It’s time to do more than talk about income inequality, and increase the minimum wage

Bob Kustra
Bob Kustra

“Everybody talks about the weather, but no one ever does anything about it.”

The line Mark Twain used often came to mind the other day when two studies on income inequality were released. Everybody talks about income inequality, but no one ever does anything about it. In fact, it grows as the days grow longer.

We live in what’s been called the new gilded age. According to the progressive Economic Policy Institute, from 2009 to 2015, the incomes of the top 1 percent grew faster than the incomes of the bottom 99 percent in 43 states and the District of Columbia.

Criticism of income inequality and the call for narrowing the gap between the rich and poor are hardly the exclusive preserve of liberals. From a most unusual corner of the economy comes the critique of Ray Dalio, one of the highest-earning hedge-fund managers in America. He claims the widening gap between rich and poor poses an existential threat to the U.S. that weakens the economy and proves that U.S. capitalism “is not working well for a majority of Americans.”

And this from one of America’s wealthiest and most successful capitalists.

One proof of Dalio’s premise comes right from his own backyard, Wall Street. The New York State Comptroller reported the bonus pool for the 181,300 security industry employees who work in New York City at $27.5 billion. A hefty number, indeed, especially when compared to the combined annual earnings of the 640,000 U.S. workers employed full time at the federal minimum wage. The bonuses going to Wall Street amount to more than three times the amount going to all minimum wage employees.

In a second study, the Economic Policy Institute reported the average 2018 bonus for security industry employees at $153,700. According to the Institute, the average Wall Street bonus has increased 1,000 percent since 1985, but the federal minimum wage only 116 percent. If the minimum wage had kept pace with Wall Street, it would be $33.51.

The reluctance of the federal and some state governments to address the minimum wage issue stems from a line of thinking that claims increasing it will cause employers to react negatively and lay off workers rather than pay the increase to all employees. This argument is as old as the hills and has been trotted out by congressional Republicans as they have successfully stalled increases for years. Too often, the rhetoric is not matched with proof of such claims.

Fortunately, thanks to our federal form of government, not all of America must live by the dictates of business lobbies in Washington. A number of cities and states have enacted substantial minimum wage increases. San Francisco was the first to raise it to $15 per hour, but it has been followed by Seattle and at least 10 other large cities, seven states and other local governments.

Contrary to the rationale offered by the opposition, the latest studies found no negative impact on employment as a result of such increases. The Center on Wage and Employment Dynamics at the University of California-Berkeley completed a study of six cities that increased the minimum wage well beyond the measly federal rate, focusing on the food service industry in particular, and found no employee layoffs.

The University of Massachusetts conducted a larger analysis of minimum wage increases dating back to 1979 and found no impact on employment as a result of minimum wage increases.

Unfortunately, the ability of state and local entities to increase the minimum wage is in jeopardy with a very clever Republican strategy in place to kill any effort to increase the minimum wage. The Republican Party platform in 2016 failed to address the issue with a line in its platform that the “minimum wage is an issue that should be handled at the state and local level.”

By such action, Republicans dodge the issue in Congress and avoid taking a public stand against the increase in minimum wage, but they also know that state legislatures across the land in Republican hands are preempting cities from enacting their own minimum wage legislation.

The Republican-controlled Legislature in Missouri, for example, passed a law forbidding cities from raising the minimum wage. It was vetoed by the Democratic governor, and then the Legislature overrode the veto.

Wages of the average worker in America have failed to move enough in the past 40 years, but those most affected are at the lower end of income distribution. Although economists list many reasons for wage stagnation, a simple fix for those suffering the most would be a substantial increase in the current federal minimum of $7.25. But no need to check in with economists on this one. Just ask the woman who cleans up after a motel stay or the home health aide who keeps Grandma out of the nursing home or the host of other workers stalled at the lowest end of the salary structure.

Unfortunately, Twain’s quote applies to the minimum wage as much as the weather. It is time Congress does more than talk about the minimum wage. And until then, it’s time for states and localities to follow the example of their brethren who have taken the matter into their own hands.

Bob Kustra served as president of Boise State University from 2003 to 2018. He is host of Readers Corner on Boise State Public Radio and is a member of the Statesman editorial board.