By L&T Publisher Earl Watt
The rungs of the economic ladder are getting wider and wider apart, and class warfare politicians have blamed the rich. Looking at the numbers and the trends, however, it has been social policies that are erasing the middle class.
America has changed significantly over the past 200 years, and the road to economic success has had to compete with the promise of a government-sponsored living.
Two hundred years ago, the road to success was hard but available. For those that wanted to carve out their own path rather than work in a northeast factory or tend the crops for a landowner in the South, all they had to do was move West.
Pioneers flocked to the wide open spaces, and new towns were built along the prairies and mountains.
But that opportunity would have been for naught if there was not a thriving economy back east hungry for the products produced on the great plains.
From crops to animals, and later other natural resources like oil and natural gas, the creation of independent economies was fueled throughout the nation, and jobs came with those opportunities.
Those who once lived with meager means were moving up the ladder, and self-made men and women were taking advantage of their entrepreneurial spirit.
They had to.
There was no welfare payments. If there were, the West would probably still be mostly wilderness.
Necessity, after all, is the mother of invention, and sometimes that necessity is to provide a living.
A review of our history shows that millions of people did not live in the streets prior to welfare and social security.
To the contrary, family units were stronger. Neighborhoods and friendships were more meaningful. Charities were well funded. We took care of our own without the government.
The gap between the haves and have nots was not as wide for a reason. The tools of progress were smaller and accessible to most. Anyone could work the land with a very small investment, and they could provide for their own family if no one else.
As America industrialized, concentrated wealth was needed to increase the size of the machinery. Bigger factories built bigger tools. The days of the blacksmith were over.
Rail connected the entire country, and not far behind were automobiles.
The blacksmith began to service vehicles, and the little guy still had a role in the expanding economy.
Big business, however, became entrenched with two key activities. They influenced politics financially, to their benefit, and opponents regulated their industry, to their benefit.
Regulations caused the operational costs to increase. Those who could not afford to implement the regulations were ran out of business, leaving more customers for those who could.
So, the big got bigger.
Imagine how difficult it would be today for group of investors to start a new automotive manufacturing company. It would be an impossibility, because the cost to start up and meet regulations would be prohibitive.
This holds true with those that believe raising the minimum wage benefits the economy.
It doesn’t, and here’s why:
It increases the cost of doing business, which again makes sure the little guy never gets the chance to reach the next rung on the ladder by starting up. Only the big companies can afford to pay the higher wages. They pass the cost on to the customers, so they maintain their income.
The government knows they always win with a minimum wage increase.
If a $7.50 per hour job is forced to raise to $10, and an employee works 40 hours, the employee makes another $100, but the government gets $30 through payroll taxes. Even if most of that is refunded, the employer has to match $10 that never comes back.
Again, the ladder rungs widen, and the little guy can never become an owner himself because the cost of doing business is too high.
Every time the cost of doing business has increased through government intervention and regulation, the middle class shrunk.
With unemployment benefits now being extended five years, there is no incentive to come up with a new trade, and the existing trades have been regulated to the point that a hard worker has little hope at getting a chance to start his own company.
Those working low-pay jobs like flipping burgers at a fast-food restaurant, which was supposed to be for high school kids or for a few extra bucks of spending money, are demanding $15 per hour in some parts of the country.
When Hostess temporarily shut down, its drivers said they could make more money staying at home than taking a reduced salary offer, so they did.
Many states do not require unemployment recipients to search for a job while receiving benefits, and Monday, President Barack Obama said unemployment benefits “stimulate the economy.”
What government benefits and regulations have done is remove the American spirit of innovation from the individual and replaced it with a sustenance payment that is just enough to keep people satisfied but not prosperous. In exchange, big business has excessive regulations that simply cause the price of their products to be higher and prevents others from competing.
If America wants to see an economic revolution, they should remove the “too big to fail” tag from regulation-protected companies that would bring the costs of doing business down and allow smaller companies to compete, and limit unemployment benefits so that workers would be compelled to find a job or create one themselves.
We can rebuild the middle class only if we require the best from everyone.