Liberate markets to help workers succeed
Published January 12, 2023
By John Hood
I have two favorite quotes from Ronald Reagan about the world of work. The first one illustrates his mastery of an indispensable political tool: self-deprecating humor. “It’s true hard work never killed anybody,” he quipped, “but I figure, why take the chance?”
My other favorite Reagan quote makes a serious point: “I believe the best social program is a job.” He was right, as mountains of empirical evidence have subsequently demonstrated. Government actors can boost the real incomes of low-income people with a variety of means, including cash welfare and non-cash benefits such as housing assistance and Medicaid. American governments have done this to a massive extent over the past five decades, helping to reduce the real poverty rate from 31% in 1960 to less than 2% in 2021.
Yet many people who now live above the poverty line — when the government benefits they receive are properly counted as income — certainly feel poor, appear to others to be poor, and are often bitterly disenchanted or deeply unhappy. That’s because one’s material condition, while obviously important, isn’t as critical in determining one’s sense of well-being as what Harvard University scholar Arthur Brooks calls “earned success.”
Although our unemployment rates remain relatively low — 3.9% here in North Carolina in November and a statistically indistinguishable 3.7% for the nation as a whole — far too many people are without the dignity and stability that comes from having a job. And many more are employed but lack the opportunity to advance in their chosen profession, enter a new and more promising profession, or start a business of their own.
Elected officials often proclaim themselves to be champions of labor. But the policies they propose, be they progressives advocating giveaways or national populists advocating trade restrictions, will do little to help average workers. You’ll find a better set of policies in a new Cato Institute bookentitled Empowering the New American Worker.
In a section on occupational licensing, for example, Cato analyst Chris Edwards points out that places with freer labor markets tend to have higher levels of employment, economic mobility, and entrepreneurship. Policymakers can make workers better off, while maintaining or even improving the quality of services for consumers, with such common-sense reforms as replacing mandatory licensure with voluntary certification and allowing workers licensed in other states to be automatically licensed in a new one.
One of the strongest chapters, co-written by the book’s editor Scott Lincicome, explains the potential for remote work to smash barriers to worker advancement. While some jobs clearly can’t be done from home, many employers and employees learned during the pandemic that shifting to remote or hybrid models can be mutually advantageous. The broader effects on, say, traffic congestion and affordable housing are also significant. Unfortunately, public policy has yet to adapt to these new realities. Governments need to change how they tax individuals who earn income from multiple states, for instance, and how they tax businesses that employ large numbers of remote employees. They’ll also need to rethink how employee benefits are regulated.
From educational services and child care to transportation, housing, and health care, the Cato team offers sensible reforms that either eliminate barriers to opportunity or make it easier for individuals to spend public dollars in the way most likely to meet their particular needs.
As Lincicome observes in the book’s conclusion, our political debate is filled with supposedly “pro-worker” proposals that are based on faulty assumptions about the past, present, and future of the American workplace. Far too many politicians think of workers as “helpless and in need of government protection from cradle to grave, despite the long‐term harms that such policies inflict on these very same workers and the economy more broadly,” he writes. “By contrast, pro‐market policies that respect the individual agency and ability of all workers would allow them to pursue their unique hopes and dreams in a more dynamic, diverse, and high‐wage economy—and to adjust to whatever comes next.”