Thursday, July 17, 2014

Study: State Laws To Enhance Business Growth Widen Wealth Inequality

I suppose the results presented by DSWright at FDL should not be surprising:
Who beggars whom?
When state governments try to create a better business climate they run the risk of encouraging a more stratified society, according to a new study by David Neumark and Jennifer Muz of the University of California. The study compares two different policy approaches to improve the business climate of a state – those that attempt to increase growth by lowering business costs and those that work to improve the quality of life.

There was little exacerbation of wealth inequality when states enacted policies to improve their quality of life to create a better business climate, but when the method was lowering business costs to augment growth the wealth gap widened.

(NOTE: the "new study" link above is to a summary of the study. If you want more, downloading the full paper will cost you $5 unless your receiving email address is connected with an "appropriate" institution. Oh, irony! The CityLab link is free, and has more general info about the relationship of business climate to wealth inequality.)

This suggests to me that when business conditions improve, the businesses that benefit do not use any significant portion of their enhanced profits to pay their employees more, let alone to hire more people. This indifference to including employees in the gains reflects what I saw over my working life: my own increased productivity never significantly increased my salary. This result is part of what led to my becoming a full-time contractor (a solution which had its own set of problems for the worker who chooses it).

As far as I can see, there is no simple modification of what passes for capitalism in America that would benefit both employers and employees. All the "job creation" that Mitt Rmoney bragged about is exclusively at the discretion of, and largely to the benefit of, the employer. And states and cities that try to buy into the benefits on behalf of their working citizens by lavishing expensive benefits on the business community are wasting their time... and to a large extent their money.

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