Posts Tagged ‘Unemployment’

As I discuss in this recent interview, a higher minimum wage is a terrible idea if we care about facts and evidence (and also want to help poor people).

In the interview, I mentioned that minimum wage mandates aren’t good news for workers who lose their jobs.

One of them, Simone Barron, wrote in the Wall Street Journal about her unfortunate experience after the minimum wage was increased in Seattle.

This city’s minimum wage is rising to $16.39 an hour on Jan. 1. Instead of receiving a bigger paycheck, I’m left without any pay at all… That’s because the restaurant where I’ve worked for six years is closing as a consequence of the city’s harmful minimum-wage experiment. …When rent is too high, labor costs too much, and customers don’t want to pay $40 for a roast-chicken entree, the only way for many operators to ease the pain is to close. So now, after six years working at Mr. Douglas’s restaurant Tanakasan, I need to find a new work home. My first thought was to go back to Sitka & Spruce, a restaurant where I had once worked. …As it turns out, I can’t return to Sitka & Spruce. Its James Beard Award-winning owner, Matt Dillon, is closing Sitka after 14 years, defeated by the one-two punch of rising rents and labor costs. …I often hear people in Seattle lament that it’s becoming “more corporate.” The truth is that the city has made it nearly impossible for many small businesses to survive. …I’ve started applying for other open positions around town. I landed an interview at a restaurant called Super Bueno, owned by another established chef, Ethan Stowell. Before I could even confirm the interview, Mr. Stowell announced that he will close down Super Bueno at the end of the year.

Just in case you’re tempted to dismiss Ms. Barron’s story as a mere anecdote, let’s now look at some broader evidence.

There’s a new study from the National Bureau of Economic Research that measures the impact of minimum wage mandates. The results are not encouraging.

Using intertemporal variation in whether a state’s minimum wage is bound by the federal rate and credit-score data for approximately 15.2 million establishments for the period 1989–2013, we find that increases in the federal minimum wage worsen the financial health of small businesses in the affected states. Small, young, labor-intensive, minimum-wage sensitive establishments located in the states bound to the federal minimum wage and those located in competitive and low-income areas experience higher financial stress. Increases in the minimum wage also lead to lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate for small businesses. …Our results document some potential costs of a one-size-fits-all nationwide minimum wage, and we highlight how it can have an adverse effect on the financial health of some small businesses.

But not everybody cares about evidence.

The New York Times just opined in favor of the Bernie Sanders approach on the topic.

Over the past five years, a wave of increases in state and local minimum-wage standards has pushed the average effective minimum wage in the United States to the highest level on record. The average worker must be paid at least $11.80 an hour… Millions of workers are being left behind because 21 states still use the federal standard, $7.25 an hour… House Democrats passed legislation in July that would gradually increase the federal standard, to $15 an hour in 2025…the legislation also would require automatic adjustments in the minimum wage to keep pace with wage growth in the broader economy. …For most companies, the bill is relatively small, and it can be defrayed by giving less money to shareholders, or by raising prices. …The American economy is generating plenty of jobs; the problem is in the paychecks. The solution is a $15 federal minimum wage.

Interestingly, the editorial actually acknowledged that a one-size-fits-all $15 mandate would backfire.

It is possible that a national $15 standard would produce the kinds of damage critics have long predicted; the Congressional Budget Office puts the potential increase in unemployment…3.7 million people… Workers may be most vulnerable in areas where prevailing wages are relatively low. In California, for example, the minimum wage for large employers (more than 25 workers) will rise to $13 an hour on Wednesday. That is unlikely to cause problems in San Francisco — but the new minimum is quite close to the median hourly wage of $15.23 in the Visalia metropolitan area in the Central Valley. The federal minimum would apply to metropolitan areas like Daphne, Ala., and Sumter, S.C., where the median worker earned less than $15 an hour in 2018. One simple corrective, proposed by Senator Michael Bennet of Colorado, would be to include exemptions from the $15 standard for low-wage metropolitan areas and rural areas.

In other words, the NYT endorsed a $15 federal minimum wage, and then concluded by admitting it would be very bad if there actually was a $15 federal minimum wage.

This is why I prefer this editorial from the New York Times.

…there’s a virtual consensus among economists that the minimum wage is an idea whose time has passed. Raising the minimum wage by a substantial amount would price working poor people out of the job market. …An increase in the minimum wage…would increase employers’ incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired. …Those at greatest risk from a higher minimum would be young, poor workers, who already face formidable barriers to getting and keeping jobs. …The idea of using a minimum wage to overcome poverty is old, honorable – and fundamentally flawed. It’s time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little.

Sadly, that editorial was from 1987, back when the newspaper had a more rational perspective.

In those days, the New York Times also favored the flat tax.

Today, the publication is almost a parody of “woke” emotion since many reporters and editors push a statist agenda, presumably because (their perceptions of) good intentions matter more than good results.

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A couple of years ago, I praised federalism in part because state and local governments would be less likely to adopt bad policy (such as higher minimum wages) if they understood that jobs and investment could simply migrate to jurisdictions that didn’t adopt bad policy.

But “less likely” isn’t the same as “never.” Some state and local politicians can’t resist the temptation to raise taxes, even though that means workers “vote with their feetfor places with lower tax burdens.

And some state and local politicians continue to mandate higher minimum wages (see here, here, here, and here), even though that means workers have fewer job opportunities.

Today, we’re going to look at some fresh evidence from Emeryville, California.

The local newspaper has an impressively detailed look at what’s happened to the town’s labor market.

Representatives from the Mills College Lokey School presented data from its recent ‘business conditions’ survey to our City Council on Tuesday. The study confirmed what restaurant owners warned when the ordinance was hastily passed in 2015. They are struggling, rapidly raising menu prices and increasingly looking to leave. …It’s getting harder to find small food service businesses that were around in 2015 when the MWO was passed. Emeryville institution Bucci’s, Commonwealth, Farley’s, Scarlet City … all gone. In fact, nearly all the brick & mortar businesses that comprised the short-lived Little City Emeryville small business advocacy group have moved, folded or sold. …The survey also identified that “the restaurant industry is clearly struggling.” Specifically, small, independent, non-franchise establishments are having the most difficulty.

Here’s some of the survey data on the negative effect.

Here’s some specific information on how restaurants have been adversely impacted.

…nearly all the new businesses that have opened have embraced the counter service model that requires fewer employees. Paradita Eatery, whose original plan was for a full service sit-down restaurant, cited Emeryville’s wage ordinance specifically for ‘pivoting’ to a counter service model. Counter service models require fewer employees to offset higher labor costs. …The only full service restaurant that has opened since the Minimum Wage was passed was 612One Asian Fusion which folded after just two years in business.

One of the reasons for the economic damage is that Emeryville has gone further and faster in the wrong direction.

The local law is more onerous than the state law and more onerous than other nearby communities.

But it’s not just workers who are suffering.

Consumers are adversely impacted as well.

One commenter, who identified herself as a resident, questioned why the survey did not include consumer data noting her dining frequency was altered by the drastic price increases she’s observed. …She noted that she used to frequent her local Doyle Street Cafe 2-3 times per month but last year went only twice. …Once franchise owner noted that the price increases they’ve been forced to pass along have ironically had the biggest impact on vulnerable communities that are more price-sensitive. “Our largest decrease in guests are folks over 50. Obviously our elderly, disabled, and folks on fixed incomes are unable increase their income to compensate for the price increases.”

Let’s close with a new video from Johan Norberg, which looks at the impact of minimum wage increases in San Diego.

P.S. If local communities are allowed to mandate minimum wages higher than the state level or federal, shouldn’t they also have the freedom to allow minimum wages that are lower than the state level or federal level?

P.P.S. A number of European nations have no mandated minimum wage. As explained in this video, that’s an approach we should copy.

P.P.P.S. If you want some minimum-wage themed humor, you can enjoy cartoons herehereherehere, and here.

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I shared a video last year that pointed out that Americans live in a nation that became prosperous thanks to “creative destruction.”

That’s the term developed by Joseph Schumpeter to describe the economic churning caused by competition, innovation, and markets (international trade is just a minor part of this process, though it’s the part that generates the most controversy).

The bad news is that some people lose their jobs as the economy evolves and changes. And some companies go bankrupt. There are real victims and tragic stories.

But the good news is that other jobs are created. And entrepreneurs start new businesses.

And the better news is that our living standards increase. Especially over time. Even for many of those who lost jobs in the short run.

That’s why we’re much richer, on average, than our parents and grandparents.

Needless to say, a key measure of a healthy and dynamic economy is for the job gains to exceed the job losses.

