Social Democratic America (23 page)

There is evidence that efforts by government, unions, and employers to improve working conditions and to increase employee participation in decision making can make a difference. Denmark and Sweden have made concerted efforts in this direction, and survey evidence suggests that they stand out among European nations as the ones in which job quality and employee participation are highest.
¹⁴²

Duncan Gallie recommends an auditing procedure whereby government sets outcome standards for work conditions, leaves it up to firms to decide how to meet the standards, and monitors their efforts to do so. He describes it as

a system of periodic “health audits” in organizations, which will provide for an external evaluation of an organization's strategy in relationship to both physical and psychological health, of the internal system for monitoring working conditions, and of the internal procedures for acting upon issues that are likely to be detrimental to the health (in the broad sense of the term) of employees. Such audits would require organizations to develop systematic risk assessments, which would clearly need to take account of employees' reports of their jobs and working conditions, as part of the evidence collected. As well as providing a strong incentive to organizations to improve their practices, such audits would provide a means for the diffusion of best practice information to individual work organizations. Such a system would require the development of specialized health-audit organizations that would be licensed to assess and approve company policies.
¹⁴³

Work schedules are important too. According to Harriett Presser, about two-fifths of the American labor force works at nonstandard times—during the evening or at night, on a rotating shift, or on the weekend.
¹⁴⁴
This calls for an increase in the availability of high-quality affordable childcare, so that those with children have more options.
¹⁴⁵

Mobility out of low-wage jobs
. Whether the wage floor is low, high, or in between, we should aim to help people exit from low-end jobs into better ones. Government services can help by enhancing human capital, assisting with job search and placement, and facilitating work-family balance. Here we tend to think mainly of the K-12 school system, but there is far more, including healthcare, early education, lifelong learning opportunities, retraining, job placement assistance, special services for the mentally or physically disabled, language assistance for immigrants, targeted programs for the young and the elderly, assistance with transportation, and help in organizing formal job ladders.
¹⁴⁶

Like the EITC, a basic income grant would give American adults a lump sum of money every year. But unlike the EITC, a basic income grant would be unconditional; it wouldn't depend on need or employment status. In most proposals, it also would provide a larger amount than the EITC. The idea originated with Milton Friedman, and Congress gave a version of it serious consideration in the early 1970s.
¹⁴⁷
Today, it is supported by some on the left, most prominently Philippe Van Parijs, and some on the right, such as Charles Murray.
¹⁴⁸

On the left, the argument in favor focuses on the potential enhancement of freedom—specifically, freedom from work. In the words of Van Parijs:

A basic income would serve as a powerful instrument of social justice: it would promote freedom for all by providing the material
resources that people need to pursue their aims.…A UBI [universal basic income] makes it easier to take a break between two jobs, reduce working time, make room for more training, take up self-employment, or join a cooperative. And with a UBI, workers will only take a job if they find it suitably attractive.… If the motive in combating unemployment is not some sort of work fetishism—an obsession with keeping everyone busy—but rather a concern to give every person the possibility of taking up gainful employment in which she can find recognition and accomplishment, then the UBI is to be preferred.
¹⁴⁹

For proponents on the right, the chief advantage is reduction in the deadweight costs of public social programs. If the government simply cuts a check to each adult, there is no need for caseworkers or bureaucratic oversight.

Proponents also point to the universality of a basic income grant. If everyone receives the grant, and in the same amount, recipients of government assistance face no stigma.

Despite these considerations, I don't think a basic income grant is a good idea for the United States, for two reasons. First, a grant that is large enough to allow adults to live without earnings would reduce employment.
¹⁵⁰
We need high employment to ensure that we have a tax base large enough to pay for generous social programs and government's other functions.
¹⁵¹
Moreover, the notion of reciprocity is strong among Americans,
¹⁵²
so a program that reduces employment might weaken support for public social protections, including the basic income grant itself.

Second, while letting people choose what to do with the help they receive from government has a certain attractiveness, a key purpose of government is to do things that individuals should do but don't. Government builds roads, ensures clean air and water, and protects us from physical harm. It educates us, provides access to medical care, and forces us to save for retirement. These types of services and public goods ought to take precedence over maximization of individual choice.
¹⁵³
Giving people cash is consistent
with a libertarian approach to the good society. The idea has some merit. But in my view, the case for a paternalistic orientation is stronger.

The final alternative strategy I consider in this chapter is promotion of asset accumulation by middle and low-income households. There are various proposals for how to do this. Some recommend a government match for saving by the poor, others a government grant at birth (a “baby bond”) that can grow in a tax-exempt savings account throughout the childhood years, and still others a “stakeholder grant” of, say, $20,000 to be given to each American on reaching adulthood.
¹⁵⁴

Assets can help to reduce economic insecurity and expand opportunity. But the lessons of recent decades suggest that asset building is not the best strategy for achieving these goals. If the assets are liquid—in a savings account, for example, or a retirement account that can be accessed early—those with low incomes will be tempted to spend them. We see this most clearly in the tendency of Americans with a defined-contribution pension, such as a 401(k), to cash it out when switching jobs. Another problem is the vulnerability of money invested in stocks or housing to market swings. Since 2000, the US stock market has had two sharp declines, leaving those who invested at or near the peak with a severely depleted net worth. The crash in home prices beginning in 2006 was just as devastating, and unlike stock values, the housing market's recovery is likely to be very slow.

