Yesterday, Jim Hoffa, president of the International Brotherhood of Teamsters, issued the following statement:
“The Republicans’ message is, ‘The middle class hasn’t suffered enough’.”
In some ways this is a dream press release. One liner garnished with a few more statements from some other laudable notables and you have yourself a quickie news item. But this is the silly season and with a substantial portion of the electorate looking for more substance, at least according to my Twitter feed, a quickie wouldn’t be good enough. So let’s first look at the Republican platform.
At first blush, Mr. Hoffa is spot on. Of the sixteen platform planks provided by the Grand Old Party, none specifically address the middle class. “Regulatory Reform: The Key to Economic Growth” comes the closest to addressing the middle class, and that address is pretty brief. The plank talks about the adverse effects over regulation has on jobs and small businesses. Specifically in terms of jobs it says, “The bottom line on regulations is jobs. In listening to America, one constant we have heard is the job-crippling effect of even well-intentioned regulation.”
When it comes to their economic agenda, the Republican Party appears more interested in “small businesses” and “job creators” versus the portion of consumers that need jobs or who need to start businesses where they cannot find jobs.
But just who is this middle class that Mr. Hoffa may be referring to? According to Pew Research, the middle class is comprised of households earning two-thirds to double the national median household income. This amounts to approximately $68,274 a year. Fifty-one percent of all adults fall into this group says Pew Research.
This group has seen a loss in income and in wealth since the last recession. People in the middle class now take in 45% of household income compared to 62% four decades ago. During the first decade of the 21st century, middle income earner wealth fell 28% from $129,582 to $93,150.
Mr. Hoffa’s sentiments about the GOP may be shared by the middle class. Pew Research found that 52% of the middle class believed that policies that President Obama may put forth in a second term would help the middle class. Thirty-nine percent of the middle class believe Mr. Obama’s second term policies would not benefit them.
Only forty-two percent of the middle class believed that Governor Romney’s policies would help them versus 40% who responded his policies would not help them.
And the type of policies that the middle class, a sector that holds most of its wealth in houses and income would like to see implemented are those touted by the Democrats. Those policies include increasing the minimum wage; making unionization easier; and increasing access to the housing market. In short, market interventionist policies that may not pan out to be effective in the long run because they do not address the core problem of the middle class, especially the minority middle class. That problem is ownership of equity or capital.
Take the minimum wage. Republicans have long knocked the policy as a bad for business, primarily because it drives up the cost of doing business. Their fluff supplemental argument has been that an increased minimum wage would also discourage businesses from hiring young people in need of entry level jobs.
In general, I agree with them. Wanting businesses to pay a living wage is noble, but the choice of a business to increase wages should result from recognizing the additional value of keeping and recruiting good employees for the purpose of meeting increased demand for goods and services. A minimum wage increase or a minimum wage of any kind only sends false signals through the labor market about the actual cost of labor.
Politically, however, the minimum wage is a winning argument, especially among the poor and working class, a class that contains a disproportionate number of Blacks and Latinos. Democrats are not about to abandon this goodie package.
Nor is catering to the easy union access preferences of Mr. Hoffa and other union advocates good for labor. Republicans have made unionization a right to work issue for decades. This is really a cost of business issue. Although Blacks and Latinos may have seen wage gains as a result of collective bargaining, unions create a bottleneck in the hiring process. They effectively determine who can be employed by requiring only union hires be brought into a shop.
Their collective bargaining demands drive up wages for new hires which also means wages for senior employees go up as well; an increase not based on value added and contributed to production by the employees, but based on employee perception that they deserve more of a firm’s revenues simply because they see the firm making a profit.
This is what I term an indirect interventionist policy. By legally authorizing union shops, government is substituting business judgment that should be based on consumer demand with the political demands of government and its constituents. In the end, it’s not good for employees as businesses now have additional incentive to automate wherever and whenever possible.
Mr. Hoffa is right to the extent that the GOP is diametrically opposed to the policies he sees benefiting union members in the short run. Would the GOP be satisfied with the middle class being worse off than it is now? The cynic in me says probably, but such a scenario would be politically dangerous for the GOP, especially for GOP members of Congress, who do not enjoy the highest of ratings among voters. Sixty-two percent of the middle class blame Congress for the reduction in their standard of living so the GOP must tread lightly on the middle class and employment issues.