So when I spoke to congressional staff earlier this week about trade and protectionism, I figured I should go beyond theory and include some numbers.

I went to the relevant website at the Bureau of Labor Statistics and found that more than 28 million jobs were lost in 2017 (final data for 2018 is still not available).

That sounds terrible. And for many workers, it was horrible news.

But the good news, as you can see in the screenshot below (click to expand), is that the U.S. economy created more than 30 million new jobs that year.

The obvious takeaway from this data is that the crowd in Washington should adopt policies that ensure we have strong growth so that people who lose jobs have lots of good options for new employment.

In other words, don’t impose the kind of policies that have created high unemployment and economic stagnation in many European welfare states.

For what it’s worth, that message seems to be lost on Bernie Sanders, who has a long list of policies that would turn America into a version of GreeceFrance, and Italy.

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Looking through an economic lens, what’s the best country in the world?

If your benchmark is economic liberty, then Hong Kong is the answer according to both the Fraser Institute and Heritage Foundation.

If per-capita GDP or per-capita wealth is your benchmark, then Monaco wins the prize.

And you get different answers if you focus on specific features such as competitiveness (the United States) or ease of doing business (New Zealand).

You can also measure national performance by looking at key economic variables.

And that’s what Professor Steve Hanke of Johns Hopkins University has done.

In the sphere of economics, misery tends to flow from high inflation, steep borrowing costs and unemployment. …Many countries measure and report these economic metrics on a regular basis. Comparing them, nation by nation, can tell us a lot about where in the world people are sad or happy. …To answer this question, I update my annual Misery Index measurements.

Hanke explains the evolution of the Misery Index and how he puts together his version.

The first Misery Index was constructed by economist Art Okun in the 1960s as a way to provide President Lyndon Johnson with an easily digestible snapshot of the economy. That original Misery Index was just a simple sum of a nation’s annual inflation rate and its unemployment rate. The Index has been modified several times, first by Robert Barro of Harvard and then by myself. My modified Misery Index is the sum of the unemployment, inflation and bank lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are “bad” and make people more miserable. These are offset by a “good” (GDP per capita growth), which is subtracted from the sum of the “bads.”

You can see the entire list of 95 nations (some countries don’t report adequate data, so they aren’t counted) by clicking here.

And here are the nations with the best scores (remember, this is a Misery Index, so the top results are at the bottom of the list).

Professor Hanke comments on Thailand’s first-place results and Hungary’s second-place results.

Thailand takes the prize as the least miserable country in the world on the 2018 Misery Index. It’s 2018 rank of No. 95 out of 95 countries is a stunner. …Hungary delivered yet another stunner, making a dramatic improvement from 2017 to 2018.  It comes in at No. 94 as the second least miserable country in the world. While the European Union and the international elites have thrown everything they can throw at Prime Minister Viktor Orbán, it’s easy to see why he commands a strong following at home.

Keep in mind, by the way, that Hanke’s list is a measure of annual economic outcomes.

So a relatively poor country can get a very good score. Indeed, they should get comparatively good scores according to convergence theory.

Assuming, of course, that they have decent policy.

However, if you look at the nations with the most miserable outcomes, you can see that many countries don’t have decent policy.

Here’s Hanke’s analysis of the world’s worst performers.

Venezuela holds the inglorious title of the most miserable country in the world in 2018, as it did in 2017, 2016, and 2015. The failures of President Nicolás Maduro’s socialist, corrupt petroleum state have been well documented… Argentina jumped to the No. 2 spot after yet another peso crisis. Since its founding, Argentina has been burdened with numerous economic crises. Most can be laid at the feet of domestic mismanagement and currency problems (read: currency collapses). To list but a few of these crises: 1876, 1890, 1914, 1930, 1952, 1958, 1967, 1975, 1985, 1989, 2001, and 2018.

For what it’s worth, if you look at the actual Misery Index numbers, Venezuela is in first place by an enormous margin. Chalk that up as another “victory” for socialism.

Moreover, I’m not surprised to see that Jordan, Ukraine, and South Africa are doing poorly. Sadly, there’s not much hope for improvement in those nations.

It’s also not a surprise to see Brazil on the list, though there may be room for optimism if the new government can adopt meaningful reforms.

