www.roanoke.com

David Kreutzer

Kreutzer is a former professor of economics at James Madison University

Democratic presidential hopeful John Edwards is terribly misguided about how to reduce poverty in America.

I know, I know -- it's blasphemous to even suggest that a man who has scraped by on million-dollar lawsuit commissions and subsistence-level hedge fund consulting fees doesn't have his finger on the pulse of the nation's poor.

But, surprisingly enough, several of the top "anti-poverty" measures in Edwards' presidential platform disregard a root cause of persistent poverty in America -- unemployment. And, consequently, they're likely to exacerbate the conditions that keep poor people from moving up the income ladder.

A prime example is Edwards' plan to increase the federal minimum wage. Like a lot of legislative controls on business, the assumption behind government-ordered raises is that low-income employees don't (or can't) improve their lot on their own, and so get stuck struggling for the entirety of their working lives.

But the fact is that most poor people aren't falling behind because they have a job that doesn't pay well -- it's because they don't have a job at all. Nearly 60 percent of adults in poverty haven't worked in the last year, according to research from economists at Ohio University. They've also found that the poverty rate among nonworkers is nearly seven times higher than the rate for people working full time at any wage level.

The message from the data is clear: Being employed drastically reduces a person's chances of being in poverty. And a fool-proof way to climb the employment ladder is to bulk up on skills and experience.

That means Edwards should be backing federal initiatives that encourage employers to create stepping-stone jobs for America's poor. But minimum wage hikes do just the opposite: Businesses will not employ people whose value is less than their wage. When laws artificially force wages up, lots of low-income, low-skilled employees no longer make the cut and lose their jobs.

Edwards' backward thinking doesn't stop at the minimum wage. He's also firmly behind federal legislation that would force businesses to provide all their employees with paid time off in the event of an illness. The appeal of so-called "paid sick leave" laws is clear: No one wants low-income employees to have to choose between their health and next month's rent.

The majority of employers voluntarily provide paid sick leave or "utility" days that can be used for vacation or sick time, according to an August 2007 survey from the federal Department of Labor. But it's also true that most of the companies that don't provide either are more likely to employ a relatively high percentage of low-wage employees.

But sick leave mandates are liable to be counterproductive: They increase the cost of employment (for a minimum wage worker by 3-5 percent) and employers compensate by cutting back on other labor costs (e.g., shorter shifts, fewer benefits). When profit margins hover around 5 percent, adding costs usually provokes a response.

Same goes for one of the central planks in the Edwards health care plan -- he wants to force employers to either contribute directly to their employees' health insurance or pay a fee into a government-run insurance pool.

Who gets hurt when employers are saddled with ever-increasing health care costs or hefty fines? It's not the corporate executives Edwards loves to demonize, or even the mid-level managers and experienced support staffers essential to a successful business. It's the low-skilled, less-educated employees populating the lowest rungs of the pay scale -- that is, the people who employers can most afford to do without.

The bright light in the Edwards anti-poverty agenda is his plan to expand the Earned Income Tax Credit -- a highly successful federal- and state-level program that provides tax-free income to low-income Americans based on how much they work.

But the EITC gets surprisingly little attention in Edwards' stump speeches and didn't play a major role in his recently concluded "Road to One America" tour.

Why, then, is Edwards, like a lot of self-styled "progressives," still pushing for minimum wage hikes, sick leave laws and health care mandates if they're likely to hurt the very people they are supposed to help? Especially when there's a significantly more effective way to alleviate poverty already at his disposal?

Because in this case effective public policy isn't conducive to political ax-grinding. Too bad the EITC can only promise results -- not votes.