Increases in the Minimum Wage Correct Inequalities in Wage Distribution

Citizen Wealth Financial Justice Ideas and Issues

Capital_in_the_Twenty-First_Century_(front_cover)Kiln     One of my projects for my wor-cation had been to finally finish reading Thomas Piketty’s Capital in the Twenty-First Century.  I had ordered the book from the first notice, read 50 pages, and then just couldn’t see hauling the weight on airplanes.  I even read that Amazon e-book surveys based on noting “underlining” on Kindles and other devices found that the Piketty book was setting new records for how few people actually read the book.  Having finished it and made notes throughout, it’s a shame, because it in fact it really is an excellent book, if you care about equality, citizen wealth, and what’s happening in the world anyway.

            A small example concerns the still raging issue about the critical importance of the minimum wage in creating any kind of equality for lower waged workers.  Piketty is very clear:

Inequalities at the bottom of the US wage distribution closely followed the evolution of the minimum wage:  the gap between the bottom 10 percent of the wage distribution and the overall average wage widened significantly in the 1980s, then narrowed in the 1990s, and finally increased again in the 2000s.

Comparing the US to France, where for a long time that country continued to keep pace with inflation, Piketty notes that,

As in France, changes in the minimum wage played an important role in the evolution of wage inequalities in the United States.  It is striking to learn that in terms of purchasing power, the minimum wage reached its maximum level nearly half a century ago, in 1969, at $1.60 an hour (or $10.10 in 2013 dollars, taking account of inflation between 1968 and 2013.)

            On the other hand Professor David Neumark from UC-Irvine continues to rail against minimum wage increases, but largely these are two ships passing in the night without seeing each other.  Neumark wants to argue, as he does in the Wall Street Journal, recently that the issue is about whether or not the minimum wage reduces poverty, rather than helping achieve wage equality.  These are actually two different issues, as he surely must know, so his argument is all about the apples and oranges and hoping to create confusion.  With a student’s research he makes the case that “…to raise the minimum wage to $10.10 nationally, 18% of the benefits of the higher wages (holding employment fixed) would go to poor families.  Twenty-nine percent would go to families with incomes three times the poverty level or higher.”

            The first response to Neumark still has to be, “so what?”  That sounds like a win compared to where we stand now, dude!  And, as Piketty notes where we are now on wage and capital inequality (and, yes, these are different, too) is comparable to the historic highs ever, and getting worse.

            There really isn’t an honest, factual argument any more for not raising the minimum wage.

Ironically, both Piketty and Neumark come to agreement, even from their different directions, on the fact that moving to $15 per hour or higher could have what Neumark calls “sizable employment losses that would likely result from such a large minimum-wage increase,” and Piketty’s note that, “If the minimum wage were doubled or tripled, it would be surprising if the negative impact were not dominant.”

Either way you cut it, there’s no excuse not to at least bring us up to $10.10 per hour so that we can buy as much with that wage as we could back in 1969, forty-five long years ago.