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Date: Sat, 17 May 2003 11:50:12 -0400
Subject: [libnetd] Liberty: -- Solution -- Putting America back to work
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Putting America back to work

by Bill Winter


According to economists, the U.S. unemployment rate -- 5.8% in
February 2003 -- isn't high by historical standards. But don't tell
that to the 8.5 million Americans who are looking for jobs.

Take Alicia Garcia, a former credit manager in Belmont, California,
who has been without a job and a paycheck for eight months.

"Right now I'm in a position where I'm going to be able to pay my rent
[this month] and pay my bills," she told the San Jose Mercury News.
"After that, I don't know where the money's going to come from."

Or Matt Heminger, a senior engineer in Silicon Valley, California, who
has been job-hunting for five months and is now willing to take any
job -- even a temporary one.

"I don't even think about [long-term] career opportunities," he told
the Contra Costa Times. "I just have to put bread on the table."

With 8.5 million unemployed Americans, there are 8.5 million similar
stories of distress and desperation. 

Of course, unemployment can never reach zero percent. There will
always be people between jobs, new graduates entering the labor force,
companies that close unexpectedly, industries that are winding down or
moving overseas, and economic downturns.   

And unemployment plays an important role in a free-market system.
While painful, it is beneficial to the economy in the long run.

As Dwight R. Lee and Richard B. McKenzie, authors of Failure and
Progress: The Bright Side of the Dismal Science (Cato Institute,
1993), wrote: "Those who experience unemployment feel pain -- but
because of that pain they are likely to obtain new employment in which
they provide more value to consumers."

After all, economic conditions like unemployment are "to the economy
what physical pain is to the body," they noted. It's the market's way
of "letting people know when the resources they are using in one
activity would be more productively used in another activity."

So, unemployment is the market's grim method of moving people from
less-productive jobs to more-productive jobs. And more-productive jobs
create more wealth and economic growth -- which, in the long term,
raises everyone's standard of living.   

But, in the short term, America needs to move 8.5 million individuals
back into paying jobs. Because it's in the short term that Alicia
Garcia and Matt Heminger must pay their rent and support their
families.   

Before we look at how to get America working again, let's demolish
some popular myths about the causes of unemployment.

According to economic isolationists like Pat Buchanan and Ross Perot,
unemployment is caused by foreigners taking Americans' jobs, by the
giant "sucking sound" of NAFTA draining jobs into Mexico, and by trade
deficits with export-happy nations like Japan. The facts suggest
otherwise.    

* Myth: Immigration causes unemployment.

* Fact: "In the 1980s, the U.S. accepted 7 million new immigrants, but
unemployment fell sharply," wrote the Cato Institute's Stephen Moore
and Stuart Anderson. As the Cato Handbook for the 106th Congress
noted: "By starting businesses and spending their money on products
made by Americans and immigrants alike, immigrants create at least as
many jobs as they fill. Simply put, immigrants increase the supply of
labor, but they also increase the demand for labor."      

* Myth: Free trade causes unemployment.

* Fact: "After passage of NAFTA" -- a flawed, limited move towards
free trade -- "the U.S. economy created millions of new jobs," wrote
Daniel T. Griswold, at the Cato Institute's Center for Trade Policy
Studies. "Civilian employment in the U.S. economy grew from 120.3
million in 1993 to 135.1 million in 2001, an increase of almost 2
million jobs per year."     

* Myth: Trade deficits cause unemployment.

* Fact: "Rising trade deficits correlate with falling unemployment
rates," noted the Cato Handbook for the 106th Congress. "The U.S.
economy has actually grown faster in years in which the trade deficit
has been rising than in years in which the deficit has shrunk."

So what does cause excessive unemployment? In a word: Government.

In the name of the "public good," state and federal politicians have
implemented policies that boost unemployment: High taxes that slow
economic growth. Government-mandated benefits that price potential
jobs out of the market. Regulations that choke the entrepreneurial
spirit. And minimum wages that chop the bottom rung off the wage
ladder.     

Any job-creation program must begin with undoing the damage the
government has done. Here's where we can start: 

* Reduce taxes. Taxes put the brakes on job creation by reducing the
amount of money available to business to expand and hire new workers.

"High tax rates [are] the quickest way to ensure high unemployment,"
wrote Adam Thierer in a 1994 Heritage Foundation report, "The Five
Principles of Job Creation." "The aggregate effect of taxes is a huge
barrier to job creation, as capital shifts from the hands of investors
to the government."    

In other words, every dollar that goes into the coffers of the federal
government is one less dollar available for businesses "to invest in
the means of production, including land, equipment, factories, new
technologies, and labor," wrote Thierer. "Because taxes create
disincentives to invest in businesses, capital for future job creation
is being produced at a lower rate."     

* End all government-mandated job benefits, such as the Family and
Medical Leave Act (FMLA), health benefits, unemployment insurance, and
so on. Such regulations act as "hidden taxes," boosting the cost of
hiring new employees.   

