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Hicks: Gimmicks won't solve middle-class dilemma

November 15, 2014

Mike HicksMy hometown paper ran an interesting story last week outlining the 10 hottest jobs in the region. These jobs looked a lot like the help wanted ads outside of large cities in Indiana: production and quality control, packaging, laborers, drivers, retailers, and home and personal care aides. None require post-secondary education or offer a decent shot at a middle-class income.

This story should sober anyone thinking about entering the job market with only a high school diploma, but 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 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 seen unbridled prosperity over the past half century instead of decline.

There are other empirical problems with the opinion piece, from misunderstanding who gets hurt by a minimum wage (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 United States has been shifting. The 1950s low-skill, high-wage jobs have been replaced by jobs requiring more formal skills, and the technology that accompanies this change exhibits a skill bias.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.

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 businesses relocate to seek out these workers.

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

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Hicks is the George and Frances Ball distinguished professor of economics and director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.
 

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