By John Lawrence
A report by Demos revealed that, in 2012, the compensation of fast food CEOs was more than 1,200 times the earnings of the average fast food worker. Proxy disclosures recently released by fast food companies reveal that the ratio remained above 1,000-to-1 in 2013. Raising the minimum wage would do more to reduce inequality in the US than just about any other measure that could be taken.
But Republicans in the Senate voted down a Federal increase in the minimum wage. What else did we expect? As long as they have the veto, nothing will pass the Senate that benefits the middle class or the poor.
Thomas Piketty’s book Capitalism in the 21st Century is the top seller on Amazon.com. He is drawing attention to the fact that the very rich have incomes hundreds of times greater than average workers.
Piketty wrote the following in his book concerning the minimum wage:
“In the United States, a federal minimum wage was introduced in 1933, nearly twenty years earlier than in France. 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), at a time when the unemployment rate was below 4 percent. From 1980 to 1990, under the presidents Ronald Reagan and George H. W. Bush, the federal minimum wage remained stuck at $3.35, which led to a significant decrease in purchasing power when infaltion is factored in. It then rose to $5.25 under Bill Clinton in the 1990s and was frozen at that level under George W. Bush before being increased several times by Barack Obama after 2008. At the beginning of 2013 it stood at $7.25 an hour, or barely 6 euros, which is a third below the French minimum wage, the opposite of the situation that obtained in the early 1980s.
“Inequalities at the bottom of the US wage distribution have 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. Nevertheless, the inequalities at the top of the distribution – for example, the share of total wages going to the top 10 percent – increased steadily throughout this period. Clearly, the minimum wage has an impact at the bottom of the distribution but much less influence at the top, where other forces are at work.
“Various studies carried out in the United States between 1980 and 2000 … showed that the US minimum wage had fallen to a level so low in that period that it could be raised without loss of employment, indeed at times with an increase of employment …On the basis of these studies, it seems likely that the increase in the minimum wage of nearly 25 percent (from $7.25 to $9 an hour) currently envisaged by the Obama administration will have little or no effect on the number of jobs.”
President Obama will unilaterally increase the minimum wage for workers under new federal contracts to $10.10 an hour. He is now proposing a raise to $10.10 for all workers. Two of the nation’s largest private employers, Wal-Mart Stores and McDonald’s, have taken heat for paying many of their workers so little that they need government benefits and charity to get by.
In March, McDonald’s workers in California, Michigan and New York filed lawsuits against the company and several franchise owners, asserting that they illegally underpaid employees by erasing hours from their timecards, not paying overtime and ordering them to work off the clock. One of the tricks pulled by franchise owners was to order workers to show up for work and then told them to wait around (off the time clock) for enough customers to show up.
Piketty has amassed a huge ensemble of historical data to bolster his conclusions: over three centuries of data from 20 countries. His book shows that starting in 1980, under Republican Presidents Ronald Reagan and the two Bushes, income skyrocked for the upper 1% while remaining stagnant for the 99% and especially the lower 10% because the minimum wage did not even keep up with inflation.
People of conscience need to keep up the fight for the minimum wage right through the next election. While Republicans in the House vote time and again to repeal Obamacare which hasn’t a chance as long as Obama is President, the Democrats under Harry Reid in the Senate need to vote time and again to raise the minimum wage even though there’s not a prayer as long as the Republicans can veto it. However, it keeps the issue front and center before the American people. Maybe some day the logjam will break. Meanwhile cities and staes need to take the lead in raising the minimum wage.
Anna Daniels says
John- thanks for this update. The Demos findings about the ratio between CEO pay and worker pay is being overlooked in the conversation about inequality. Raising the minimum wage is absolutely necessary but we also need to find a way to address the disproportionate compensation. Switzerland recently put this particular issue to a vote that would limit CEO pay to a specific percentage in respect to worker pay. That vote failed.
How can we address the issue here? One way is to do a survey of these percentages, starting with public funded institutions (ie City of San Diego, County of San Diego). By what percentage does the highest executive pay exceed that of the lowest paid member of the workforce? We should have some discussion about that ratio. Then, if the City wants to outsource services, it should be stipulated that the private sector cannot exceed a specific ratio.
Raising the minimum wage is one significant part of addressing the issue of inequality. Not only did the Republicans not permit a vote, they are now making an argument against any minimum wage at all, because the market. Of course.
John Lawrence says
Thanks, Anna, for your comment. Piketty seems to think that the way to address the ridiculously high compensation for CEOs, which he calls “supermanagers”, is to raise taxes on the top income brackets. Their super high pay seems to correlate with the time period in which taxes on the upper brackets were reduced. When taxes were high on upper income earners, money was plowed back into businesses or distributed in the form of dividends because it didn’t make sense to compensate CEOs at the extremely high levels that they are being compensated today.
So “taxing the rich”, rather than being a vendetta, just makes good economic sense. The money could be put to good use providing jobs rebuilding infrastructure. Tax policy along with raising the minimum wage are the two most important ways to reduce inequality in the US.
Just a small quibble regarding the title. I don’t think it’s quite accurate to say that the “Republicans in the Senate Vote Not to Raise Minimum Wage.” The actual vote on the increase never happened because enough Republicans (42), although still a minority of the Senate, voted to not permit a vote on the issue! I believe this is yet another example of how the issue of the abuse of the filibuster has not been satisfactorily resolved.