Today’s Very Unequal National Minimum Wage

Financial FAQs

nymag.com

This New Year is a good time to talk about our record income inequality, in the hope that it can be improved. Because it’s the reason a minority of white male Republicans have been able to hold onto their power for so long.

U.S. income inequality is the worst since 1929, which is why it was a main cause of both the Great Depression and Great Recession. The majority of Americans held a minority of the wealth, but were the biggest spenders. So when they ran out of the means to spend, the economies crashed.

The above graphs portray the real message of such income inequality. The top 1 percent of U.S. income earners have doubled their share of national income since 1980, whereas the national income share of the 1 percent in Western Europe has held steady at just 10 percent. In other words, there has been a massive transfer of Americans’ wealth to the one percent since 1980.

The result has been disastrous for our participatory democracy. It has created a country of Haves and Have-nots, where the Have-nots live in the poorest red states dominated by Republican legislatures that haven’t raised the current minimum wage above the federal rate of 7.25 percent, and Haves in the more prosperous blue states with Democratic Party-majority governments that have.

CNBC.com

The federal minimum wage was last raised in 2009 to $7.25 per hour. Seven states and Washington D.C. are raising their minimum wage to $15 per hour and nearly 7 million wage earners will be getting their minimum pay raised January 1, according to CNBC and the Economic Policy Institute (EPI), a labor think-tank.

The CNBC graph shows those states with pending increases to $15 per hour. That comes to $2,580 per month with a 40-hour week and just $30,960 annually; barely enough for a single person to live, but not families.

That is how much conservatives (and the NFIB small business lobby) have succeeded in blocking any raise to the national minimum wage since 2009.

Recent research by Nolan McCarty, a professor at Princeton University suggests why. McCarty, working with political scientist Boris Shor and economist John Voorheis, has released a new study that shows that the growing ideological gap between the Republican and Democratic parties — a common obstacle to getting anything done in Washington — is not just due to politicians' incompetence or their unwillingness to work together. It's due, at least in part, to the widening gap between the rich and poor.

The red states have been hit hardest by the loss of industrial jobs, and conservatives have fanned the flames of political polarization by scapegoating immigrants (especially the dark-skinned), while blaming Washington’s political ‘swamp’, and big city folk in general for their suffering that has skyrocketed rates of suicide and opioid use.

The EPI calculates the federal minimum wage of $7.25 was worth 14.8 percent less than when it was last raised in 2009, after adjusting for inflation, and 28.6 percent below its peak value in 1968, when the minimum wage was the equivalent of $10.15 in 2018 dollar.

The federal minimum wage has no inflating indexing, which is why it is worth so much less today; whereas it is indexed with some state minimum wage laws, and eighteen states have upcoming minimum wage increases that are also indexed to inflation. But at least 12 red states have not slated increases. It is one reason they are among the poorest states while voting for President Trump in 2016.

There is an even greater danger looming due to the record income inequality. It is to the U.S. Constitution. For the current Republican Party has become the party of oligarchs, the supremely rich, which is why they can deny the reality of the suffering of their red state supporters, the voting rights of minorities, and constitutional laws that protect us from foreign intervention in elections.

It is incredible that the oligarchs have managed to convince their red state constituents they are not the cause of so much suffering when they were the first to advance a free trade agenda, thus allowing many of those higher-paying manufacturing jobs to flee the U.S..

This is also why they almost totally support a sociopath in the White House with no regard for the truth or laws that support a democracy. They prefer to live by the only law they heed—the law of the jungle in a Darwinian survival of the strongest exploiting the weakest for their own personal gain.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What’s Wrong With Capitalism—Part II?

Financial FAQs

Pete Buttigieg, Mayor of South Bend, Indiana and Presidential candidate, said to NBC’s Chuck Todd, “of course I’m a capitalist and America is a capitalist society, but it’s got to be democratic capitalism,” per the NYTimes’ Michael Tomasky.

But that hasn’t always been the case in America. Today we are approaching a very undemocratic form of capitalism—oligarchism, where a small percentage of Americans control most of the wealth and benefit from its laws—particularly since the end of the Great Recession.

Corporations and their stockholders have garnered 96 percent of the wealth generated since it ended in June 2009. Why? Because the busted housing bubble caused many in the middle class to either lose the equity in their homes, or their homes outright. The damage was so great that median household wealth has declined 30 percent since 2017, according to the Federal Reserve.

And taxes have been drastically cut that would fund public spending to restore some of that lost wealth—on badly deteriorated infrastructure, higher educational standards (US student test scores are now below that of other developed countries), research in new technologies, healthcare, and the environment.

These programs would help to restore some of the record income and wealth inequality that has resulted, and made America a world power in decline. A super majority of economists say public spending programs boost economic growth for the simple reason that it redistributes tax revenues where they will do the most good—to the 99 percent that have lost the most from the Great Recession.

Buttigieg has made some vague proposals to right the inequality that, after all, was the major cause of both the Great Depression and Great Recession. So why wouldn’t we want to bring back a democratic capitalism that works for all Americans?

But there is an even more important ingredient that nurtures democratic capitalism, besides public investments. It is healthy local community involvement in civic activities. Ball State, Indiana economist Michael J Hicks reports in an assessment of Mayor Pete’s accomplishments, a major component of his South Bend’s success has been local civic involvement in community organizations, such as their very active Rotary Club. “It was more like an interdisciplinary research colloquium, combined with an interfaith conference and millennial business forum,” said Hicks.

There are many studies that show positive results of what is a little known field of study—community development, also known as community organizing—that was first put into practice in the US in the 1930s with New Deal legislation as a way to counteract effects of the Great Depression that boosted the formation of labor unions.

The National Industrial Recovery Act (1933) provided for collective bargaining. The 1935 National Labor Relations Act (also known as the Wagner Act) required businesses to bargain in good faith with any union supported by a majority of its employees. 

The United Nations defines community development broadly as "a process where community members come together to take collective action and generate solutions to common problems."
One of its best-known practitioners was Saul Alinsky, based in Chicago, who is credited with originating the term community organizer during this time period. Alinsky wrote Reveille for Radicals, published in 1946, and Rules for Radicals, published in 1971. With these books, Alinsky was the first person in America to codify key strategies and aims of community organizing.

Wikipedia cites the International Association for Community Development (www.iacdglobal.org), the global network of community development practitioners and scholars, as "a practice-based profession and an academic discipline that promotes participative democracy, sustainable development, rights, economic opportunity, equality and social justice, through the organisation, education and empowerment of people within their communities, whether these be of locality, identity or interest, in urban and rural settings".

Community development has today taken on a new popularity, as communities torn apart by globalization and loss of manufacturing jobs, particularly in the rust belt, seek to rebuild themselves.
Sociologists like Robert Putnam, author of Bowling Alone, the Collapse and Revival of American Community, have been vocal in calling for a revival of local civic participation in the rebuilding of American communities.

He says in Bowling Alone, “Financial capital - the wherewithal for mass marketing - has steadily replaced social capital - that is, grassroots citizen networks - as the coin of the realm.”

Then the problem becomes how to restore the social capital of civic engagement into its rightful place in the community? It has to begin with putting public capital back into the public sector as was done with the New Deal, in order to restore democratic capitalism, a capitalism that can work for all Americans.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen