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By Greg Smith

President Obama has made income inequality an issue in this midterm election issue, but his plan unfortunately ignores the source of inequality, a lack of good blue-collar jobs and hurdles for new small businesses that will only make the situation worse.

During the Great Recession college-educated workers had an unemployment rate less than half that of persons with only a high school diploma. College graduates earn considerably more than high school graduates, are far less likely to live in poverty, and these figures ignore the roughly 20 percent increase in persons receiving Social Security disability payments in the four years between 2008 and 2011. Since blue-collar workers are more likely to do physical labor they are a greater share of people on disability programs.

President Obama’s administration has been quite unfriendly to blue-collar labor. Blue-collar jobs are much more susceptible to loss from government regulation and policy. An example is the Environmental Protection Agency regulations squeezing out coal mining jobs. The granddaddy of them all is the Affordable Care Act, which places considerable new burdens on employers to provide healthcare to employees.

Blue-collar jobs on average pay less than white collar work, so the cost of healthcare is a much greater percentage of the value of the output of blue-collar workers, meaning the ACA, commonly referred to as Obamacare, is much more likely to negatively impact either creation of new or maintaining current blue-collar jobs.

New and larger taxes, banking legislation and tax code changes all cost businesses money to comply. Since the value of white-collar work is higher, the marginal cost of complying is lower for businesses that employ white-collar workers. This heavier burden on unskilled labor is a cause of outsourcing, wage stagnation, and underemployment.

This causes employment to be more scarce, meaning workers must accept employment at lower wages just to have a job. And those who can’t get a job have to exist on unemployment, work under the table, or try to get on disability. These options pay less than even a lower-end full-time job.

The best way to help lower income workers is to lessen the burden of taxes and regulations that create needless hassles for new or smaller businesses, usually due to lobbying by larger, established businesses and industries to remove the chance for competition. Even well-intentioned laws, rules and regulations cost money to comply with, a burden considerably greater on newer and smaller businesses.

In the first four years of the Obama administration the Federal Register, a list of proposed rules, final rules, public notices, and Presidential actions increased by 310,211 pages, and this doesn’t include state laws and regulations. Ignorance of the law is no defense. Every new law and regulation makes it harder for small businesses, which according to the Small Business Administration create 64% of new private-sector jobs, to succeed.

It is little wonder why the pace of new laws and regulations churned out by government in this country is choking the life out of blue-collar jobs and small businesses. President Obama’s plan so far is for more rules and laws. That ought to help.

The name of this blog is another way of saying with government, the cure is normally worse than the disease. President Obama’s prescription will only make the patient more ill.   ©

Greg Smith is a freelance writer and political consultant who lives in Bantam, CT. His blog is found at www.betterfatthanfascist.com.

https://www.federalregister.gov/uploads/2013/05/FR-Pages-published.pdf