The Real Cure for Inequality Income gains are now rising faster for low-wage workers.

https://www.wsj.com/articles/the-real-cure-for-inequality-11569020055

The left’s apocalyptic economic predictions for the Trump Presidency haven’t panned out. With jobs plentiful and wages rising at the fastest rate in a decade, liberals are doubling down on alarms about inequality. The inconvenient evidence is that low- and middle-income folks are reaping more economic benefits than during the Obama years.

Democrats flogged last week’s Census report that showed health coverage and Medicaid enrollment declined in 2018. But they ignored the other side of that story: Worker earnings increased by 3.4% while the poverty rate declined 0.5 percentage points to 11.8%, the lowest level since 2001. Benefit rolls are shrinking as low-income workers earn more.

According to the Census Bureau, the number of full-time, year-round workers increased by 2.3 million in 2018, and employment gains were biggest among minority female-led households. The share of workers in female-led households who worked full-time year-round increased by 4.2 percentage points among blacks and 3.6 percentage points among Hispanics.

As a result, real median earnings for female households with no spouse present jumped 7.6% last year. The poverty rate among female households declined 2.7 percentage points for blacks, four percentage points for Hispanics and 7.1 percentage points for their children. Remember this the next time Senator Kamala Harris complains that Mr. Trump’s policies are harming women and minorities.

These findings reinforce Labor Department monthly reports that have shown stronger employment and earnings gains in industries dominated by women such as health care and hospitality. The jobless rate for black women last month fell to a historic low of 4.4% and neared a nadir for Hispanic women at 4.2%.

Democrats also keep saying the middle class is shrinking, but income gains are being distributed more evenly. The share of households making less than $35,000 in inflation-adjusted dollars has fallen 1.2 percentage points since 2016 while those earning between $50,000 and $150,000 and more than $200,000 have both increased by 0.8 percentage points.

More Americans are making more across the income spectrum, which has kicked some in the middle class into the ranks of the affluent. The Census Bureau reported no significant increase in real median household incomes last year, but this is probably because a decline in transfer payments and investment income offset wage and salary increases.

Seniors are also retiring in greater numbers, which usually results in an income drop. But, notably, real median incomes increased in households between the ages of 15 to 24 and 25 to 34 by 9.1% and 5%, respectively. Avocado toast-eating Bernie Sanders voters are among the biggest beneficiaries of the Trump years.

Democrats focus on income inequality in part because it will always exist to some extent, and some statistic can always be found to show that some people are much richer than others. What really matters for a healthy democratic society, however, are economic opportunity and income mobility.

By that measure the faster growth and tight labor markets of the Trump years are finally lifting incomes for folks at the bottom after the slow-growth Obama years. The Obama policy mix, which Democrats want to return to only more so, put a priority on reducing inequality rather than increasing economic growth. But higher taxes, hyper-regulation and income redistribution resulted in slower growth and more inequality during the Obama Presidency. The Federal Reserve’s policy of lifting asset prices also favored wealthier Americans with financial assets rather than lower-income workers who received smaller wage gains.

With the major exception of misguided trade policy, the Trump economic policy mix has been targeted at increasing the pace of growth. The gains to workers that have resulted underscore that the best way to reduce inequality are faster growth and job creation that require employers to compete for employees.

This is a lesson for the left and those on the big-government right who want to use tax policy and subsidies to redistribute income to reduce inequality. Policies that hurt growth hurt lower-income workers the most.

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