P.S. Professor Hanke noted that Arthur Okun created the first Misery Index. Okun also is famous for his explanation of the equity-efficiency tradeoff. Okun supported redistribution in order to increase equality of outcomes, but he was honest and admitted that this would mean less prosperity. Too bad international bureaucracies such as the OECD and IMF don’t share Okun’s honesty.

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When I write about Social Security, I normally focus on the program’s huge fiscal imbalance ($44 trillion and climbing).

But it’s not just a fiscal crisis. Social Security is also an increasingly bad deal for workers. Especially minorities with lower average lifespans. When compared to what they would get from a private retirement system, people are paying in too much and getting out too little.

There’s also another major problem with the program.

Academic experts have quantified how older workers are lured out of the labor force when they get money from the government. And since economic output is a function of the quality and quantity of labor and capital, this means we’re sacrificing wealth and reducing prosperity.

Here are some excerpts from a study by Professors Daniel Fetter and Lee Lockwood.

Many of the most important government programs, including Social Security and Medicare, transfer resources to older people… Standard economic theory predicts that such programs reduce late-life labor supply and that the implicit taxation reduces the ex-post value of the programs to recipients. Understanding the size and nature of such effects on labor supply and welfare is an increasingly important issue, as demographic trends have increased both the potential labor supply of the elderly and its aggregate importance, while simultaneously increasing the need for reforms to government old-age support programs. …We address these questions by investigating Old Age Assistance (OAA), a means-tested program introduced in the 1930s alongside Social Security that later became the Supplemental Security Income (SSI) program.

Here are charts illustrating how people are retiring earlier in part because of government payments.

And here are some calculations from the study.

Our estimates indicate that OAA significantly reduced labor force participation among older individuals. The basic patterns that we explore in the data are evident in Figure 2, which plots male labor force participation by age, separately for states with above- and belowmedian OAA payments per person 65 and older. Up to age 65, the age pattern of labor force participation was extremely similar in states with larger and smaller OAA programs. At age 65, however, there was a sharp divergence in labor force participation between states with larger OAA programs relative to those with smaller programs, and this divergence continued at older ages. Our regression results, which isolate variation in OAA program size due to state policy differences, imply that OAA can explain more than half of the large 1930–40 drop in labor force participation of men aged 65–74. …Our results suggest that Social Security had the potential to drive at least half—and likely more—of the mid-century decline in late-life labor supply for men. …Taken as a whole, our results suggest that government old-age support programs can have large effects on labor supply, through both their transfer and taxation components.

This chart captures how old-age payments in various states were associated with varying degrees of labor force participation.

By the way, I’m not sharing this information because it’s bad for people to retire at some point.

I’m merely establishing that there’s academic support for the common-sense observation that people are more likely to leave the labor force when there’s an alternative source of income (though it’s worth noting that there should be a sensible and sustainable system for providing that retirement income).

Moreover, people are likely to stop working when government systems give them money before age 65.

Three academics, Andres Erosa, Luisa Fuster, and Gueorgui Kambourov, have a study quantifying this problem in European nations.

There are substantial differences in labor supply and in the design of tax and transfer programs across countries. The cross-country differences in labor supply increase dramatically late in the life cycle…while differences in employment rates among eight European countries are in the order of 15 percentage points for the 50-54 age group, they increase to 35 percentage points for the 55-59 age group and to more than 50 percentage points for the 60-64 age group. In this paper we quantitatively assess the role of social security, disability insurance, and taxation for understanding differences in labor supply late in the life cycle (age 50+) across European countries and the United States. … The social security, disability insurance, and taxation systems in the United States and European countries in the study are modelled in great detail.

Here’s a sampling of their results.

The main findings are that the model accounts fairly well for how labor supply decreases late in the life cycle for most countries. The model matches remarkably well the large decline in the aggregate labor supply after age 50 in Spain, Italy, and the Netherlands. The results support the view that government policies can go a long way towards accounting for the low labor supply late in the life cycle for these European countries relative to the United States, with social security rules accounting for the bulk of these effects… relative to the United States, the hours worked by men aged 60-64 is…49% in the Netherlands, 66% in Spain, 44% in Italy, and 29% in France. …government policies can go a long way towards accounting for labor supply differences across countries. Social security rules account for the bulk of cross country differences in labor supply late in the life cycle (with its contribution varying from 50% to 100%), but other policies also matter. In accounting for the low labor supply relative to the US at ages 60 to 64, taxes matter importantly in the Netherlands (6%), Italy (6%), and France (5%); disability insurance policies are important for the Netherlands (7%) and Spain (10%).

