Distribution of Wealth (Part X)

In the prior posts we explored the forces that have contributed to the increasingly inequitable distribution of wealth. So, the questions remains, what can be done to improve the distribution of wealth that will avoid the negative consequences of our current redistributive policies?

1. Eliminate disincentives for job creation: there is zero doubt that businesses and the jobs that they create flee areas (cities, states and entire countries) in which the tax, regulatory burden and legal liability are too heavy. Any policy that makes it more expensive to create or run a business will limit job creation. This does not mean that we should eliminate all taxes and regulation, merely that we must be certain that their benefits outweigh their costs. Addressing government policies that drive up costs will aid American companies in their drive to increase their international competitiveness, which is a vital component in wealth and job creation.

2. Reduce incentives that encourage an irrational allocations of capital: for example, a myriad of subsidies and policies exist that encouraged Americans to over-invest in the housing market, which strongly encouraged a disastrous housing boom and bust. On the other hand anyone wishing to create industrial ventures in the United States would face a myriad of tax and regulatory hurdles. In theory the government could subsidize productive ventures for the benefit of the public, but experience clearly indicates that political connections rather than economic logic dictate the vast majority of subsidies. So, the most beneficial policy would be to create a level playing field in which no company would be unduly benefited or burdened by their relationship (or lack of relationship) to the state.

3. Encourage public school systems to develop curricula that place a far greater emphasis on preparing students to participate in a highly competitive global market. A competitive voucher system would grant greater choice to families, put pressure on public schools to improve.

4. Avoid policies that increase the supply of low-skill labor: a tight labor market places upward pressure on wages which encourages employers to pursue technological and organizational innovation. The present policy of seeking a competitive advantage through lowering wages is doomed to failure, because we can never match the rock-bottom wages of China and India. Our only possible competitive advantage is through a highly skilled and highly productive work force. And nations raise living standards by shifting towards higher level production.

What has most contributed to an expansion in the supply of low-skilled labor are immigration policy that emphasizes chain-immigration and a diversity lottery over the selection of skilled and educated immigrants. Accordingly a point system which seeks to synchronize the selection of immigrants to the changing needs of the labor force.

5. Reduce subsidies that encourage the importation of and use of cheap labor: we should conceptualize welfare benefits as subsidies that allows businesses to enjoy cheap (relative to the cost of living) labor. Without this subsidy immigrants who were unable to attain wages that provided for the basic needs of their family would return to their countries of origin, as they did before the onset of a massive welfare state.

Subsidizing cheap labor discourages employers from technological and organizational advancement. In addition, it discourages workers from developing the skills and strategies necessary to increase their productivity and wages.

A practical measure would be to charge businesses for the welfare benefits that their immigrant employees consume. Beyond an alleviation of the financial burden that the public faces, the benefits of this policy would be as follows:

-Without welfare benefits, the worker would quickly determine if the wages provided were sufficient to meet their basic needs. If the wages were insufficient they would encounter a powerful incentive to seek higher wages within their place of employment.

-This would force the employer to determine if their employee added sufficient value to their enterprise to justify the real cost (wages + welfare benefits) of their labor.

-If the employer determined that the worker added sufficient value, they would be forced to increase their wages. If not, the employer would have to let the worker go. The increased cost of labor that the first scenario entails and the shortage of labor that the second scenario entails would encourage the employer to increase the productivity of their enterprises through the pursuit of technological and organizational innovation.

-Under this scenario, workers would be limited in their ability to utilize an acceptance of low wages and poor working conditions (that welfare allows for) as their competitive advantage over their non-subsidized counterparts. The only manner for a worker to increase their competitive advantage over other workers would be through increasing their productivity.

-A worker who could not obtain higher wages from their employer or in their field of employment would be provided with tremendous incentives to develop the skills and education level necessary to shift a sector of the economy that offers higher wages. On an aggregate level this of course encourages greater upward economic and social mobility.

-Those who were unable to achieve economic self sufficiency would most likely self-deport, which is more humane, less demoralizing and more cost effective than heartless immigration raids and deportations.

-A huge added benefit would be that the American public would be far less reserved about granting amnesty to workers who offered net economic benefits and did not serve as a means for businesses to lower wages and working conditions.

6. Reduce subsidies that encourage single-motherhood and welfare dependency: To start off with schools should educate students about the economic and social costs of single-motherhood. Then, the state could mandate that welfare recipients use birth control and also provide larger payments to those who avoid getting pregnant. To avoid fostering long term dependency, the government could incrementally reduce welfare benefits while increasing educational subsidies and job training.

In a society that is increasingly oriented towards quick solutions and intellectual dishonesty brought on by politically correct dogma, these solutions would not be popular, but they are surely preferable to redistributive policies that are economically and socially bankrupting our nation.