Small government for everyone

If you have a heart, support big government. It will raise the minimum wage for low-wage workers at manageable cost to the economy as a whole. If you have a head, support small government. It will raise wages for all workers at no cost — only benefits — to the economy as a whole.

The experiment on how to best help the economy — and especially those in greatest need — has been running in real time in jurisdictions across the U.S. and Canada. In Ontario, where the fallout from the Jan. 1 minimum wage increase to $14 an hour is just beginning, the results are mixed. While low-wage workers are nabbing a hefty pay hike, consumers are seeing price hikes as employers try to recover their increased labour costs. Businesses unable to raise prices have begun shutting their doors. And workers are having their hours shortened or their wage hike clawed back by employers cutting benefits or requiring staff to pay for their uniforms.

California, long a leader in implementing socialjustice policies, has been phasing in a US$15 minimum wage as part of its anti-poverty agenda, with predictable results. California now has the highest poverty rate in America, at 20 per cent, according to the U.S. Census Bureau’s Supplemental Poverty Measure. The minimum-wage hike actually hurts the majority of those in poverty — the 60 per cent who are unemployed and unable to get a foot in the door by offering to work for less. Studies of the effect of minimumwage laws almost without exception agree that they discriminate most against those most vulnerable: In California, that would be the 35 per cent of femaleheaded households that live in poverty. Moreover, the discrimination against the vulnerable is likely to get worse, say economists writing for the National Bureau of Economic Research, because minimum wage laws increase the likelihood that Americans’ reliance on food stamps is down 2.7 per cent.

Once Republican tax cuts became law, the upward trajectory of wages steepened. In what may prove to be the largest income redistribution in history — an entirely voluntary redistribution from corporate shareholders to their employees — the titans of American industry are spreading the wealth. Walmart is giving its one million U.S. employees a bonus of up to US$1,000, based on length of service. AT&T’s 200,000 workers are receiving a bonus of and parental-leave benefits, boosting contributions to retirement plans and increasing their matching of employee contributions to charitable causes.

Corporate America is giving its employees something else, too: An ever-expanding job market, which increases their choices and their bargaining power. Apple has announced 20,000 new jobs that will come of its US$30 billion in capital expansion over the next five years; Fiat Chrysler has announced 2,500 new jobs and a US$1billion expansion; companies large and small, pretty much across the board, are planning to expand their hiring as they expand their operations.

More jobs, more job opportunities, higher pay and a cornucopia of benefits are all in the offing. As a cherry on top, the government’s cut of the pay packet is diminishing, too: 90 per cent of workers will see a boost in their take-home pay starting in February, courtesy of the Republicans’ personal income tax cuts. The 10 per cent who won’t see tax cuts, or whose taxes might actually rise, will overwhelmingly come from the ranks of the wealthy.

The results now streaming in from the big government versus small government experiment could not be more robust. Big government in pursuit of social justice does no justice to society. Small government in pursuit of economic freedom for employers and employees alike does justice to all, not least to those most in need.