1:01 PM EDT, July 29, 2013
It should surprise no one that President Barack Obama has been turning his attention of late to income inequality. In a speech last week and in a follow-up interview with The New York Times, he fretted about the widening gap between the wealthy and the middle class, the nation's "fraying" social fabric and how it might worsen racial tensions.
Those are legitimate concerns. As much as the economy has improved during Mr. Obama's time in the White House, the recovery has not produced sufficient jobs or income growth. People who are struggling are more inclined to feel resentment toward others, an antipathy often felt most keenly by blacks and immigrants.
There is no single answer for this problem. The rise of income inequality predates the economic downturn. Since 1979, the top 1 percent of U.S. earners have enjoyed 38 percent of the income growth while the bottom 90 percent accounted for 36.9 percent, according to the Economic Policy Institute.
There is, however, a proven strategy that Mr. Obama could pursue to help alleviate the worst of this imbalance, one that dates back to the Eisenhower administration. With the recent Senate confirmation of Maryland's Thomas Perez as U.S. Secretary of Labor, we would expect the administration to move forward with a proposal to raise the federal minimum wage from the current $7.25 an hour to the $9 per hour that Mr. Obama promised to support in his State of the Union address earlier this year.
We know how conservatives in Congress will react to such a plan. They'll immediately call it a jobs killer and claim it will hurt small businesses and reduce employment prospects for young people. Even some Democrats will likely oppose the increase, perhaps on the grounds that adding a minimum wage increase to Obamacare requirements would be too big and expensive a pill for employers to swallow right now.
But the fact is that the current $7.25 minimum wage is so woefully inadequate that it's ludicrous to pretend it's anything in the ballpark of what a person needs to support a family. The simple math of this was made evident recently when McDonald's, partnering with Visa, produced an instructional website counseling its workers on how to budget on a fast-food worker's salary.
The assumptions in this budget quickly became a staple of late-night comedy. Not only were workers expected to hold two jobs, but they'd have to get by on $20 in health expenses per week — far short of a typical health insurance premium. That the suggestions came from a company that pays its CEO $13.8 million annually didn't help either.
A higher minimum wage is not some communist plot. A growing number of states have been instituting their own versions to make up for the federal government's failure to offer a more realistic standard, and many are Republican-controlled. Florida, Montana, Alaska, Maine, Arizona, Nevada and Missouri are among the 18 states that, along with the District of Columbia, have imposed higher minimum wage standards as of Jan. 1.
Would it be inconvenient for a company accustomed to paying its entry-level workers $7.25 an hour to eventually have to offer $9? Perhaps. But the benefits of that higher wage are substantial: Less government spending on social safety-net programs, billions of dollars in new spending for the economy that should create jobs, and fewer American children growing up in poverty.
Experience has demonstrated that raising the minimum wage does not hurt the economy. Vermont has one of the nation's highest minimum wages and lowest unemployment rates of any state while Mississippi has one of the highest unemployment rates but has no state minimum wage. Certainly, it's difficult to regard $7.25 an hour adequate when the U.S. minimum wage, when adjusted for inflation, was higher in the 1950s, '60s and '70s.
President Obama's critics ridicule him for the growth in food stamp eligibility during his term in office, yet it's the increase number of working poor — those who hold jobs but still can't feed their families — that account for this problem. Raising the minimum wage is not a cure-all for income inequality, but it's a nice head start while longer term solutions like improved public education and a fairer tax code are pursued.
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