Horses and Sparrows
American Worker Pay: How should Americans provide for their own necessities? It's a complex problem, but a big part of the answer is—with money.
If you feed the horse enough oats, some will pass through to the road for the sparrows. — Economist John Kenneth Galbraith, 1908 – 2006
In the analogy above, the horses represent American businesses, and the sparrows represent American workers. Galbraith used the quote to describe supply-side economics, or a theory that cutting taxes on the wealthy and companies results in a trickle-down effect for the rest of the economy. Obviously Galbraith was not a fan of the theory.
President Reagan and his budget director, David Stockman, are widely acknowledged to have organized supply-side economics in the 1980s to respond to widespread economic stagnation in the 1970s. Supply-side economics and its resulting trickle-down theory have many opponents.
Another competing economic theory (of which there are many) is to tax the rich and give the money to the poor. Proponents of this scheme identify that it reduces income inequality and allows the government to hand out income equitably. They cite facts that billionaires have lower tax rates than their assistants, and the wealthiest man in the world has a 3% tax burden.
Supporters of this theory point out the success of the Earned Income Tax Credit (EITC) program. The EITC program rewards those who can work with additional annual income if their salary meets poverty thresholds. President Reagan proposed and signed a significant program expansion in 1986.
Neither trickle-down theory nor taxing the rich are compelling arguments.
First, there’s no causal link that a business or wealthy individual who pays less taxes will distribute money to people with less money. Instead, they could invest in land, infrastructure, personal investment accounts, or yachts. Many claim the trickle-down theory does not work.
On the other hand, why would funneling money through the government (taxing the rich) be the answer? In that scenario, you’re not feeding the horse or the sparrow. You’re giving it to whoever made the road.
We need strong horses, and we need strong American workers.
From our last two articles, here and here:
Our objective: How do we make a strong, innovative American workforce that can drive world markets?
Our guidelines:
Set conditions that enable Americans to provide for their own basic needs.
Consider what we can do for self-motivated Americans.
Focus on options that are not a significant burden on the American taxpayer.
And from last week: Any approach to strengthen America’s workforce must first enable Americans to provide for their basic necessities. These might include housing, food, heat, and clean water.
How should Americans provide for their own necessities? It’s a complex problem, but a big part of the answer is—with money.
Where would they get this money? There are two choices here. One is the government, which represents the American people’s money. The other is their work.
The government doesn’t seem like the logical choice. Again, this is the American people’s money. Then, there are forms to fill out—lines to wait in. Americans must prove they qualify for the benefit or lose the use. What’s more, the government takes a cut. Yes, this creates government jobs, but creating a job as a middle-man between an employer and a worker supports bureaucracy, not innovation.
The other choice? Pay American workers directly.
Instead of taxing the rich, we need to use a different government mechanism—regulation.
We need to keep business taxes low. Low business taxes spur investment in America. America needs strong horses.
We need to legislate an end to the static minimum wage (which hasn’t been updated for 14 years anyway). It’s ineffective. Different cities have different costs of living. It constantly lacks political consensus.
And most importantly, it’s not enough to keep American workers above the poverty line. Ten years ago, the federal minimum wage represented income below poverty levels for most areas. The minimum wage hasn’t increased, but housing and other expenses have. The median price for a house in March of 2013 was $258,400. The median price for a house in March of 2023? $436,800.
We don’t need a complex law to address this issue. We need to legislate a statement such as this for a minimum wage:
Employers shall pay full-time wages representing a rate no less than the poverty level plus 50%, assuming the worker and three dependents, for that locality.
Dissenters will say this rate of pay is too high for some jobs, such as being a dishwasher or fry cook. If those dishwashers and fry cooks work honest full-time jobs to support themselves and others, businesses should pay them fair wages.
From a business competition perspective, this levels the playing field. Representative Al Green (D-TX) introduced a similar concept bill in 2021 in the US House of Representatives; however, it included the verbiage, “earn an annual income 25.5% higher than the federal poverty threshold for a four-person household.” A federal poverty threshold benefits businesses in more expensive urban areas by requiring companies in low-cost rural areas to pay the same wages as businesses in more costly areas. This approach would hurt business activity in less expensive rural America.
From a states-rights perspective, it gives states the ability to influence the cost of living in their state through appropriate locality pay. Different areas have different costs of living, even in the same state. For instance, the cost of living in Manhattan is very different than the cost of living in Schoharie, New York. The same could be said comparing Jackson and Kaycee, Wyoming.
From a legislative perspective, it is more feasible than taxing the rich but still provides income to American workers. It further doesn’t require updates as living costs across the nation rise.
It is not a tax proposal and, therefore, is not a tax burden on the American people.
Most importantly, from an American worker’s perspective, it helps Americans buy houses, heat them, and put food on the table.
We need strong horses, and we need strong American workers.
Thanks for considering my perspective.
May God bless the United States of America.
