Just how solid is the case for the left’s anti-inequality agenda?

 By James Pethokoukis of AEI.

"What does a “smart” US economic policy agenda look like?

Well, everybody knows it would do something about income inequality. After all, President Obama said the income gap was the greatest economic challenge facing America. And what might that something be, exactly? Progressive (social?)

Democrats have ideas. Attack out-of-control CEO pay. Raise the minimum wage to $15 an hour. Universal preschool. Paid leave. Of these things, a humane, modern economy is made.

But consider the following:

1) A new study suggests “the prime driver of wage inequality is the growing gap between the most- and least-profitable companies, not the gap between the highest- and lowest-paid workers within each company,” according to the Wall Street Journal. In other words, companies that are best able to navigate the globalized, technologically intensive modern are more profitable and pay their workers better than those who can’t.

Peter Orszag, an executive at Citigroup and former budget director for President Barack Obama, and Jason Furman, chairman of Mr. Obama’s Council of Economic Advisers,recently dug into the details of all the companies other than financial firms in S&P 500 stock index. What they found was a dramatic widening in their profit performance. A company at the 90th percentile—that is, more profitable than 90% of all other companies—saw its return on invested capital jump from 22% in 1982 to 99% in 2014. For the median company, the return climbed from 9% to just 16%, and for the company at the 25th percentile it stayed the same, at 6%.

Separate research suggests that pay has closely followed these companies’ fortunes. Jae Song of the Social Security Administration and four co-authors looked at pay records of more than 100 million workers between 1980 and 2013, and compared their pay to that of other workers at the same firm. Workers at the 90th and 99th percentile did see their pay rise much more than median and lower-paid workers over the period. But no such disparity appeared among co-workers at the same firm: the ratio of their pay to their firm’s average remained flat. In other words, everyone at the top companies, from the lowest to highest paid, pulled away from the pack, and everyone at the bottom companies languished.

2) A new study on preschool finds that kids who attended Tennessee’s pre-K program were worse off by the end of first grade than kids who didn’t. And a new study on Quebec’s universal childcare program finds that “children’s outcomes have worsened since the program was introduced along a variety of behavioral and health dimensions. Liberal policy wonk Ezra Klein concedes that “results like the ones we’re seeing out of Tennessee and Quebec have certainly put a damper on my enthusiasm for universal pre-K.”

3) Economist Alan Krueger, a former chairman of President Obama’s Council of Economic Advisers, cautions that a national $15 an hour minimum wage “is beyond international experience, and could well be counterproductive. Although some high-wage cities and states could probably absorb a $15-an-hour minimum wage with little or no job loss, it is far from clear that the same could be said for every state, city and town in the United States. … Although the plight of low-wage workers is a national tragedy, the push for a nationwide $15 minimum wage strikes me as a risk not worth taking, especially because other tools, such as the earned-income tax credit, can be used in combination with a higher minimum wage to improve the livelihoods of low-wage workers.”

4) “What Is the Case for Paid Maternity Leave? by Gordon Dahl, Katrine Løken, Magne Mogstad, and Kari Vea Salvanes  looked at a series of policy reforms in Norway which expanded paid leave from 18 to 35 weeks and found that “the expansions had little effect on a wide variety of outcomes, including children’s school outcomes, parental earnings and participation in the labor market in the short or long run, completed fertility, marriage or divorce.” And there’s this New York Times analysis:

In Chile, a law requires employers to provide working mothers with child care. One result? Women are paid less. In Spain, a policy to give parents of young children the right to work part-time has led to a decline in full­-time, stable jobs available to all women — even those who are not mothers. Elsewhere in Europe, generous maternity leaves have meant that women are much less likely than men to become managers or achieve other high-powered positions at work. Family-­friendly policies can help parents balance jobs and responsibilities at home, and go a long way toward making it possible for women with children to remain in the work force. But these policies often have unintended consequences. They can end up discouraging employers from hiring women in the first place, because they fear women will leave for long periods or use expensive benefits.… These findings are consistent with previous research by Francine Blau and Lawrence Kahn, economists at Cornell. In a study of 22 countries, they found that generous family-friendly policies like long maternity leaves and part-time work protections in Europe made it possible for more women to work — but that they were more likely to be in dead-end jobs and less likely to be managers.

I dunno, maybe there needs to be a bit more humility, more skepticism — particularly from the media— as we hurtle forward toward IKEAmerica."