Sunday, November 4, 2012

Robert Reich's I'll Be Short 2: Solutions and Counter-productive Consequences

In my latest reading of I'll Be Short: Essentials for a Decent Working Society, Robert Reich essentially addresses the issue of whether doing the right thing would have counter-productive consequences for businesses and workers.  You hear from a number of conservatives that it would----only they would disagree with many on the Left about what the right thing is.  Conservatives have argued that raising the minimum wage would result in unemployment; that unions encourage businesses to go overseas to escape union demands, or to hire fewer workers because each worker costs so much under unionization; and that Family and Medical Leave would result in the hiring of fewer women because it would be costly for businesses to train a female worker's replacement while she is on leave.

Reich argues that policies such as flexible work hours actually help businesses because they increase worker morale and productivity, reduce absenteeism, and keep good workers, which means that businesses would not have to spend as much money training new people.

But Reich also acknowledges that there could be such a thing as too much.  If the Earned Income Tax Credit is increased, for example, then businesses may pay their workers less because they know that the "taxpayers would make up the difference" (page 56).  Reich says that raising the minimum wage too high could discourage employers from hiring low-skilled workers or lead them to rely on machines rather than working people.  Reich does not think that unionization would necessarily encourage companies to go overseas, for most low-income people are in the "local service economy", and Reich refers favorably to efforts to unionize health care workers and raise janitors' wages.  And yet, Reich states that "there's a limit to how high unionized wages can go before employers find it cheaper to automate the jobs, cut back on staffing, or not offer the services to begin with" (page 56).  Reich says that the Federal Reserve could stimulate the economy and thus demand for low-wage workers, resulting in higher wages.  But, if that is taken too far, Reich says, the result could be inflation.  Reich then says that "the best way to make work pay is to ensure that everyone has an education sufficient to raise their productivity and thereby warrant higher pay" (page 57).

Reich states that "Together, a somewhat higher minimum wage, a somewhat expanded EITC, more unionization of low-wage workers, faster growth, and better education can lift full-time working families out of poverty" (page 57).  But Reich acknowledges that we may have to try until we get the "ideal combination of these measures", and yet he says that we're "rich enough and clever enough" for such a task (page 57).

I'd also like to note something that Reich says about welfare.  Here, too, Reich seeks to understand conservative positions about that issue.  Reich says that there was at one point resentment among working women towards welfare mothers who were only "slightly poorer" than they, for welfare mothers got to stay at home with their kids and receive welfare, whereas working mothers were out there trying to earn an income for their family after the loss of American manufacturing jobs.  But Reich then goes on to say that, now, many mothers are in the same boat, for the law aims to put welfare recipients into the workforce.  On page 59, Reich states that "direct handouts and income transfers to do the job" result in dependency and are hard to sustain politically, for "there's no political will to carry them out on a large scale."  Reich expresses openness to an idea that I read about in Rick Santorum's It Takes a Family: give the poor capital.

I appreciate Robert Reich's acknowledgement of nuance.  I think that it's important to try to solve problems, while also keeping an eye out for potential drawbacks to proposed solutions.  Both need to be balanced.  We shouldn't decide not to solve problems because some solutions may have drawbacks.  But we should also seeks ways to lessen the drawbacks, or to seek better solutions.

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