Minimum Wage, Maximum Inequality?

A bill to raise the floor on wages may be an empty gesture, but it opens a discussion worth having.


Stiglitz argues that fixing the U.S. economy requires a substantial increase in consumer demand, which is the purchase of everyday goods and services by millions of American households. And we can’t increase demand, Stiglitz says, without addressing inequality.

You’ve probably seen the statistics that Stiglitz cites, but they bear repeating:

* In 2007, the year before the collapse of the economy, the top 0.1 percent of America’s households had an income that was 220 times larger than the average of the bottom 90 percent.

* The wealthiest 1 percent of U.S. households owned more than one-third of all of America’s wealth.

* In the first postrecession years of the new millennium, 2002-2007, the top 1 percent grabbed more than 65 percent of the gain in total national income.

* In 2010 it got worse: The top 1 percent received 93 percent of the increase in total national income.

It wasn’t always like this. From 1950 to 1970 — years of sustained growth and prosperity, Stiglitz reminds us — there was a marked reduction in income inequality in America, due in part to development in the markets, “but even more to government policies, such as the increased access to higher education provided by the GI Bill, and the highly progressive tax system enacted during World War II. In the years after the ‘Reagan revolution,’ by contrast, the divide in market incomes increased, at the same time government initiatives to temper the inequities of the marketplace were dismantled, taxes at the top were lowered, and social programs were cut back.

“While there may be underlying economic forces at play, politics have shaped the market, and shaped it in ways that advantage the top at the expense of the rest,” Stiglitz writes. “The economic elite have pushed for a framework that benefits them at the expense of the rest, but it is an economic system that is neither efficient nor fair.”

An increase in the minimum wage would in no way eliminate the problem of inequality in America. The proposed increase would raise the annual salary of a full-time minimum wage worker from $15,080 to $20,384, still just one-sixty-fourth of the $1.3 million average annual earnings of the top 1 percent of households.

And the bill won’t get through Congress. Although it has more than 100 Democratic co-sponsors, no hearings have been scheduled. “That’s up to the [Republican] majority, and they have no interest in it,” said Aaron Albright, a spokesman for Rep. George Miller (D-Calif.), the bill’s principal sponsor in the House. “Chances of passage this year are minimal at best. Last time, it took 10 years and control of Congress to get something passed. But we have to start somewhere.”

Harold J. Logan is a business writer with a background as an Internet entrepreneur.

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