Monday, January 12, 2015

STOP SUBSIDIZING INEQUALITY!!! It is past time to make changes that help the middle class.

http://truth-out.org/opinion/item/28483-idea-for-tackling-inequality-number-27-653-stop-subsidizing-it

It's rare that a week goes by in Washington without some major conference on inequality. This usually involves some prominent people, who get six or even seven figure paychecks, speculating on why inequality has grown and what we can do about it. These exercises illustrate the basic problem.
Most of the discussion assumes that inequality is something that happened. By contrast, the more obvious story is that inequality is something that was done; it was the result of policies that had the effect of redistributing income upward.
It isn't hard to identify these policies. A trade policy that is intended to put US manufacturing workers in direct competition with low-paid workers in countries like Mexico and China has the predicted and actual effect of lowering their wages. It also lowers the wages of non-college educated workers more generally, as displaced manufacturing workers crowd into other sectors of the economy.
By contrast, recent trade agreements have done little or nothing to put highly educated professionals like doctors and lawyers in competition with their counterparts in the developing world. The same argument for gains from trade that economists used to justify deals like NAFTA would apply to proposals to make it easier for foreign professionals to train to US standards and work in the United States. The lower pay to doctors and lawyers would save us tens of billions a year on health care costs and legal fees.
But economists get really confused when they're asked about free trade in professional services. They apparently only studied policies that lower the wages of less-educated workers.

No comments: