Thursday, November 12, 2015

Demand side, supply side, tax and regulatory side

Charles Lipson writes,
BIGGEST UNNOTICED MISTAKE IN THE REPUBLICAN DEBATE
Trump said "wages are too high." That's wrong; it is a bad message; and it is noxious when it comes from a multi-billionaire.

The Republican message should be three-fold: a demand side, a supply side, and a tax-and-regulatory side. The demand side is that wages rise when the need for workers rises because the economy is growing. The supply side is that we need an education system (and families and neighborhoods) that produce people who will be good workers at the entry level and have the skills and incentives to move up the ladder to better jobs, not remain stuck at the bottom. (The libertarians would add that it is none of the government's business to tell an employer and an employee, who voluntarily agree to a wage, that they cannot keep that bargain.) The tax-and-regulatory side is partly about fostering economic growth and partly about lowering the burdens on the least-well-off.

What will NOT work is a government mandate to raise wages. That may help some low-wage workers, but it does so at the expense of the least-skilled at the lowest end of the ladder. Employers will calculate that the lowest-skilled workers are simply not profitable for them to hire, so they never get a foot onto the jobs ladder. Over the medium-run, of course, it also speeds the on-going process of substituting robots and software for unskilled jobs.

No comments: