March 19, 2007
If this is the Future of Republican Economic Thought, then I’m Changing my Affiliation to Whig
Who says that Republican big-business types don’t care about income inequality? From Bloomberg News, via the Boston Globe…
Inequality of incomes is the "critical area where capitalist systems are most vulnerable," [Former Federal Reserve Chairman Alan Greenspan] said yesterday in Washington at a conference on maintaining the competitiveness of US capital markets convened by Treasury Secretary Henry Paulson. "You cannot have a system that we have unless the people who participate in it believe it is just."And Mr. Greenspan has the solution! All we need to do to even out incomes is depress incomes at the upper end of the scale, by allowing more immigration of skilled workers into the U.S…
Allowing more skilled workers into the country would bring down the salaries of top earners in the United States, easing tensions over the mounting wage gap, Greenspan said.I don’t think Ronald Reagan, who appointed Mr. Greenspan to his original Federal Reserve term, would have gotten behind this one."Our skilled wages are higher than anywhere in the world," he said. "If we open up a significant window for skilled workers, that would suppress the skilled-wage level and end the concentration of income."
Two questions for your consideration…
- For the practically minded: If “inequality” is the concern, why not enforce existing immigration laws to tighten the labor market to increase wages at the lower end of the pay scale, rather than try to depress wages in the middle and at the top of the scale?
- And for the more theoretically minded: How is using immigration policy to control wages any less noxious than implementing direct wage controls?
First, skilled immigrants are not the problem. There is often a shortage of spots for them (see: Gates, William & many other Silicon Valley types).
Second, why is OK to suppress lower-end, and middle-tier wages by offshoring, but then we get all nervous when the pinch moves up the econ ladder? I mean, wages for college grads have been falling as more mid-level jobs are sent offshore.
Third, we had a pretty good system for compressing wages for the period between WWII and the mid-70s. It's called "progressive taxation." In a capitalist society, income inequality is pretty much a given, unless there are gov't programs to re-distribute wealth.
So, you can have your free-markets, but there has to be some sort of re-distributive mechanism. Otherwise, the result is a banana-republic economy where 3% of the population owns 97% of the wealth.
Is that your idea of how our country should look? We did that once, remember? I do keep reminding you of how it was before the New Deal and the Progressive Era.
Posted by: klaus at March 19, 2007 7:23 PMRonald Reagan ?
Ronald Reagan gave 6 million illegal immigrants amnesty at the urging of
the meat-packers,and southern textile sweat shops.Reagan would have been with Greenspan on this one.