Monday, February 20, 2006

Income Inequality Gap Widens

This will come as no surprise to most people, but according to the Economic Policy Institute we are poised to break a record in 2006 for the greatest inequality between minimum wage and average wage workers since the end of World War II.
"The minimum wage reached a peak of 56% of the average wage in 1950 and remained near 50% throughout the 1950s and 1960s. The decline in the minimum wage relative to the average wage since 1969 has resulted from continuous increases in average wages while Congress has raised the minimum wage only modestly and sporadically. In January 2006, the average hourly wage was $16.41. To reach 50% of the average wage — the level experienced in the 1950s and 1960s — the minimum wage (currently at $5.15) would need to be raised to $8.20."

We should be ashamed in this country that we're breaking that record. It's come down to a matter of fairness. Jerald Fishman, chief executive of Analog Device, just picked up a payday worth $144.7 million (that's not a typo). Compare that to the $10,712 dollars a full-time, minimum wage worker earns in one year.

If hard work is a virtue we value in this country - and we claim we do - then it's time to raise the minimum wage to a reasonable level. In addition, once the minimum wage has been raised, it should be annually adjusted to prevent future erosion. That's the only way to help curb rising inequality in the United States and provide a more adequate floor for low-wage workers.


Kvatch said...

I think I read recently that the ability to move between income levels has practically disappeared in the last 3 decades. In other words it's not longer possible to give one's children a better life than you have--the cornerstone of the American Dream, in my opinion.

abi said...

You're right - this is a disgrace. Congress has refused to pass a minimum wage increase since 1997. But since 1997, they've voted themselves seven pay increases totaling $28,000.

Kathy said...

The American Dream and decent salaries have become "perks" for those in power. The rest of America is being left behind.

ExDemocrat said...

While I'm not totally opposed to an increase in the minimum wage, I'm not convinced of its value. I keep looking for minimum wage jobs, in one of the most depressed counties in this country, and can't find any. Everywhere I look, the starting wage is well above the minimum. I'm also confused as to how increasing the minimum wage has anything to do with creating hard work. In this area, thanks to the unions, minimal levels of work are rewarded equally with hard work. How exactly does raising the minimum wage increase the level of effort? If the goal of minimum wage is to create a "living wage" then I would suggest $8.20 isn't the number. And if we really want to help the lower-wage worker, why stop there? Why not $10 per hour? Or $20? Dave Barber suggested on his show the other day that we have crime because we don't "give" everyone a $40,000 per year job. Using that logic, if the minimum wage was $20 per hour, we would have no crime.

Kathy said...

ExDem, raising the minimum wage is only a starting point, and guarantees a bottom. You're correct that starting wages are higher in some areas. The market determines the wages to a degree.

Also, how exactly does raising the minimum wage increase the level of effort? It doesn't of course. Its up to employers - and yes, unions too - to put into place performance objectives that employees need to meet in order to justify the wage. Most companies already have those in place, but they don't apply them uniformly.

I'd also like to point out that higher wages don't neccessarily translate into more effort. I know many professional level people who work their tails off and give 125% effort to their employers, but every company also has slackers who sit around and put forth only minimal effort for equal pay.

I've worked with a number of people like that over the years myself. They're no different from the people fraudently taking welfare that they complain about. In fact, the higher up the chain, the worse abuse at times. I worked for Sears for many, many years in personnel, accounting and several other positions. The store manager pulled down a six figure salary and so did several managers, yet they were the worst abusers. They would sit in the employee cafeteria playing cards for hours on end, leave early to play golf, or take 3 hour lunches. They were in essence stealing from the company.

So, I guess my point is that there is always going to be abuse at all levels, and hard workers are found at all income levels. However, because some people choose to abuse the system, that doesn't justify hurting those honest, hardworking people struggling to put food on the table.