Because most philosophies that frown on reproduction don't survive.

Monday, November 27, 2006

Skilled Nation

Having ridden to power (in part) simply by virtue of not being Republicans, there seems to be a certain degree of excitement amount the new congressional majority as to what they should do now that they're in charge.

Falling back on the "two Americas" rhetoric from the '04 presidential campaign, one answer seems to be: decrease the income gap. How to do this is, of course, tricky. While nearly everyone is ready to speak out against 10mil bonuses for CEO's whose companies are losing money, in order for a tax bracket to make any significant amount of money for the government it has to hit much lower down as well. Taxing the 200k+ bracket is the traditional way of taking it to the rich. Yet while most Americans make much less than 200k (goodness knows I do) a lot of us know people who do make that much, and maybe even aspire to make that much. And as a result, slapping 75% taxes on all income over 200k (which would be the serious wealth re-distribution approach) is not nearly as popular as you might think.

Yet, the income gap, both within our own country, but much more so between our country and other less fortunate countries, is the sort of thing that naturally inspires the desire to "do something".

I would dispute the idea that the gap between rich and poor is wider now than it has ever been. In the first hundred years of our country's existence, the gap between the haves and the have nots was so wide that in some parts of the country, that in some parts of the country more than fifty percent of the human population was owned by the "top ten percent".

However, the income gap is especially apparent right now in part because the middle class is in the process of splitting in two, and the dividing line is that oddly charged term "skilled labor". I feel a trifle odd talking about being on the "skilled" end of the divide when there are a great many things I can't do. A cabinet-maker has an incredible degree of skill which I could not match, and at producing a permanent, well crafted product. I, on the other hand, write web page code and database queries. However, a cabinet maker's income is limited by the maximum profit after materials that he's able to derive from selling the cabinets he makes. If he spends two weeks working on a truly set of cabinets, his personal income relies on how much he's able to charge for the one set of cabinets produced during those two weeks.

The "modern worker" on the other hand often makes his income by skimming a very small percentage of a very large pool of money which is effected by his work. One of the database jobs I've worked on involved evaluating the pricing of 5000 product SKUs every week and making adjustments in order to maximize revenue or margin based on the calculated responsiveness of the products to price changes, and whether the executives want more revenue or more margin at the moment. One week's price changes might produce projected 13-week incremental revenue of 10-20 million, or up to a million in incremental margin. Sure, it took a certain degree of mental skill, but the main thing that made that such well-compensated work was that the monetary results of your work were so large compared to the number of people involved (the team making price changes was only four people) that the case for paying those people a decent income was pretty strong.

Two groups of people seem to me making large amounts of money in the skilled economy: people like doctors and lawyers whose jobs require long and intensive periods of study (which most people lack the time, inclination or ability to go through) and people holding jobs which can effect very large amounts of money with a small number of people.

Unfair though it seems from a cultural perspective, the technicians who build Steinway pianos by hand make significantly less than the advertising and marketing people who have inflicted Bratz dolls upon the world. And in strictly economic terms, this actually makes a fair amount of sense.

Within the world of those whose productivity is limited by physical labor, (either the blue color labor of assembling a product or the white collar labor of answering phones or manning cash registers) those with the higher skills (like the Steinway technicians) do make a good deal more than those without (say, fruit pickers).

Accentuating this divergence between these two groups of workers is the increasingly global economy. Unless one is a hopeless nationalist, it seems hard to justify the claim that someone assembling stuffed bears in a factory inherently deserves to make more because he lives in the United States rather than in Indonesia. If the Indonesian works for $1.75/hr while the American works for $11.75/hr, and your goal is to sell bears for 9.99 a piece, the US worker needs to be significantly more productive than his Indonesian counterpart to win out. For many decades that was the case, with the US on the cutting edge of developing new efficiencies in manufacturing. However, others have learned from our success, and today manufacturing facilities in developing nations are often incredibly high quality infrastructures.

And yet we can't be an entire nation of high skill, high productivity workers. The spectrum of human abilities, personalities and desires is such that it simply cannot be the case that all US workers would could do high skill work while exporting absolutely all manual and low skilled work to other countries. Which leaves the question: is there any just way to keep the income gap between someone who produces one $9.99 stuffed bear every ten minutes and someone who sets pricing for the entire toy line from widening? Should we try to reduce an income gap which is mainly the product, not of the wages of bottom rung workers going down, but of high skill/high productivity workers going up?

7 comments:

M_David said...

