New jobs don't pay well. What to do? Tax low incomes less

Thanks to an anonymous poster for the link to this New York Times story about the new lower-wage economy (the basis of a new book, "The Disposable American: Layoffs and Their Consequences" by Louis Uchitelle).

Here's the end of the article:

So the demand for jobs is considerably greater than the supply, and the supply is not what the reigning theory says it is. Most of the unfilled jobs pay low wages and require relatively little skill, often less than the jobholder has. From the spring of 2003 to the spring of 2004, for example, more than 55 percent of the hiring was at wages of $13.25 an hour or less: hotel and restaurant workers, health care employees, temporary replacements and the like.

That trend is likely to continue. Seven of the 10 occupations expected to grow the fastest from 2002 through 2012, according to the Labor Department, pay less than $13.25 an hour, on average: retail salesclerks, customer service representatives, food service workers, cashiers, janitors, nurse's aides and hospital orderlies.

The $13.25 threshold is important. More than 45 percent of the nation's workers, whatever their skills, earned less than $13.25 an hour in 2004, or $27,600 a year for a full-time worker. That is roughly the income that a family of four must have in many parts of the country to maintain a standard of living minimally above the poverty level. Surely lack of skill and education does not hold down the wages of nearly half the work force.

Something quite different seems to be true: the oversupply of skilled workers is driving people into jobs beneath their skills and driving down the pay of jobs equal to their skills. Both happened to the aircraft mechanics laid off by United.

The article also mentions that more than 30% of the country has a college degree now (up from 10% 50 years ago), but less than 30% of all the jobs require a college degree. That's why a lot of twenty-something graduates are working retail. There aren't that many jobs that require a degree. And with a lot of student debt, that's not good at all.

What to do?

One thing is to tax incomes below $30,000 less than we do now, and therefore tax incomes above $100,000 or so more than we do now.

The structure of the economy is moving to more low-wage work, so it makes sense that we lessen the low-income tax burden.

The payroll tax hits jobs, not wealth. The federal income tax is somewhat progressive (higher rates for higher incomes), but the federal GOP is hell-bent on cutting high-income taxes, and has been successful at doing so for the last six years.

The state sales tax hits lower incomes more than higher incomes, and the state's 3% flat income tax rate with a very low $2100 personal exemption also hits lower incomes far more than it should.

There's a good focus on creating more high paying jobs, but we also should ensure our tax system reflects the new economy. Cut taxes on low incomes!