"When the government increases [the] burden on the private sector by
promulgating new rules, firms must adjust their behavior accordingly,"
wrote Thierer. "Regardless of the adjustment method, costs will be
incurred." And higher costs-per-job mean fewer jobs.   

Ironically, mandated benefits may not even help workers, argued the
Heritage Foundation's William G. Laffer, III in "How Regulation is
Destroying American Jobs," a 1993 Heritage Foundation report.

"In the long run, employers will seek to offset their increased costs,
either by reducing wage and salary payments or by cutting back on
other benefits that the employer previously might have provided
voluntarily," he wrote. "As a result, the total value of the
employees' compensation eventually may be no higher than it would have
been in the absence of the regulation."

* Abolish the minimum wage.

The minimum wage -- currently set at $5.15 per hour by federal law --
harms the people it is most intended to help.

"It is now almost universally accepted that minimum wage laws reduce
the employment of low-skilled workers whose productivity simply is not
worth what the employers are required by law to pay," wrote Laffer.

For example, when Congress raised the minimum wage in 1989 and 1991 by
27%, teenage employment fell by 11%. 

Every increase in the minimum wages makes "it harder for young adults
with little education, skill, or experience to obtain their first
full-time entry-level jobs," wrote Laffer. "These are the jobs where
they would acquire the training, experience, and work habits that
eventually would make their labor worth more than the legal minimum."

How can politicians get away with such job-killing legislation? By
inflicting the harm on those least likely to complain, said Jim Cox,
the author of The Concise Guide to Economics.  

"The vast majority of people adversely affected by [a minimum wage]
increase are young, illiterate, or among the lowest ranks of the
socioeconomic ladder," he said. "They generally don't vote [and] do
not count in the political process. So politicians can posture as the
saviors of these low-income people while actually destroying their
prospects for attaining upward mobility."     

* Repeal regulations that create barriers to work and job creation.

Like minimum wage laws, government regulations chop the bottom rungs
off the economic ladder, and make it more difficult for lower-income
Americans to start businesses and create jobs.

Here's one example: In 1996, JoAnne Cornwell decided to open an
African hair-braiding service in San Diego. Cornwell, an
African-American, had learned a unique technique of traditional
hair-braiding from her grandmother. She wanted to use her skill to
start a new business.    

California bureaucrats had other ideas. The state's Department of
Consumer Affairs informed Cornwell that she would have to attend 1,600
hours of schooling at a cost of $5,000 to obtain a cosmetology
license. This was the law, even though African hair-braiding was not
taught in cosmetology classes.    

Cornwell was lucky. The Institute for Justice, a public interest law
firm, took her case. After two years in court, she finally won the
right to open her hair-braiding shop. Others aren't so lucky.

A myriad of regulations and licensing requirements keep thousands of
poor Americans from starting small businesses and lifting themselves
out of poverty. In fact, by 1993, excessive regulations had cost the
American economy 3 million jobs, estimated Laffer -- and untold
millions since then.    

"This toll is not usually apparent, because in most instances
regulation merely leads to a slower growth in employment rather than
to visible loss in existing jobs." he wrote. Like mandated benefits,
"regulations act like a hidden tax on job creation and employment."

A final note about unemployment: By laying out an agenda that would
result in more jobs, we're not suggesting that the function of
government is to stimulate the economy or to "create" jobs.  

"[Economic] growth should be of no concern to the government," argued
the Future of Freedom Foundation's Sheldon Richman in 1996. "The idea
that the [government] is the steward of the economy is an
intrinsically statist idea."

But it's more than just a "statist idea" -- it also doesn't work. The
more the government meddles in "job-creation" schemes, the more
jobless Americans there are.

Here's the proof: In 1946, Congress passed the Employment Act, which
established for the first time "the principle that it was the
responsibility of the federal government to maintain full employment,"
wrote Thayer Watkins at San José State University.   

Alas. As Milton Friedman acidly noted in 1993: "In the years since
[1946], unemployment has averaged 5.7%. In the years from 1900 to
1929, when government made no pretense of being responsible for
employment, unemployment averaged 4.6%. So, our unemployment problem
is largely government created."    

That's why the government needs to stop taking actions that slow
economic growth, hinder business, and stifle employment.

As Henry David Thoreau wrote in Civil Disobedience: "Government never
furthered any enterprise but by the alacrity with which it got out of
the way."  

It's time for a little alacrity from the federal government. It's time
for Washington, DC to get out of the way of America's free-enterprise
job-creation machine.  

-----
Source: lp-news


Archive: http://politics.marcbrands.com/newsletter
=====================================================================
Quote:
- The high rate of unemployment among teenagers, and especially black
teenagers, is both a scandal and a serious source of social unrest.
Yet it is largely a result of minimum wage laws.  We regard the
minimum wage as one of the most, if not the most, antiblack laws on
the statute books. -Milton & Rose Friedman, authors of Free To Choose
=====================================================================

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