As I was thinking about the big bad world of economics the other day, a thought occurred to me. I've long realized that the current approaches to poverty are dead wrong. They don't help, and in too many instances, exacerbate the very problems they were meant to remedy.
One of the biggest problems is the activists who decry the income disparity from the rich and poor. As I've come to look at the big picture, I've come to realize that lack of education is the most common reason that disparity exists. Let me explain why, in the simplest manner possible.
Let's assume for simplicity's sake that the available percentage of employees for each sector of the job market fall into the following, equally divided categories:
- Executive level: 20%
- Middle Management: 20%
- White Collar: 20%
- Blue Collar: 20%
- Service Sector: 20%
Now, let's assume the demand for employees breaks down as follows:
- Executive level: 30%
- Middle Management: 20%
- White Collar: 20%
- Blue Collar: 20%
- Service Sector: 10%
Because the demand for executive level employees (30%) exceeds the supply, a premium will be applied to the salary of the executive level, as employers compete for the limited number of employees. At the bottom, service sector tier, however, the supply exceeds the demand, and therefore, the pay level will be lower because there are simply more employees available in that job sector than needed. This example played out in the Great Depression, when farmers would pay pickers low wages, then when the pickers got up and left, they would simply walk back into the migrant labor camps and pick up a new crop of pickers. Put simply, if there's not much demand for your job, you don't have much bargaining power.
In the above scenario, what will happen is that less qualified employees will need to fill in the market at higher levels. Because they are less qualified, they will find themselves paid less, with less job stability.
Now let's assume we implemented a massive retraining program, and the employee's skill sets broke down as follows:
- Executive level: 40%
- Middle Management: 15%
- White Collar: 15%
- Blue Collar: 15%
- Service Sector: 15%
Basically what would happen is that most employees would need to work below their skill level. The only way this would happen is if the lower tier jobs paid employees slightly more to accept those jobs. Higher level jobs would pay less because there are more people to do them and employers could pick and choose from a large candidate pool.
We already see this type of economy at play. Go to the heartland and see what fast food places pay. They pay the bare minimum, just for the record. Now go into Washington DC, or even Oshkosh, Wisconsin. They pay significantly above, because the only way these restaurants can keep their doors open is to hire people with more education to do the jobs at these levels.
Basically, what is happening at present, is we have an employee's market in top level jobs, and an employer's market in bottom level jobs. Meaning if you are a CEO, you have a lot of bargaining power. If you're a fry cook, your boss does. If individuals put more focus on education and on gaining the skills necessary to work at higher tiers of employment, they would not only create more bargaining power for the fry cooks (by removing themselves from the pool of available candidates), but they would also decrease the bargaining power in the higher tier, creating more of this "wage equity" everyone keeps yammering about.
But for advocates for the poor, education offers even more benefits. See, if you are sympathetic to the poor and you work your way up, you have more money that you can give to charities, to help programs, scholarships, etc. In doing so, you can have a much greater impact on the lives of the "have nots".
I know that my illustration is less than perfect as it stands. I know that demand for jobs does not fall equally across the board. But I also know that CEO's make massive amounts of money because of the limited number of available candidates. And I feel the best remedy to that situation is, create more available candidates.