And here’s one of their charts comparing hours worked at various ages in Switzerland, Spain, France, and the United States.

The good news is that we don’t push people out of the labor force as much as the French and the Spanish.

The bad news is that we’re not as good as Switzerland (probably in part because the Swiss have a retirement system based on private saving, so they have the ideal combination of good work incentives and comfortable retirement).

But it shouldn’t matter whether other countries have good systems or bad systems. What does matter is that America’s demographic profile is changing. We’re living longer and having fewer children and our system of entitlements is a mess.

We should be reforming these programs, both for fiscal reasons and economic reasons.

P.S. It’s not just Social Security. Other programs also lure people out of the job market and into government dependency, with Obamacare being an especially harmful example.

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One of the core principles of economics is that prices are determined by supply and demand. That includes the price of labor – i.e., the wages received by workers.

Another core principle is that taxes create distortions by reducing demand and supply. Which is why it’s not a good idea to impose high tax rates on behaviors that contribute to prosperity, such as work, saving, investment, and entrepreneurship.

That’s the theory. Now let’s consider some real-world implications of taxes on work.

Here are some excerpts from new research by the European Central Bank.

Several reforms can be enacted to reduce the unemployment rate in the euro area. Among them is a permanent reduction in the labour tax. Typically, a decrease in labour taxes reduces labour costs to employers and increases the net take-home pay of employees, positively impacting both labour demand and labour supply. Reducing taxes on labour can contribute to increase employment and activity rates in the EA, by increasing incentives to hire, to look for, and take up, work. …In this paper we contribute to the debate on those issues by evaluating the macroeconomic effects of a fiscal reform in the EA countries.

The study look at what happens with employment-related taxes are lowered at either the employer level or the employee level.

Permanently reducing labour tax rates paid by Home firms would have stimulating effects on economic activity and employment, and would permanently reduce the unemployment rate. The same is true when tax rates paid by Home households are reduced.

Here are some of the specific estimates of the positive impact of lower labor taxes at the firm level.

The tax rate is reduced by almost 2 p.p. (trough level). The reduction of labour taxes paid by firms reduces the gross wage bill of firms and hence increases the value of having a worker. Workers are able to obtain part of the increase in firms’ surplus in the bargaining process, which results in a real wage increase. Nevertheless, the wage increase is not sufficient to undo the increase in the value of having a worker for firms, which leads to an increase in labour demand through vacancy posting. The number of matches increases as well and, consistently, the probability of finding a job and that of filling a vacancy increases and decreases, respectively. Employment increases (and unemployment rate decreases) by roughly 0.3 p.p. after two years and 0.4 p.p. in the medium and in the long run, respectively. …Home GDP increases by 0.5% after two years. Both consumption and investment increase. Consumption increases because of households’ larger permanent income, associated with the increase in employment, hours and production. Investment increases because firms augment physical capital to accompany the rising employment.

I’ve combined some of the key results from Figures 3 and 4, all of which show the benefits over time of lower tax rates on work (the horizontal axis is quarters, so 20 quarters equals five years).

And here are the specific estimates of the good outcomes when labor tax are reduced at the household level.

Qualitatively, results are similarly expansionary as those obtained when reducing labour taxes paid by firms. Hours worked, employment, matches, and the probability of finding a job increase, while the probability of filling a vacancy decreases. …hours worked now increase by 0.4% (0.3% in the previous simulation), employment by almost 0.5% (0.35% in the previous simulation), while the unemployment rate falls by almost 0.5 p.p. (0.4 p.p. in the previous simulation). …Home GDP increases by around 0.7% after two years.

Once again, let’s look at some charts showing the benefits over time of lower tax rates on workers.

Interestingly, it appears that there are slightly better outcomes if labor taxes are reduced for workers rather than employers, but the wage numbers are better if the tax cuts take place at the business level.

I’ll take either approach, for what it’s worth.

Let’s close with one additional excerpt. The study incorporated the impact of government employment, which can have a very distorting effect on private employment given the excessive size of the bureaucracy and above-market compensation for bureaucrats.

…we allow for public sector employment and for the possibility of directed search between the private and public sector labour market… In fact, a proper assessment of the impact of the labour market reforms on private-sector employment should take into account that a common characteristic of the EA labour market is the important share of the public employment in total employment, which is, according to OECD (2015), around 20% in France, 15% in Spain, Italy and Portugal, and 13% in Germany. Thus, this component is important to understand the labour market dynamics in the EA, given also that, during a crisis period, public and private labour markets tend to be more inter-related (when the unemployment rate is high, the number of applicants to the public sector is larger).