For these reasons, I see asset building as a potentially useful supplement to the types of social programs I emphasize in
chapter 3
. But we shouldn't allocate funds to it at the expense of those programs.

It's important to distinguish asset building from banking. Recent estimates suggest that one in four low-income Americans don't
have a bank account, compared to just one in fifty in Sweden and the United Kingdom.
¹⁵⁵
As a result, many use check-cashing outlets and payday lenders, which charge very high fees and interest rates. Getting more of America's poor banked, via a checking account or even simply prepaid spending cards, would be helpful.
¹⁵⁶

Throughout this book I have drawn lessons for America from the experience of the Nordic countries. Have I gone too far?

According to some, those nations' small size, homogeneity, and tradition of good government allows them to have strong economies despite their generous public social programs and high taxes, so it's best not to draw any inferences for the United States.
¹⁵⁷
The problem with this argument is that when we examine the full set of rich nations, there is no apparent advantage to small size, homogeneity, or government quality for national economic success.
¹⁵⁸

Actually, the economic success of the Nordic nations is not puzzling. Orthodox economic theory suggests that markets encourage innovation and allocate resources effectively but don't adequately provide infrastructure, education, safety, protection against risks, or other valuable goods and services. The most efficient way to address these failings is with public programs rather than through regulation of private behavior. This is essentially what the Nordic countries do: they let markets work, and government fills in the gaps. It isn't
in spite of
their policies and institutions that the Nordic nations achieve economic security, equal opportunity, and shared prosperity together with strong economic performance. It's
because of
them.
¹⁵⁹

Growth of government spending is not, for the most part, a consequence of rent-seeking special interests or narrow-minded
bureaucrats expanding their turf. It's a product of affluence. As people and nations get richer, they are willing to allocate more money for insurance (protection against risks) and for fairness (extension of opportunity and security to those who are less fortunate). There are quite a few proposed private-sector remedies for economic insecurity, inadequate opportunity, and slow income growth. But none is likely to work as thoroughly and effectively as the government programs I outline in
chapter 3
.

We don't only want security and fairness, however. We also want freedom, flexibility, and a vibrant economy. It's perfectly reasonable to worry about the impact of big government on the economy and on freedom. Happily, the available evidence suggests that rich nations can generate the tax revenues needed to pay for generous social programs, couple big government with an innovative and growing economy, and do so without excessively restricting liberty.

The evidence also suggests we can reap the benefits of generous social programs without importing the full Nordic gestalt. We have much to learn from those nations' policies and institutions, but that doesn't mean we need to adopt all of them.

I EXPECT THE
size and scope of American social policy will expand significantly in coming decades. My reasoning can be stated simply:

• The United States has deficiencies in economic security, opportunity, and shared prosperity.

• The economic and social trends at fault will continue and perhaps get worse.

• Experience here and abroad suggests that government social programs can help.

• Policy makers try to solve problems. Reason and evidence will lead some of them to propose new government programs and the expansion of existing ones.

• On occasion, they will succeed. (The hypothesis doesn't specify when or why. It's probabilistic.)

• Those successes will tend to stick.

This is how social policy in the United States has evolved over the past century. It has expanded in fits and starts, bursts and lulls. Movement has been largely forward; backsliding has been rare. Simple extrapolation suggests that this is what we should expect for the future. Further advance won't necessarily happen soon, and progress almost certainly won't be steady or regular.
But if we think in terms of decades or, better yet, a half century, the most reasonable projection is for a significant expansion of public social programs along the lines of those suggested in chapter 3.

Is it sensible to extrapolate? In this chapter, I consider five reasons for skepticism. First, Americans don't want big government. Second, opponents of big government have become very effective at deploying the rhetoric of reaction. Third, the left will increasingly struggle to get elected. Fourth, the balance of organized power in the United States has shifted to the right. Fifth, the structure of our political system impedes progressive policy change.

Each of these is a potentially powerful obstacle to progress. Yet none is likely to derail America's slow but steady movement toward an expanded government role in improving economic security, enhancing opportunity, and ensuring rising living standards for all.

Compared to other rich nations, the United States has a relatively small government—particularly with respect to programs that provide economic security, enhance opportunity, and facilitate rising living standards. Many say this is because it's what Americans want. More than our counterparts in other rich nations, we tend to believe that individual effort, rather than luck, determines success in life. We therefore see a need for only minimal government assistance.