Policy changes are more effective at closing the income gap than raising taxes on the wealthy, a study released Wednesday by the Competitive Enterprise Institute found.
The living standard for people in the lowest economic levels is more important than the ratio between the top and bottom economic brackets, according to the report.
“For years, experts have focused on the income gap, the difference between rich and poor, but helping people gain access to economic and job opportunities that raise their standard of living is more important,” study co-author and CEI fellow Ryan Young, said in a statement. “Policy reforms that help poor people include access to affordable energy, access to capital for entrepreneurs, ending occupational licensing restrictions, an honest price system, and overhauling a range of regulatory barriers.”
The Washington, D.C.-based think tank said regulatory barriers like occupational licensing, which a third of Americans need to lawfully practice their occupations, are problematic for people trying to move up the economic ladder.
The study also concluded increasing the minimum wage would exponentially drive up unemployment rates.
“If Congress had increased the minimum wage to $10.10 per hour, employment would have dropped by roughly 500,000 workers in the second half of 2016, according to a 2014 Congressional Budget Office report,” the report reads.
Countries with a higher economic freedom rating have a higher per capita GDP, with the top quartile seeing an average per-capita GDP of $39,899 in 2012, compared to bottom quartile, which stood at $6,253, according to the findings.
The study notes the living standards for the poor are higher now than they have been for past generations.
“In addition to better health, poor people today have more, better, and cheaper consumer goods than their parents or grandparents did,” the group said. “And while the price of formal schooling has gone up significantly, schooling and education are not the same thing, and today the latter is affordable to all.”
The findings show even just a few tenths of a percentage point in GDP growth would make a major difference in upping living standards for the world’s poor.
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