Free markets to empower workers to succeed

Another favorite Reagan quote of mine makes a serious point. “I think the best social program is work.” He was right, as mountains of empirical evidence later showed. Government actors can raise the real incomes of low-income people through a variety of means, including cash welfare and non-cash benefits such as housing assistance and Medicaid. American governments have done this to a great extent over the past five decades, helping to reduce the real poverty rate from 31% in 1960 to less than 2% in 2021.

However, many people who now live above the poverty line, when the government benefits they receive are properly counted as income, certainly feel poor, appear poor to others, and are often bitterly disappointed or deeply dissatisfied. This is because a person’s material condition, while obviously important, is not as important in determining their sense of well-being as what Harvard University scholar Arthur Brooks calls “earned success.”

While our unemployment rate remains relatively low at 3.9% in North Carolina in November and a statistically indistinguishable 3.7% for the nation as a whole, too many people lack the dignity and stability that comes with a job. And many more work, but do not have the opportunity to advance in their chosen profession, enter a new and more promising profession or start their own business.

Elected officials often tout themselves as labor champions. But the policies they propose, whether they’re progressives promoting giveaways or national populists promoting trade restrictions, will do little to help average workers. You’ll find a better policy package in the Cato Institute’s new book, Empowering the New American Worker.

In the occupational licensing section, for example, Cato analyst Chris Edwards notes that places with freer labor markets tend to have higher levels of employment, economic mobility and entrepreneurship. Policymakers can improve workers while maintaining or even improving the quality of services for consumers with sensible reforms such as replacing mandatory licensing with voluntary certification and allowing workers licensed in other states to be automatically licensed in a new one.

One of the strongest chapters, written by the book’s editor Scott Lincicome, explains the potential of remote work to break down barriers to employee advancement. While some jobs clearly can’t be done from home, many employers and employees have learned during the pandemic that switching to remote or hybrid models can be mutually beneficial. Broader impacts 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 receive income from multiple states, for example, and how they tax businesses that employ large numbers of remote workers. They also need to review how employee benefits are handled.

From educational services and child care to transportation, housing, and health care, the Cato team proposes smart reforms that either remove barriers to opportunity or make it easier for individuals to spend public dollars to meet their specific needs.

As Lincicome points out in the book’s conclusion, our policy debate is filled with supposedly “pro-employer” proposals based on faulty assumptions about the past, present, and future of the American workplace. Too many politicians view workers as “helpless and in need of cradle-to-grave state protection, despite the long-term damage such policies do to these very workers and the broader economy,” he writes. “In contrast, pro-market policies that respect the individual agency and capabilities of all workers will allow them to pursue their unique hopes and dreams in a more dynamic, diverse, and high-wage economy and adapt to what comes next.”