An Active Labor Force Comes From Individual Responsibility

By Josiah Dalke
December 1, 2021

It goes without saying that the post-pandemic world will (at least initially) operate differently than how we are used to.  We are essentially in this state of limbo in which many aspects of society have returned to normal, and yet we still see the effects of the pandemic in effect in areas like schools, cities, and public spaces.  Economically, the world is placed in a precarious position as stocks continue to fluctuate as fear of the rise of different Covid variants comes into play.

However, this precarious situation has had several impacts on society beyond just the stock market.  Due to the fear of some variant rising or more government restrictions being instituted, the percentage of people leaving the workforce for retirement has significantly increased in recent years, and the average retirement age is now 55.  The Peterson Institute for International Economics demonstrates numbers that suggest that even those people that are not old enough to retire are less likely to return to in-person employment because doing so may negatively affect their kids' ability to go to school.  The net result of this is exactly what America is experiencing at the moment: slow labor-force recovery.

Yet, as Niall Ferguson notes, the U.S. labor market is facing an inflation surge that cannot simply be attributed to fear of Covid exposure.  For one, the Biden Administration erred in providing a $1.9 trillion stimulus package earlier in the year when support had already been provided in 2020.  The effect of this policy is that people now have excess savings that have provided that extra cushion needed for retirement to become a reality.

However, Ferguson also errs in his assessment that tax credits and cuts in marginal personal income tax rates negatively affect the incentive for people to return to the workforce.  The assumption is that those with more money in their pockets will have less of an incentive to work.  While this may be true within the context of giving people “free” paychecks in the form of stimulus packages, the effect of tax cuts helps (or at the very least contributes to) economic recovery.

When people receive tax cuts, it does not mean that they can now live with excess money.  They still must pay taxes and still have additional expenditures in which to pay.  However, the difference is that they now have an incentive to engage in the economy in a much freer manner and that in turn requires them to have jobs to maintain that same level of engagement. 

In other words, tax cuts are effectually different from providing stimulus packages. Unfortunately, Ferguson treats them as if they are synonymous.  The reality is that the fewer taxes person has to pay, the healthier the economy gets.  The labor force is included in that equation.  In fact, when Trump cut taxes during the pandemic, it greatly helped the economy.  It is when those cuts are removed that recovery becomes stagnate.

Moving forward for the nation and for Mississippi, public policy must be crafted in such a way that encourages people to work and engage in the economy rather than enable them to remain at home, reliant on government money.  Ironically, both government interference and an excessive fear of Covid originate from taxpayers giving into a narrative that does not necessarily reflect reality.  Relying on the government to return everything to normal is not the answer.  Only when people get their hands dirty again and get back to work will the economy eventually return to normal.


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