wage at the living wage and employ all people displaced from the private labor market, but able to work, in meaningful jobs to maintain national infrastructure. By keeping the labor rate for these infrastructure jobs at the living wage, and not allowing it to increase, any demands for labor in the private sector which could pay a higher wage would be met by shifts from this pool of infrastructure labor. This would eliminate the frustration and worry of being unemployed and unproductive, yet provide opportunity for workers to move into better paying jobs as the demand for labor increased. This movement would be augmented by training and experience acquired in the infrastructure jobs. Anyone not willing to enter the infrastructure job network would be on their own unless they can show they are disabled or otherwise unable to work.

The infrastructure job network would be funded out of progressive taxes on corporations and those making more than the living wage and implemented by private contracts from agencies like the Corp of Engineers or other federal, state or local agencies engaged in maintaining infrastructure.

Saturday, November 12, 2005

The Roots of Rebellion

Rebellion has many faces. All stem from some form of oppression which is only overcome by action. This action usually takes to form of embracing the stereotype impressed on the rebelling party by the controlling entity, and doing precisely what the controlling party fears most, without concern for the consequences.

Probably the most well known form of rebellion is that of the youth approaching adulthood. The youth cannot continue their development toward adulthood by continuing to follow the dictates of the parent. They must start to make their own decisions and learn by their mistakes. If even the smallest deviations from the prescribed behavior are met with stern reprimand, resentment builds and inevitably is followed by more drastic rebellious acts. If what the parent fears most is the use of drugs and promiscuous sexual behavior it is likely that some form of this behavior will ultimately result to demonstrate independence if lesser forms of independent behavior are repressed. The form of independent expression is usually dictated by the accepted norms of the group to which the oppressed individual belongs, which are, in turn, usually dictated by the more daring and bold leadership of the group.

A second example is that of oppressed minority cultures. David Brooks of the New York Times has recently commented on the common use of “gangsta rap” customs in both the American youth culture and the participants in the recent uprisings in French minority ghettos:

“The images, modes and attitudes of hip-hop and gangsta rap are so powerful they are having a hegemonic effect across the globe.

American ghetto life, at least as portrayed in rap videos, now defines for the young, poor and disaffected what it means to be oppressed. Gangsta resistance is the most compelling model for how to rebel against that oppression. If you want to stand up and fight The Man, the Notorious BIG shows the way.

When rap first came to France, American rappers dominated the scene, but now the suburban immigrant neighborhoods have produced their own stars in their own language. French rap lyrics today are like the American gangsta lyrics of about five or 10 years ago, when it was more common to fantasize about cop killings and gang rape.

The French gangsta pose is familiar. It is built around the image of the strong, violent hypermacho male, who loudly asserts his dominance and demands respect. The gangsta is a brave, countercultural criminal. He has nothing but rage for the institutions of society: the state and the schools. He shows his own cruel strength by dominating women. It is perhaps no accident that until the riots, the biggest story coming out of these neighborhoods was the rise of astonishing and horrific gang rapes.

In other words, what we are seeing in France will be familiar to anyone who watched gangsta culture rise in this country. You take a population of young men who are oppressed by racism and who face limited opportunities, and you present them with a culture that encourages them to become exactly the sort of people the bigots think they are — and you call this proud self-assertion and empowerment.

You take men who are already suspected by the police because of their color, and you romanticize and encourage criminality so they will be really despised and mistreated. You tell them to defy oppression by embracing self-destruction.

In America, at least, gangsta rap is sort of a game. The gangsta fan ends up in college or law school. But in France, the barriers to ascent are higher. The prejudice is more impermeable, and the labor markets are more rigid. There really is no escape.”

It’s not such a leap to extend this sort of behavior to dead-end Muslims in ghettos throughout the Islamic world. Along comes an Osama bin Laden or an al-Zarkawi with utopian reasons to commit to a world uprising against The Man, particularly when The Man is doing very well and infusing his cultural norms into a culture dominated by a stifling religion. And what results is Islamic extremism, just another form of rebellion from an oppressed culture with no hope of controlling their own destiny.

But, in all these cases, is the rebellion really a threat to organized society if the causes are reduced or eliminated? Can the struggling adolescent, the gansta rapper, or the Islamic extremist take over and control a society by force? Do they really want to? Or are they just looking for some reason to believe they can control their own destiny?

Obviously there’s a difference in these three forms of rebellion, and that Islamic extremists are a greater danger than adolescent teens. But, should our approach be to declare war or to protect against such behavior while at the same time trying to correct the situation giving rise to the behavior? The decision is up to us.