Today’s N&O features an article by an NC State professor which is impressive only in how it packs in so many fallacies and mindless/baseless assertions. There is so much wrong with what the author says an entire book could probably be written about it, but I’ll focus on just a few of his primary claims.
The author begins by lamenting the fact that anybody could possibly believe that reducing tax rates on upper levels of income could benefit the economy. That anybody could believe that, according to the author, is proof that the “class war” is going badly for the middle and working classes.
First off, this notion of “class” is an inherently flawed idea to begin with. People’s earning power fluctuates greatly throughout their lifetimes, they are not permanently born into some inflexible caste system. Young, inexperienced people make less income, while middle-aged experienced people earn more. Retirees earn very little income and largely live off of accumulated wealth.
As economist Mark Perry points out with the use of 2009 Census Bureau data,
The highest-income quintile has four times more people working per household than the lowest quintile (2.08 earners vs. 0.48), and individuals in those households are far more likely to be well-educated, married and working full-time in their prime earning years. In contrast, those individuals with low incomes are far more likely to be less-educated and working part-time, and either very young or very old living in single-parent households. Given these significant differences in household characteristics, it’s not too surprising that there are huge differences in incomes among American households.
Then the professor insists on throwing in this widely discredited progressive talking point: “wages (have) stagnated for 30 years while productivity has risen and profits have soared.”
For a professor, he sure doesn’t do much research to back up his claims. He should know that wages are not compensation. Compensation includes the costs of health benefits, retirement funds, training, etc. Compensation reflects the employer’s total costs for workers. Total compensation has not been stagnant over the past 30 years, a growing share of compensation costs have gone toward these non-wage benefits.
Moreover, his lament about rising profits is misguided if his intent is to prove the problem with our economy is not enough political control (which I believe is his intent). The sociology professor should check with an industrial organization student to learn that in a competitive economy, rising profits attracts new entrants into an industry. The increased competition in the industry serves to drive down profits. The primary factor keeping profits on a sustained uptick would be government intervention – in the form of privileges or protections.
Other ridiculous, unthoughtful assertions made by the nutty professor include:
- “Relatively few of the rich actually create jobs, and some become richer by destroying jobs.” Here he conflates creating wealth with creating jobs. Anyone can create jobs. But jobs are a means to an end, a cost to creating a good or service that consumers value. What sense does it make to hire more people than necessary to produce goods? How will that make society better off?
- “The other notable trend is to cut jobs in the U.S. and re-create them overseas, where wages are lower.” This old “outsourcing” canard is baseless and irresponsible. As economist Walter Williams points out, “Because of automation, the U.S. worker is now three times as productive as in 1980 and twice as productive as in 2000. It’s productivity gains, rather than outsourcing and imports, that explains most of our manufacturing job loss.” Further, manufacturing jobs are not being “re-created” oversees, they are being lost to technology all over the world. As former Clinton labor secretary Robert Reich confirms: “Factory jobs are vanishing all over the world. Even China is losing them. The Chinese are doing more manufacturing than ever, but they’re also becoming far more efficient at it….Economists at Alliance Capital Management took a look at employment trends in twenty large economies and found that between 1995 and 2002–before the asset bubble and subsequent bust–twenty-two million manufacturing jobs disappeared. The United States wasn’t even the biggest loser. We lost about 11% of our manufacturing jobs in that period, but the Japanese lost 16% of theirs. Even developing nations lost factory jobs: Brazil suffered a 20% decline, and China had a 15% drop” (By the way, this is a good thing. Productivity gains is the essential factor in improving economic conditions)
- “The flip side to the distortion that credits the rich with creating jobs is the claim that only the private sector creates jobs, not the government. In fact, without a robust public sector, nobody would be creating any jobs, let alone getting rich.” His proof that the government creates jobs is the fact there are government employees. And this passes for serious commentary by a University professor! I hope I don’t have to remind people that the government can not create jobs, merely confiscate resources from the productive sector to finance the compensation of government workers. Every government worker means one less productive job in the private sector.
I certainly hope this Sociology professor does not indoctrinate his students with such belligerent and sloppy commentary on economic matters.