Home / Blog / Article


August 1 2017

How Government Policies Create More Income Inequality

by Charlotte Hays

Quote of the Day:

Lawmakers and government officials put on their concerned faces to talk a good game about income inequality. But then they impose policies that raise household costs, discourage employment, and distort even their own hiring practices. They then offer social services that can actually make working harder unattractive—unless you do so off the books.

--J.D. Tucille in Reason magazine

One of the sad ironies is that all too many government policies harm the very people they were designed to help. Welfare, which had a profound effect on family structure in America, is perhaps the prime example of this phenomenon.

 And now it appears that the people  who shout loudest about income inequality are favoring policies that are likely to increase . . . income inequality. J. D. Tuccille writes in Reason mag:

[T]he growing gap between the wealthy and the poor is a preoccupation in many circles—particularly among people who favor activist government economic policies to rectify the situation.

So it's interesting when the Federal Reserve Bank's { Leilani ]arnett adds that "One factor contributing to this trend is the increase in involuntary part-time workers," and then reports that employers tell researchers they've turned to hiring part-time workers instead of full-timers because of the costs associated with employee benefits, health care, workers' compensation insurance, and minimum wage hikes.

Barnett draws from an April 2017 working paper that collected data through roundtables held across the West. Researchers found that housing, transportation, and child care availability and affordability are major concerns for job seekers.

Employers told them they've changed their hiring practices in response to expensive government mandates. Workers are worried about exceeding income thresholds for social service benefits and so deliberately work less. And the "shadow economy"—off-the-books-work—has become an attractive way for people to make ends meet without running afoul of taxes, rules, and regulations.

Government mandates aren't just discouraging full-time private sector employment, the working paper notes—it's even hitting the people generating all that red tape. "One participant from the public sector stated that her agency 'chose to hire two part-time employees rather than one full-time employee because they could get a lot more hours of work for cheaper with two part-time employees due to much lower cost of benefits.'"

Some of those higher household costs burdening workers can be laid at the government's doorstep, too. I've written in the past that regulation of child care tends to make it inflexible and expensive. "Regulation intended to improve quality often focuses on easily observable measures of the care environment that do not necessarily affect the quality of care but that do increase the cost," reported economics professors Diana W. Thomas of Creighton University and Devon Gorry of Utah State University in a 2015 paper for the Mercatus Center.

Tucille argues that government's role should be to undo the damage it has done.

With more economic freedom (including the freedom to hire workers for part-time jobs which can come in handy, if you want to pay your bills and lead to full-time jobs), people can get on with the business of finding work and leading decent lives. That is the real route to upward mobility.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
Follow us