Prosperity Requires Economic Growth

Many authors have pointed out recently that the world is gradually getting better in the sense that world-wide poverty is steadily decreasing.  The primary cause is the steady economic growth which has taken place ever since the beginning of the industrial revolution in the late 1700’s.

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Faster economic growth means that more workers are needed to perform the necessary labor to produce the growth.  This in turn means that the unemployment rate goes down and wages go up as employers have to compete more vigorously to hire the available workers.
The eternal debate about the best way to increase growth has flared up again recently as Amazon has decided to back out of its plan to create 25,000 new jobs in New York City because of local opposition.

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Some people say that the best way to bolster workers and the middle class is to increase minimum wages and to provide free college and federal job guarantees.
The problem is that before jobs can be enhanced with a minimum wage or hiring guarantees, for example, the jobs have to exist in the first place.  It is true that some jobs are created by government investment but this requires spending tax dollars which are usually in short supply and have to be spent carefully and efficiently so that voters won’t object to paying them.
In our free enterprise system most jobs are in the private sector.  This means that the best way to create more jobs and better paying jobs is to encourage entrepreneurs to start new businesses and existing companies to grow and expand.  Let the market determine pay levels and job conditions with minimal government interference.
In turn, the best way to help workers at the lower end of the pay scale is with the already existing Earned Income Tax Credit which provides a wage subsidy for many workers. This government program could easily be expanded to help even more low-income workers.
Summary.  The best way to address income inequality in American society is by encouraging more economic growth in the private sector and then expanding wage subsidies to apply to all workers in the lowest wage categories.

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