Monday, February 23, 2015


It's official now. A study from the Economic Policy Institute found we had yet another year of poor wage growth in 2014. Wages essentially stalled or took a step backwards for the vast majority of Americans last year. In an interesting twist, because the biggest decline hit those with advanced degrees hardest - a 2.2 percent drop - falling wages can't simply be blamed on a lack of education or low skill levels.

In what might be considered some good news, workers in the bottom 40th percentile saw their wages increase by 0.3 percent. According to researchers who put the study together, much of this growth can be attributed to regions and states that increased their minimum wage.

Why is any of this important? Here's a meme that helps explain how low wages create a nation of working poor, which contributes to our national dependence on public assistance.

So, we need to ask ourselves, If the richest Americans have seen their share of the income pie grow why haven't ordinary Americans?

This is a fair question because beginning in the early 1980s we were told that reducing taxes on the richest Americans would lead to a booming economy that would make everyone better off.

In spite of a growing economy, this has not been the case ...

Think about the following.

According to David Cooper at the Economic Policy Institute, if minimum wage in America had been tied to an economic index after 1968 - rather than allowed to stagnate and wallow according to government policy and to the whims of the market - America's low wage earners would be far better off today.

Specifically, if we had indexed federal minimum wage in 1968 (then $1.15 / $1.60 an hour) to ...
* Inflation, minimum wage would be $9.25 today.
* Average hourly wages, minimum wage would be $10.59 today.
* Increases in productivity, minimum wage would be $20.16 today.
* Earnings of the top 1 percent, minimum wage would be $28.75 today.
Starting point of  minimum wage reflects purchasing power in 1968 (in 2012 dollars).
Actual minimum in 1968 wage was $1.15 / $1.60 an hour.

So, what's the answer? There are many suggestions, which include taking a look at our broader commercial and financial policies (which I discuss here and here). But there are also many naysayers, and economic illiterates weighing in on the discussion.

One of the challenges we have come from the intellectual midgets who use slippery slopes as their economic model. They like to argue that if we raise minimum wage to $15 an hour that we'll just end up at $25 or $35 per hour within  a week, at which point cute puppies die and economic Armageddon happens. What they ignore is what happened in America throughout the 1960s, and the economic realities of Seattle, San Francisco, and San Jose when they recently raised their minimum wage.

In my view, one thing is clear: More needs to be done to increase middle class wages in general.

How you do this is the tricky part. This is especially the case if minimum wage is going to become the middle class salary battleground. For example, should mom-and-pop stores and summer jobs for high school kids be excluded from minimum wage increases? Generally speaking, I think so.

Still, we need to acknowledge there will be little upward pressure on average wages if minimum wage is not increased. The last 40 years of trickle down economic policies make this clear.

Other issues those who oppose raising minimum wage need to consider include the declining amount of goods that can be bought with an hour of minimum wage work, rising tuition costs, purchasing power parity, the fact that so many minimum wage earners are heads of households, and the amount of public assistance that's required to help sustain someone working 40 hours a week, among other issues.

In the end, history tells us that the increasing wage and wealth gaps we are seeing in America today is not a sustainable path. Something needs to be done.

This is just not just me speaking. This the voice of every civilization through history.

- Mark

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