From The Wall Street Journal:
The Blue-State Path to Inequality
States that emphasize redistribution above growth have a wider gap between lower and higher incomes.
By Stephen Moore and Richard Vedder | June 4, 2014 7:16 p.m. ET
For those in Washington obsessed with reducing income inequality, the standard prescription involves raising taxes on the well-to-do, increasing the minimum wage, and generally expanding government benefits—the policies characterizing liberal, blue-state governance. If only America took a more “progressive” approach, the thinking goes, leaving behind conservative, red-state priorities like keeping taxes low and encouraging business, fairness would sprout across the land.
Among the problems with that view, one is particularly surprising: The income gap between rich and poor tends to be wider in blue states than in red states. Our state-by-state analysis finds that the more liberal states whose policies are supposed to promote fairness have a bigger gap between higher and lower incomes than do states that have more conservative, pro-growth policies.
A lot more at the link, but it isn’t very surprising, if you think about it. The “progressive” blue states tend to have higher dollar incomes, but they also tend to have higher costs of living. We’ve noted previously how some firms from California have been moving to places like Texas, for the more friendly business and tax environments, and the lower costs of living. People in the Lone Star State making the same income as Californians are wealthier, in real terms, in purchasing power, due to the lower taxes and lower costs of living than in the Pyrite State.
The real problem is at the bottom. If costs of living are higher in the more progressive states, then the people at the bottom have less real purchasing power than the poor in the red states. From the Journal again:
Do the 19 states with minimum wages above the $7.25 federal minimum have lower income inequality? Sorry, no. States with a super minimum wage like Connecticut ($8.70), California ($8), New York ($8) and Vermont ($8.73) have significantly wider gaps between rich and poor than those states that don’t.
Why, it’s almost as though the economic policies of the left don’t work the way the left think they should. As we pointed out earlier today, if liberals really understood economics, they wouldn’t be liberals anymore.
It is the position of The First Street Journal that the government shouldn’t be in the business of addressing income inequality; in the end, people are paid relative to their production, and the government does not control productivity. But even if you don’t hold to that philosophical point of view, from a practical standpoint, the data show that governments don’t do a good job in that area. Why should governments try to do things that they just can’t do?