P.S. I’m periodically asked whether I’m exaggerating when I assert that something (such as taxes distorting the supply and demand for labor) is a “core principle” in economics. But I don’t think left-leaning economists (and there are plenty) would disagree about taxes impacting supply and demand. But they presumably would quibble about the “elasticity” of supply and demand curves (in other words, how sensitive are people to changes in tax rates). Moreover, they surely would claim in some instances that any “deadweight loss” would be offset by supposed economic benefits of government spending (and pro-market people acknowledge that’s possible, at least when government is small). And, when push comes to shove, some folks on the left would openly argue that it’s okay to have less prosperity if there’s more equality.

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There is a lot of good news about the job market in America.

The official unemployment rate, released just yesterday, is down to 4.1 percent, which is the lowest its been since the end of the Clinton years. Even more impressive, the number of people getting unemployment benefits (i.e., getting paid not to work) has dropped to the lowest level since the early 1970s.

I don’t want to rain on this parade, but the numbers aren’t as good as they seem.

Back during the Obama years, I repeatedly pointed out the real health of the labor market should be measured by looking at either the rate of labor force participation or the employment-population ratio.

These are the numbers that give us a more accurate picture of the extent to which labor is being productively utilized (remember, national income is determined by the quality and quantity of labor and capital in the economy).

So let’s dig into the government’s database on labor force statistics and see where we stand when examining these more-insightful numbers.

We’ll start with the data on the rate of labor force participation, which is basically a measure of those working and looking for work as a share of the adult population. As you can see, that rate dropped significantly at the end of the Bush years/beginning of the Obama years. And it hasn’t recovered even though the recession ended back in 2009.

By the way, we shouldn’t expect this rate to be 100 percent, or even anywhere close to that high. After all, the 16-and-up population includes plenty of full-time students, retired people, disabled, stay-at-home moms (or dads), and others.

But I worry about the downward trend.

Now let’s look at the employment-population ratio, which is slightly more encouraging. We see a precipitous drop during the recession, but at least the number has been trending in the right direction for several years.

Though it’s nonetheless semi-depressing that the increase has been rather slow and we haven’t come anywhere close to recovering from the downturn.

To help understand the rate of joblessness, here’s a video from the Mercatus Center.

And to better understand the rate of employment, here’s a video from Nicholas Eberstadt at the American Enterprise Institute.

As far as I’m concerned, the key factoid is near the end, where he points out that we would have 10 million additional working-age men productively employed if the rate of employment today was the same as it was in 1965.

And that’s largely the fault of government programs – such as unemployment insurance, disability, Obamacare, licensing, etc – that make it easier for people to choose to be unproductive.

Speaking of which, let’s close with some excerpts from one of Jason Riley’s columns in the Wall Street Journal.

Peter Cove dropped out of a graduate program at the University of Wisconsin-Madison more than 50 years ago to enlist in Lyndon Johnson’s War on Poverty. These days, he’s fighting a war on dependency. …Mr. Cove moved to New York in 1965 to work for the city’s new Anti-Poverty Operations Board… Mr. Cove…noticed… “The government’s unprecedented expenditures failed to bring about the decline in poverty that Johnson had promised. Instead, they made things worse.” Between 1962 and 2012, the percentage of the U.S. population receiving government assistance in the form of cash transfers almost doubled to 21% from 11.7%. …Between 1965 and 2011, the official poverty rate was essentially flat, while government spending per person on poverty programs rose by more than 900% after inflation. “…But as welfare spending soared, the decline in poverty came to a grinding halt.” …Mr. Cove…came to understand that the answer to poverty is prosperity, that the private sector is the better generator of prosperity, and that the best antipoverty program is a job. “Not only does big government get in the way when it provides disincentives to work, it also has a profoundly negative effect on community,”… The increase in government dependency that Mr. Cove laments predates President Obama by decades, but it did accelerate on Mr. Obama’s watch.

Great points, particularly about how the welfare state actually undermined progress on reducing poverty and also eroded societal capital.

All of which is captured in this Wizard-of-Id satire.

P.S. Some honest leftists admit that the welfare state has caused collateral damage.

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