Tough love needed to solve in­equal­ity

For bet­ter or worse, Amer­i­can pros­per­ity re­sides now in the cities

The Washington Times Daily - - OPINION - By Peter Morici Peter Morici is an econ­o­mist and busi­ness professor at the Univer­sity of Mary­land, and a na­tional columnist.

Ris­ing in­equal­ity is a gold vein for politi­cians seek­ing votes among Amer­i­cans weary of stag­nant in­comes. Hil­lary Clin­ton’s cam­paign was premised in large mea­sure on taxing the wealthy to pay for fed­er­ally sub­si­dized child care, free col­lege and other new en­ti­tle­ments. She rea­soned ris­ing in­equal­ity de­prived the econ­omy of con­sumer spend­ing that could in­sti­gate more hir­ing and bet­ter wages.

Don­ald Trump promised to tackle low wages by cut­ting off il­le­gal im­mi­gra­tion and fix­ing the trade deficit to bring back fac­to­ries but also pledged to main­tain the so­cial safety net.

He is find­ing those prom­ises tough to keep — not sim­ply be­cause Congress has its own ideas but also ow­ing to the re­fusal of for­eign leaders to sim­ply roll to his de­mands. Mrs. Clin­ton likely would have faced equally vex­ing ob­sta­cles.

That’s not all bad, be­cause the con­nec­tion be­tween in­equal­ity and growth is more com­plex than ei­ther liberal or con­ser­va­tive politi­cians are in­clined to ac­cept.

Eco­nomic the­ory and em­pir­i­cal ev­i­dence in­di­cate some in­equal­ity is good for growth. Higher wages for doc­tors en­cour­age peo­ple to trudge through med­i­cal school and in­tern­ships, but too much in­equal­ity makes folks at the bot­tom too poor to in­vest in ed­u­ca­tion.

Amer­ica is tee­ter­ing on the edge of the lat­ter, but pal­lia­tives like free health care and col­lege would make the prob­lem worse, not bet­ter.

Ris­ing in­equal­ity in Amer­ica has two fun­da­men­tal sources — glob­al­iza­tion and tech­nol­ogy.

In­ex­pen­sive Chi­nese la­bor dis­placed work­ers who once sewed dresses in Los An­ge­les. Im­mi­grants do drive down wages for la­bor­ers in con­struc­tion. How­ever, the same forces cre­ate more op­por­tu­ni­ties for skilled work­ers and raise in­comes over­all — witness the vi­brant growth on the two coasts from sell­ing in­for­ma­tion tech­nol­ogy and fi­nan­cial ser­vices to the world.

The rev­o­lu­tion in ro­bot­ics and ar­ti­fi­cial in­tel­li­gence is extending au­to­ma­tion, which once only dis­placed farm­ers and semi-skilled fac­tory work­ers, to many bet­ter-pay­ing oc­cu­pa­tions like in­sur­ance ad­justers and fash­ion de­sign­ers. How­ever, those in­no­va­tions cre­ate new jobs for non-col­lege grad­u­ate tech­ni­cians to run and ser­vice ma­chines and for col­lege grad­u­ates with spe­cial­ties in sys­tems man­age­ment and de­sign.

The win­ners should out­num­ber the losers, and we should be able to re­train dis­placed work­ers to par­tic­i­pate in new fields. Eco­nomic growth has stag­nated in large mea­sure, be­cause not enough of the lat­ter is hap­pen­ing.

Too many Amer­i­cans are stranded in ru­ral ar­eas and small towns that couldn’t sup­port new fac­to­ries and ser­vice en­ter­prises even if Mr. Trump per­suaded busi­ness to bring fac­to­ries back from Mex­ico.

Nowa­days, firms that sell be­yond their lo­cal mar­kets can­not be run with­out broad­band ac­cess, and large swaths of Amer­ica’s in­te­rior are too sparsely pop­u­lated to sup­port the cost of build­ing out fiber op­tic net­works. And much of ru­ral and small town Amer­ica lacks ed­u­ca­tional pro­grams to ad­e­quately train work­ers for the spe­cial­ized jobs that are hard to fill in man­u­fac­tur­ing and so­phis­ti­cated busi­ness ser­vices, and is dis­ad­van­taged by much lower la­bor pro­duc­tiv­ity.

Gen­er­ally, the fo­cused com­mu­nity col­lege and ap­pren­tice­ship pro­grams cham­pi­oned by Pres­i­dents Obama and Trump work best in al­liance with ex­ist­ing em­ploy­ers and with high con­cen­tra­tions of well-mo­ti­vated stu­dents and a range of busi­nesses — not in places where Med­i­caid-sup­ported hos­pi­tals and doc­tors are the prin­ci­ple em­ploy­ers.

Sim­i­larly, most young peo­ple who get to col­lege from those lower-in­come com­mu­ni­ties too of­ten re­ceive a sec­ond-rate ed­u­ca­tion at non-se­lec­tive private or state in­sti­tu­tions that don’t ad­e­quately im­prove their crit­i­cal think­ing and ex­ec­u­tive skills. And whose fac­ul­ties are bet­ter at liberal po­lit­i­cal in­doc­tri­na­tion than pro­vid­ing pro­fes­sional train­ing in tech­ni­cal dis­ci­plines like en­gi­neer­ing.

In the end, folks in the ru­ral com­mu­ni­ties and smaller towns that voted for Mr. Trump will have to move to big­ger cities to ap­pre­cia­bly im­prove their lot. They have to be will­ing to wait on ta­bles, work in con­struc­tion and the like and avail their chil­dren of bet­ter ed­u­ca­tional op­por­tu­ni­ties cities of­fer.

We do know from the Clin­ton era that im­pos­ing work re­quire­ments for wel­fare in­spired re­cip­i­ents to seek work and get train­ing. Now do­ing the same for Med­i­caid, food stamps and other en­ti­tle­ments would likely mo­ti­vate peo­ple to move to cities that of­fer bet­ter op­por­tu­ni­ties.

Sim­i­larly, link­ing ac­cess to Pell Grants and stu­dent loans to the start­ing salaries of new grad­u­ates from com­mu­nity col­leges and uni­ver­si­ties would have profoundly ben­e­fi­cial ef­fects.

Of­fer­ing tough love is not a win­ning for­mula in pol­i­tics but in the end, the coun­try can’t suc­ceed with­out it.

ILLUSTRATION BY HUNTER

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