Points:

1) We cannot have "free" trade with countries that have different laws than us; e.g., if France has free health care, that's not fair. If we have lots of lawsuits, that's not "free" - we have different costs that come from our moral code. Environmental controls, minimum wage, you name it. Your analysis is meaningless due to this overriding issue. There is no fair trade between countries with different laws

2) In Japan, drywallers and meatpackers are all Japanese, and get good wages that one can raise a family on. In the US, we use illegals that drive down wages big time.

3) Free enterprise is a good thing, but without a minimum wage at the level needed for one to raise a family, it is simply not Christian. No matter what one's skill level, a culture should allow those who are willing to work the chance to make it on one income. Otherwise, our families will continue to decline.

4) Solution: make countries that don't follow our laws (environmental, minimum wage, etc.) pay to import at the level of this cost so our companies have fair trade. Next, raise the minimum wage to about $20/hr. Tax, leaning harder on the well off, to pay for this.

Yes, our country as a whole would be poorer. One can always get ahead on the backs of the weak and poor. But it ain't right, and it's not a good place to live, even for those of us who do make a good living.

Darwin said...

I won't try to address point 1), since I think it ties very much in with one's ideas of "fairness". (To me, it would seem unfair to say that I can't buy coffee grown in central Africa simply because the laws there are different. How are 3rd world workers ever to catch up with our own if we don't allow them to build wealth by taking advantage of their competitive edge: price?)

On 2), it's important to remember what is considered a decent living in other countries. In japan, having a 400 square foot apartment is considered "normal", and so is living with your parents even as a married couple in your thirties. And there a huge numbers of couples who (despite both working) don't believe they have enough money to have even one child. In America, those kind of lifestyle sacrifices would be considered totally intollerable.

Your point 3) is perhaps the one that should give us the most thought as Christians. On the one hand, I definitely take your point that those who work should be paid a just wage. On the other hand, it seems to me that part of the "justice" of a wage is how it relates to what you're doing. While on the one hand, it strikes me as being the duty of employers to pay a wage that people can live off of, it also strikes me as being the duty someone who wants to be a head of household to do work that's worthy of a household supporting wage.

This in turn leads to point 4). (A quick digression, I'm not sure what relation you're seeing between minimum wage and higher taxes on the 'well off' since most wages are not paid out of taxes.) I think it's important to think about what setting the minimum wage at $20/hr would mean. On the one hand, it would mean saying that all work was worth at least $20/hr, but on the other it would mean saying that no work worth less than $20/hr was worth doing (or worth paying someone to do.)

It's hard to imagine how big a change we'd face in our national character and economy if we set the minimum wage at $20/hr, but one thing I think we could bet on for use is that unemployment for those with only a high school education or less (many of the people one would be intending to help) would go up to 50% or more, for the simple reason that people would re-assess what it was worth it to hire people to do, and eliminate a lot of the lower skilled jobs from the economy.

Steven said...

Dear Darwin,

The "income gap" is of no interest to me whatsoever, nor do I think it a particular example of where one can employ Catholic Social Justice principles. What is of concern to me is that regardless of the size of the gap, every worker who is doing productive work be able to earn a wage that will allow him or her to support the family without having to work two or three jobs or ninety-hour weeks.

I think it's a travesty that a football coach often makes more money than the highest paid professor in a university setting. But both football coach and professor are earning a living, while the person who cleans up after them probably is not.

Income gap is the concern of the envious, just wages is the concern of all Catholics.

shalom,

Steven

Father Martin Fox said...

Steven "beat me to the punch": if you are doing well, or well enough, why should it matter how much more than you someone else is making?

Darwin said...

Leave it to Steven and Fr. Fox to isolate in a few words of morality what I spent many paragraphs of ad hoc economics trying to argue.

Yes, I think you're right that the "income gap" rhetoric appeals primarily to envy.

Trying to turn the entire middle class into a victim group and then propose ways to help them probably appeals more to a certain type of politician, since those who aren't making a living wage in the first place tend to vote in rather smaller numbers than those who are getting by but envy their neighbors.

The Opinionated Homeschooler said...

I had a tax law professor who recommended (half seriously) that the income tax rate increase sharply up until some very high income level (say half a million), at which point it would drop precipitously. His reasoning is that most wealthy people assume they'll get wealthier, so they'll endure unreasonably high rates, which they'd see as temporary, on the way to the low "prize" rate, and they will work like dogs to get there, growing the economy and generating lots of revenue at the same time.

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