But, averages can be deceiving. An income that affords a family a middle-class lifestyle in, say, Nebraska doesn’t provide the same in California. A recent Fast Company article points to examples of those making $75,000 per year and up who can’t afford anything near the average $1.6M cost of a San Francisco home. The housing crisis in California, if it can be called that, extends to 55+ retirement communities. The Wall Street Journal ran a story of the battle between residents of Oakmont Village over the addition of pickle ball courts. The average cost of a home in Oakmont has doubled over the last few years and newer residents want to upgrade the facilities. Their proposed development, at a $300,000 cost that would be borne by all residents through an increase in maintenance fees, amounts to socializing the costs of amenities.
There’s no relief in sight for the middle class. Government programs to address income inequality have typically been targeted to the lowest 20% of income earners and tax benefits to encourage saving, investment and home ownership help the wealthy more than the bottom 60%. After all, if you’re living paycheck-to-paycheck, you can’t afford to set aside money for the down payment on a house, your kids’ college fund or your retirement.
Further, programs directed at alleviating poverty often work at cross-purposes to their objectives. In the absence of federal increases in the minimum wage, states and local governments are experimenting. Initial outcomes are not encouraging. Analyzing the impact of a minimum wage increase in the city of Seattle, the National Bureau of Economic Research found it resulted in a slight lowering of income for those in the restaurant industry. As the hourly wage went up, the number of hours worked went down. Go figure.
Similarly, wealth transfers haven’t lifted the bottom 20% out of poverty. Since LBJ declared the War on Poverty, it has become entrenched in our inner cities and is now mirrored in rural committees devastated by loss of industrial jobs, breakdown in families and drug addiction. This has occurred despite that the bottom 20% receiving more than 84% of its income from government sources. (To arrive at this figure, one must include non-cash benefits like food stamps, Medicaid, and subsidized housing that are not included in the government’s income data.)
I recently pointed out that nearly 2 billion people have been lifted out of poverty in India, China and the developing world through capitalist reforms that have enabled the poor to climb the income ladder. Yet, the focus of policy discussions in the U.S. have focused on doubling down on failed policies rather than removing barriers to upward mobility. Citing licensing requirements, land use regulations and (yes) the minimum wage, the Archbridge Institute asserts, “… barriers are typically imposed by some level of government. Usually justified by claiming to protect citizens from some kind of harm, these policies often end up as little more than legal obstacles that prevent people from being able to take the calculated risks necessary to climb the income ladder.”
At a local level, communities can improve public education, develop skills-based training programs and collaborate with businesses to create jobs. But, most of our tax dollars and, therefore, the resources to address our economic challenges go to Washington and come back to us in one-size-fits-all programs that don’t work in at a local level.
The pitched battle in Washington over this issue and every other is unlikely to achieve any breakthroughs in the near future. But, something’s got to give. Skirmishes like those in Seattle and Oakmont are the tip of the iceberg. As the interests of the middle class become more aligned with those who live in poverty, diverging visions of how to maintain our prosperity will disrupt the current political order.
WHO WILL LEAD?
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