The war on work
When Ed Glaeser writes for City Journal it's always worth reading - take his brilliant takedown of infrastructure spending. His posts are rare but valuable. His latest "The War on Work—and How to End It" is no exception.
In it he sets out how America could significantly increase employment from simplifying welfare to replacing the minimum wage with wage subsidies and fixing vocational educations.
Here are some of my favourite excepts:
We also need to make hiring workers less costly for employers. Temporarily cutting the payroll tax was one of the most constructive policies adopted during the Great Recession. We could enact a permanent payroll-tax reduction. The tax could be gradually phased in for workers once their hourly earnings went beyond a certain threshold. The payroll tax could be eliminated for workers who had been unemployed, at least for an initial period. The costs of reducing the payroll tax could be offset by raising the minimum retirement age for employees who hadn’t paid these taxes for enough years. Reducing mandated benefits, like health care, that employers must provide lower-income earners would help encourage work, too. Ideally, the reform of our health-care system will ensure that workers have health-care options that don’t unduly burden employers.
Making work pay needs one final, major policy initiative: wage support, which would replace the EITC. The EITC had the right overall idea, but it is cumbersome and indirect. Instead, the federal government could simply provide pay to increase the earnings of minimum-wage workers by a fixed amount—say, $3 per hour. Consequently, a worker paid $7.25 would take home $10.25 hourly, with the difference paid for by taxpayers. The subsidy could fall gradually as wages rise, and it could be targeted for specific groups—larger for returning veterans or the long-run jobless—and rise or fall with the level of aggregate unemployment. The phaseout might slightly slow private-sector wage growth, but the cost would be more than offset by the benefits of such a visible push toward employment. Such a program would be expensive, so it should be matched with spending reductions for other social services.
And
We should also improve the way that we do vocational education. (See “Vocational Ed, Reborn,” page 36.) Many vocational schools, like Boston’s Madison Park High School, have long been troubled. The most ambitious students avoid getting tracked onto a vocational path, and they—and their parents—want schools that focus on college readiness. Consequently, less fortunate or struggling students often get segregated into these vocational centers. The conventional teachers in many vocational programs often lack the know-how for teaching either high-paying blue-collar trades, like plumbing, or cutting-edge fields, like computer programming.
A more effective approach might be to keep students in college-readiness-oriented schools and experiment with out-of-school vocational training. Kids could be taught after school, on weekends, and during the summer by programs specializing in particular occupations. These initiatives can be evaluated swiftly—you can readily determine if a program has produced, say, good carpenters. The superior training programs can then be scaled up and bad ones shut down. Adopting this structure would mean that anyone could potentially compete to run the programs—trade unions, private providers, nonprofits—increasing the chances that some programs will excel. We should also be open to initiatives like Cambridge, Massachusetts’s “The Possible Project,” which has been training youths, many from poorer backgrounds, to launch themselves in the start-up economy. (I am currently working on a randomized control trial for the project.)