As I See It

Revealing real income inequality

Updated: 2014-01-29T00:37:46Z

By DANIEL C. WILLINGHAM

Special to The Star

During the State of the Union address, President Barack Obama focused heavily on ameliorating individual income inequality, which — as CNN’s Jim Acosta pointed out in a December White House press conference — has increased since Obama entered office.

Even worse, Obama’s proposal — which seeks to raise the minimum wage from $7.25 to $10.10 per hour — fails to fix the sluggish pace of the economic recovery, his biggest liability as president.

There are two main reasons for the upturn in income inequality under Obama. The first of which Obama cannot control, but the second — which has plagued his presidency since day one — could be improved if he would drop his liberal dogma and be the post-partisan president he promised voters in 2008.

The first reason is that there is an ever-increasing education gap.

In his book “Outliers: The Story of Success,” Malcolm Gladwell argues that parents in middle-income and wealthy families are more likely to provide their children opportunities to learn during the summer through lessons, camps and various other types of structured activities.

Because of limits imposed on the federal government, improving in this realm requires proactive participation by local communities, nonprofit organizations and churches — not Obama. Education’s close nexus to future income potential makes this local participation paramount.

The second reason that income inequality has increased with Obama at the helm is — not surprisingly — because of the absurdly high unemployment rate.

The latest Department of Labor figure shows a 6.7 percent unemployment rate, which — dismal as it is — does not even tell the full story. If we include those who are unemployed and have given up looking for work, then the jobless rate actually skyrockets up to 13.1 percent.

With nearly one in eight Americans eligible for the workforce sitting on the sidelines earning no income, we are bound to see a collective drop in average income for the bottom quintile of earners.

Clearly, upping the minimum wage by nearly 30 percent will not benefit the unemployed. Similarly, just giving up on the unemployed population’s job pursuits and extending their government benefits — Obama’s other key objective — will not close the income gap either.

To constructively redress income inequality Obama needs to focus on one thing: jobs. Providing incentives for those who can help create jobs is something the federal government has done successfully in the past. This includes stimulating investment in businesses that add jobs in low-income communities through the New Markets Tax Credit and using salary tax credits to encourage businesses to hire currently unemployed workers.

These programs yield far better outcomes than Obama’s proposals. For example, the New Markets Tax Credit has single-handedly created or retained more than 500,000 jobs nationwide since its inception in 2000. In addition, the Work Opportunity Tax Credit encouraged employers to hire nearly 1.2 million new workers in 2011 alone.

Thus, these programs have made huge strides for the unemployed and narrowed the income gap. We just need to use them more.

Instead, Obama had the audacity to hope that we forgot about his serious unemployment problem, and that it contributes heavily to income inequality.

Daniel C. Willingham of Rock Hill, Mo., is a tax attorney who prior to attending law school worked in Jim Talent’s U.S. Senate office.

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