Richard K. Vedder: “Federal Government Has Declared War On Work” – Investors Business Daily

Posted on :Jan 18, 2014

By: Richard K. Vedder

Investors Business Daily

January 17, 2014

While 50 years ago the federal government declared war on poverty, I would  submit that in recent years it has led an undeclared but real new war: a War on  Work. The government increasingly is using its coercive powers to punish people  who want to work, creating a vast class of able-bodied Americans dependent on  the government — and politicians — for their daily bread.

The statistics are startling. A smaller proportion of working-age Americans  works today than when the recession officially ended 4-1/2 years ago (June  2009).

But this trend is not just a failure of policies to encourage economic  recovery, such as the stimulus package and the ineffective, highly expansionary  Federal Reserve monetary policy. The decline in work has been going on since at  least 2000, under both Republican and Democratic administrations.

Suppose today we had the same proportion of Americans working that we did in  2000 — the end of the Clinton administration. We would have 14.6 million more  workers in America — 4 million more than the number of unemployed.

Making reasonable assumptions about the productivity of these lost workers,  the annual national output today would be over $2,500 per person higher — over  $10,000 for a family of four. The actual recent recorded decline in real median  income per household almost certainly would not have occurred. Much of the  21st-century growth dearth — the fall in growth rates from above 3% to only 2% a  year — would have been averted.

While a vast number of government policies cause a decline in work, let me  mention just six:

• Extended unemployment benefits.

• Expansion of food stamps.

• Higher taxes on workers, especially the most productive ones.

• Increases in Social Security disability payments.

• Increases in Pell Grants and other forms of federal higher education  aid.

• Increases in minimum wage laws at local, state and federal levels.

Extended Unemployment Benefits

For almost eight decades, the federal-state unemployment insurance system  provided 26 weeks of benefits for unemployed workers, with occasionally a modest  short-term extension of those benefits (to typically 39 weeks) during  recessions. In 2013, those benefits were given for 73 weeks — four years after  the recession ended.

You pay people not to work — and many respond accordingly. In the month with  the highest unemployment (10.8%) since the Great Depression, December 1982, the  average duration of unemployment was 18.0 weeks; in December 2013, it was 37.1  weeks.

The 73-week benefit provision ended recently, but President Obama and the  Senate want it extended — preventing the creation of many jobs.

Food Stamps

If the government subsidizes the purchase of life’s most critical essential —  food — it reduces the need to work. In 2000, 17.1 million Americans received  food stamps; in October 2013, 47.6 million did.

Higher Taxes on Workers

A decade ago, in 2004, the top marginal federal income tax rate was 35%;  today, it is about 43%, counting ObamaCare-related taxes. There is overwhelming  empirical evidence that high income taxes impede economic growth. There has been  a vast migration of Americans, for example, from the 41 states with state income  taxes to the nine states that do not tax work income.

Social Security Disability

In 1990, about 4 million Americans and their dependents received Social  Security disability payments — today 11 million do. At a time when health care  is improving, and more Americans work in relatively less-risky nonindustrial  settings, there has been an explosion in the number of people paid not to work  because of alleged inability to do so.

Federal Student Financial Aid

In 2000, fewer than 4 million Americans received Pell Grants to attend  college; by 2012, nearly 9 million did. From 2002 to 2012, total federal aid  more than doubled, going from $83 billion to $170 billion. Yet large portions of  those recipients never graduate, and many that do are truly underemployed — we  increasingly have college-educated taxi drivers, janitors, bartenders and retail  sales clerks.

Minimum Wage

Seven years ago today, the federal minimum wage was $5.15. By the end of this  year, if Obama gets his way, it will be $9.25. Many cities and states have  enacted huge minimum wage increases, at a time when the unemployment rate of  black teenagers exceeds 35%.

Future Nobel laureate George Stigler noted in 1946 that minimum wage laws  caused unemployment, and subsequent empirical evidence overwhelmingly shows that  they kill jobs for the most vulnerable unskilled workers.

No nation ever achieved greatness when vast portions of its productive  workforce were idle. America will not regain its economic vitality until it ends  this war on work.

• Vedder is a senior fellow at the Independent Institute, professor of  economics at Ohio University and co-author of “Out of Work: Unemployment and  Government in America.”

Gold Goliath is not your typical gold dealer.


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