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Baseball, Markets and Revitalizing the Middle Class

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization. 

By John Pearson
December 18, 2018

The baseball world is watching this offseason to see what compensation package Washington National’s star Bryce Harper will receive as a free agent. There are reports he rejected an initial offer from the Nationals of $300 million over 10 years.

It’s wrong to think that baseball team owners don’t know what they are doing. Major league baseball franchises employ statisticians who analyze the output metrics of each player to determine how to most efficiently manage scarce payroll dollars. Harper is a very dangerous hitter and is of superstar quality. He could make a significant difference to a team’s future revenues and profits. The Nationals won four division championships in the seven years Harper was with them compared to zero in the preceding seven years. Harper’s market value may well be in excess of the initial $300 million offer. Time will tell.

The truth is each of us has a market value just as baseball players do. Some people are worth hundreds of dollars per hour in the best job they could qualify for. Others are worth less than the minimum wage or even zero in some cases. Think of individuals with severe physical or mental impairment.

A 2017 study by the Government Accountability Office (GAO) estimated that 40 percent of the U.S. workforce was earning $16 or less per hour. These low wages are not the result of a “rigged system.” These workers compete in the marketplace and simply have a low market value. In some cases, they may be able to increase their wages through education and training. But many are doomed to permanently low wages. You can look at workers in fast food restaurants, hotels, retail establishments and in the caregiving field, for example, and you see many older workers that are permanently in low wage jobs.

Beyond the labor force, 63 percent of working age people in the U.S. are not working at all. From my observation, at least some in this group have low skills and low market value as well.

Recently, there has been some discussion in the public administration community about revitalizing the middle class in America.

Personally, I’m more concerned with relieving the discomfort of the millions of people with low income, especially those individuals whose lives are spiraling downward (losing employment, savings, car, relationships, etc.) and who are at risk of slipping into homelessness or who are homeless.

A 2017 study quoted in the journal JAMA Internal Medicine says the richest counties in the U.S. have life expectancy as much as 20 years greater than the poorest counties. Most of the difference is due to socioeconomic and race/ethnicity factors.

Low income can mean a much more stressful life: problems with housing, high crime neighborhoods, food insecurity, lack of transportation (a cheap car may be unreliable and have expensive maintenance problems) and access to medical care, especially if a person does not qualify for Medicaid or substantial Obamacare subsidies. Low income means the things the middle class may take for granted (a reliable car, a safe neighborhood, emergency savings, adequate medical, dental and vision care) are just beyond reach.

Economists usually teach it is a bad idea for governments to try to interfere directly with market prices and wages. A country that interferes a lot with prices and wages will produce goods and services less efficiently and will have lower output.  Governments simply cannot increase a country’s output by arbitrarily raising minimum wages or controlling prices. Extreme examples of government-controlled economies are the former Soviet Union and its Eastern European satellites. These countries consistently underperformed the market economies of the West.

Economic growth is not a viable answer to helping low income people either unless you are looking at decades and centuries. A rising tide does not necessarily lift all boats. A person worth $10 an hour will remain near $10 an hour even if economic growth occurs.

Private charities, churches and billionaire foundations are not the total answer to low income either in my view. The U.S. still has thousands of homeless people despite the efforts of private organizations. How many private charities do you see financing even one elderly person’s monthly nursing home bill, which can average $6,844 a month for a semi-private room?

Only the welfare state—in the U.S., programs like the Earned Income Tax Credit, Section 8 Housing, Medicaid, Supplemental Security Income, Temporary Assistance for Needy Families, the Supplemental Nutrition Assistance Program (food stamps), Unemployment Insurance and Obamacare—have the potential to ease the burdens of low-income people.

In the final analysis, the voters (in democracies at least) must decide how much, if any, they wish to use welfare state programs to assist people with low incomes. If they want a society like the U.S. was in the 19th century with dog-eat-dog economic competition and reliance mostly on private charities to help the poor, then fine. I have never believed value issues such as the proper amount of welfare have any objective right or wrong answer.

Author: John Pearson recently retired from a lengthy career in the federal government where he was a program analyst. He has an MPA and a bachelor’s degree in economics. He now writes columns reflecting on his experience in government. His email is [email protected].

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