The federal minimum wage still sits at $5.15 per hour and has lost
over 17 percent of its purchasing power since 1997. In 2005, minimum wage workers
earned only 32 percent of the average hourly wage and in fact, the wage would
have to rise to $8.20 just to reach half of the current average hourly wage.
If Congress fails raise the minimum wage this year, it will mark the longest
stretch the wage has remained unchanged since it was instituted in 1938 and
the greatest inequality between minimum wage and average wage earners since
the end of World War II
Karl Marx would be amazed. The American worker is criminalized, sent to fight
in meaningless wars, called lazy and immoral by fundamentalist Christians and
ignored by the healthcare system. More and more people are earning less and
less – when will it all implode?
There are two Americas. One, the wealthiest country in the world. Two, a mid
ranking developed nation with a poor healthcare system and draconian laws. They
are drifting apart, as this analysis shows and the Bush administration (who
are already making plans for the consequences) are driving this process ever
[Posted By Szamko]
Republished from OMB
How income inequality has intensified under Bush
Though the Bush administration continues to laud the strength of the economy
and the success of its economic and tax policies, a large percentage of Americans
are continuing to struggle to make ends meet as income growth has become increasingly
concentrated at the top of the income scale. Income inequality, in fact, is
at an all-time high, illustrating that current tax, budget, and wage and employment
policies are all not working in favor of average American families.
The country experienced relatively broad-based wage growth during the latter
part of the 1990’s, but this growth ended with the 2001 economic downturn.
Growth in real wages for low- and moderate-income families began to slow, and
by 2003 wages began to decline and have not picked up in real terms. The economic
recovery after the recession, one of the weakest recoveries on record, has not
been diverse enough to generate the kind of income gains among low- and middle-income
families seen over the last decade.
This real wage stagnation comes despite economic expansion over the last two
years, relatively strong Gross Domestic Product (GDP) growth of late, and record
highs for corporate profits in many sectors. These gains have not been reflected
in job and wage growth across the board for averages workers. Real hourly wages
fell for most low- and middle-wage workers by 1 – 2 percent last year
and have not increased since 2000 after adjusting for inflation. In addition,
the Federal Reserve recently reported in its Survey of Consumer Finances that
average income for American families declined 2.3 percent between 2001 and 2004
after adjusting for inflation.
Compounding this trend has been Congress’s utter inability to pass even
one minimum wage increase in the last nine years. The federal minimum wage still
sits at $5.15 per hour and has lost over 17 percent of its purchasing power
since 1997. In 2005, minimum wage workers earned only 32 percent of the average
hourly wage and in fact, the wage would have to rise to $8.20 just to reach
half of the current average hourly wage. If Congress fails raise the minimum
wage this year, it will mark the longest stretch the wage has remained unchanged
since it was instituted in 1938 and the greatest inequality between minimum
wage and average wage earners since the end of World War II.
The connection between the drastically low minimum wage and growing economic
inequality seems to have escaped notice only in the nation’s capitol.
Eighteen states have now enacted higher state minimum wages, and many others
are currently considering increases of their own. According to the Ballot Initiative
Strategy Center, as many as 30 states could consider legislative proposals this
November to increase the minimum wage or tie it directly to inflation.
Other Bush administration policies have contributed to these negative income
trends, particularly the regressive redistribution of federal revenues through
the President’s tax cuts. The Bangor Daily News summed up the problem
“Suppose that the administration’s tax cuts, which began in 2001,
remain in effect until 2015. Over these 15 years, more than half of the tax
cuts – 53 percent – will go to people with incomes in the top 10
percent, according to studies commissioned by The New York Times. And 15 percent
of the cuts will go to the top one-tenth of 1 percent of taxpayers. By 2015
the tax cuts, if retained, will provide average yearly tax savings of $23 to
taxpayers in the bottom 20 percent. The wealthy will fare better. The top one-tenth
of 1 percent of all taxpayers will save an average of $196,000 a year, or a
total of $2.9 million over the 15 years. By 2015, the top 1 percent of taxpayers
will pay a lower share of total taxes than they did in 2001.”
Far from distributing money back to average American families, the Bush tax
cuts overall have profited the super rich, leaving the vast majority of Americans
with comparatively little or nothing to show for it. This has only made the
distribution of income and wealth across America more skewed.
Showing further evidence of an exacerbated income gap, the Center on Budget
and Policy Priorities and the Economic Policy Institute recently released Pulling
Apart: A State-by-State Analysis of Income Trends, a study highlighting the
growing gap between rich and poor. The study finds that this gap—mainly
between the highest-income families and low- and middle-income families—grew
significantly between the early 1980s and the early 2000s. During this period
of time, the incomes of the bottom fifth of families grew more slowly than the
incomes of the top fifth of families in 38 states; the incomes of the rich grew
by an average of 62 percent, while the incomes of the poor grew by an average
of 21 percent. Additionally, in 39 states the incomes of the middle fifth of
families grew more slowly than the incomes of the top fifth of families.
The five states with the largest income gap between the top and bottom fifths
of families, according to the study, are New York, Texas, Tennessee, Arizona,
and Florida. The five states with the largest income gaps between the top and
middle fifths of families are Texas, Kentucky, Florida, Arizona, and Tennessee.
Generally, income gaps are larger in the Southeast and Southwest and smaller
in the Midwest, Great Plains, and Mountain West.
These trends indicate a fundamental inconsistency and unfairness within our
economic system that threatens the well-being of future generations. Jared Bernstein,
a senior economist at the Economic Policy Institute, makes this point, explaining,
“When income growth is concentrated at the top of the income scale, the
people at the bottom have a much harder time lifting themselves out of poverty
and giving their children a decent start in life. A fundamental principle of
our economic system is that the benefits of economic growth will flow to those
responsible for their creation. When how fast your income grows depends on your
position in the income scale, this principle is violated. In that sense, today’s
unprecedented gap between the growth of the typical family’s income and
productivity is our most pressing economic problem.”
Growing income inequality in America did not happen by accident and it cannot
fix itself. It will take proactive changes from policy makers at the state and
national level to help reduce the gap and truly level the economic playing field
to create a more robust environment for opportunity for all. Raising the minimum
wage, as well as adjusting it annually for inflation, would be one small but
necessary first steps toward reducing the enormous income disparity in America
Despite the White House’s selective use of economic data and
sweeping generalizations about the overall strength of the economy, mining the
data actually paints a much drearier picture, one in which most Americans are
not making progress but actually losing ground, while the wealthy prosper more
and more. This trend will only worsen unless more just and sensible fiscal and
economic policies are adopted.