True economic growth requires thoughtful ideas, not gimmicks


My hometown paper ran an interesting story recently outlining the ten hottest jobs in the region.

These jobs looked a lot like the help wanted ads outside large cities in Indiana: production and quality control, packaging, laborers, drivers, retailers and home and personal care aides.

None of these jobs requires postsecondary education, and none offers a decent shot at a middle class income.

This story should be a sobering one to anyone thinking about entering the job market with only a high school diploma, but more than just high school kids need some schooling on these matters.

Without even a hint of irony, the same paper’s opinion page offered a puerile editorial bemoaning the growing income gap and the pain it causes the middle class.

The solutions offered in this piece were as follows: a higher minimum wage, higher earned income tax credit, higher family tax deductions and lower sales tax.

What gimmicky hogwash. If excessive government spending and artificially inflated wages offered actual help for America’s dwindling middle class, then east-central Indiana would’ve had seen unbridled economic growth

and prosperity over the past half-century.

Instead the region is in its fifth decade of decline.

There are other empirical problems with that opinion piece; from misunderstanding who gets hurt by a minimum wage (it is workers, not small businesses) to repeating the myth of Indiana’s high sales tax rate (misremembering local option sales taxes and exemptions).

This editorial was far less than the sum of its parts. That is unfortunate because the dwindling middle class is one of the most important issues of our time.

For more than a half-

century employment in the U.S. has been shifting. The 1950s model of low-skilled, high-wage jobs is long gone.

These jobs have been replaced by jobs that require more formal skills, and the technology that accompanies this change exhibits a skill bias.

High-skilled workers get machines that enhance their productivity by complementing their skills. Low-skilled workers get machines that enhance their productivity by substituting for their lack of skills.

This is easy to see in the real world. A nurse practitioner gets sophisticated software and time management assistance to make sure she can see more patients.

The cashier at the fast-food restaurant gets

little food icons on a cash

register to substitute for the lack of elementary math skills. Guess who gets the better wages?

This gets us back to the basic problem.

Over time, economies

adjust to the type of workers they have available, workers move to the places they want to live, and business relocate to seek out these workers.

Among the few things government can do to influence these outcomes is by improving education, crafting a healthy business climate and creating places to live that are more desirable. That is where we need real sustained policy focus.

The folks chatting up the minimum wage and more income tax deductions as cures for middle class woes have simply run out of good ideas.

Michael J. Hicks is the director of the Center for Business and Economic Research and the George and Francis Ball distinguished professor of economics in the Miller College of Business at Ball State University. Send comments to [email protected].

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