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The Walton (Walmart) heirs now have as much wealth as up to 40 percent of all Americans combined, and Walmart's sales have been slowing down. What does the first fact have to do with the second? (Hint: Sign this petition for raising the minimum wage.)

The top 1 percent now rakes in 20 percent of the nation's income and holds one-third of the country's wealth. Meanwhile the economy remains stagnant because the incomes of regular people are stagnant and falling --“ meaning they can't buy stuff and can't invest in their own futures.

From the post "40% Of Americans Now Make Less Than 1968 Minimum Wage":

The chart shows that wages used to go up as productivity went up, but in the 1970s they decoupled. Productivity kept going up but wages stagnated.
Regular people's incomes have been stagnant since the 70's while costs keep going up. In fact, 40 percent Of Americans now make less than the 1968 minimum wage if that minimum wage had kept rising along with productivity. If the minimum wage had stayed coupled to productivity the minimum wage would now be $16.50 an hour --“ which more than 40 percent of Americans now make!

Instead all of those people's possible additional income went to the top. And that plus changes in taxation is why we have the inequality we have. That is what happened to our economy and to all of us.

Now, here's another chart. This chart shows that financial-sector and non-financial-sector compensation used to rise together, but in the late 70's / early 80's they decoupled. Financial-sector compensation took off, while non-financial-sector compensation did not.
It is as simple as this: If we want our economy and democracy to recover, the minimum wage needs to be raised as a core part of the solution. (But only part.)

Sign this petition calling for "œthe leaders of the House and Senate to allow an up-or-down vote on the Fair Minimum Wage Act of 2013, which would raise the minimum wage to $10.10 an hour and then index it to inflation." While $10.10 is too low, it's a start, and it is what is before the Congress. There are other essential things we need to do, but we need to raise the minimum wage to set a floor that is not falling out from under us.

Inequality Holding Back Recovery

The recovery from the economic crash is stagnant, and unemployment remains in emergency territory.

In January Economist Joseph Stiglitz wrote this op-ed for The New York Times, listing four reasons why the terrible inequality we face today is holding back the recovery, "Inequality Is Holding Back the Recovery":

There are four major reasons inequality is squelching our recovery. The most immediate is that our middle class is too weak to support the consumer spending that has historically driven our economic growth. While the top 1 percent of income earners took home 93 percent of the growth in incomes in 2010, the households in the middle -- who are most likely to spend their incomes rather than save them and who are, in a sense, the true job creators -- have lower household incomes, adjusted for inflation, than they did in 1996. The growth in the decade before the crisis was unsustainable --” it was reliant on the bottom 80 percent consuming about 110 percent of their income.


Second, the hollowing out of the middle class since the 1970s, a phenomenon interrupted only briefly in the 1990s, means that they are unable to invest in their future, by educating themselves and their children and by starting or improving businesses.


Third, the weakness of the middle class is holding back tax receipts, especially because those at the top are so adroit in avoiding taxes and in getting Washington to give them tax breaks. The recent modest agreement to restore Clinton-level marginal income-tax rates for individuals making more than $400,000 and households making more than $450,000 did nothing to change this. Returns from Wall Street speculation are taxed at a far lower rate than other forms of income. Low tax receipts mean that the government cannot make the vital investments in infrastructure, education, research and health that are crucial for restoring long-term economic strength.


Fourth, inequality is associated with more frequent and more severe boom-and-bust cycles that make our economy more volatile and vulnerable. Though inequality did not directly cause the crisis, it is no coincidence that the 1920s --” the last time inequality of income and wealth in the United States was so high -- ended with the Great Crash and the Depression. The International Monetary Fund has noted the systematic relationship between economic instability and economic inequality, but American leaders haven't absorbed the lesson.
Translation:
  1. Top 1 percent (a few people) taking most of the gains, income in the middle (lots of people) is falling, they can't buy stuff.
  2. Middle class disappearing, unable to invest in education or start businesses.
  3. Tax system rigged so gains going to 1 percent not bringing revenue to government, with incomes to the rest falling, revenue to government decreasing. Government can't afford to invest in infrastructure, research, education, health and other things the help economy.
  4. Inequality that drives such massive amounts to a top few makes even the rich feel poor so they speculate and engage in quick-buck schemes, economy becomes "volatile and vulnerable."

Raising the minimum wage is at the center of a set of policies. It is one part of what to do if we want economy to work again for regular people and for the future. Other parts include but are not limited to:
  • New tax brackets for higher incomes,
  • restoring the estate tax,
  • restoring corporate taxation,
  • getting rid of tax incentives that encourage corporations to move jobs and factories and profit centers out of the country,
  • possibly a wealth tax to address the deficit and debt,
  • a tax on Wall Street speculation,
  • restoring government services that help lower- and middle-income people obtain affordable higher education and get job training,
  • renegotiating trade deals that pit American workers against exploited, underpaid workers in non-democracies, thereby making American democracy and wages a competitive disadvantage
  • and many other steps to address the changes brought in since the "Reagan Revolution" that drove the huge increase in inequality and decrease in government investment in our economy's future.

Raising the minimum wage is not only the moral thing to do, it is essential to bringing the low end up and start distributing the gains more fairly.

Even Walmart's Sales Hurting Now

After the economic crash Walmart was ascendant. More and more people were moving down the income ladder toward the bottom, they were moving from the upper-scale stores to the bottom, i.e. Walmart.

But now so many people have fallen below the bottom that even Walmart's sales are slowing down. Seeking Alpha recommends a SELL on Walmart stock because,

WMT derives most of its revenues from domestic operations in the U.S. where it has a dense network of stores and logistic centers. However, U.S. growth has almost flattened over the last couple of years eking out a yearly growth rate of just 1 percent.
Walmart can't just raise wages on their own because that will give their competitors an advantage, and soon we'll all be complaining about Target instead.

Even Walmart needs someone to come along and force wages up. Who could that someone be? It's up to government --“ We the People --“ to make all employers raise wages so they can all have customers again.

Government Needed

All businesses will tell you that if they didn't do everything they can to boost profits, someone else will, and then they're screwed. Business is a cut-throat game and you have to fight to survive. You have to fight as dirty as the rules let you fight. Businesses will tell you that if they don't keep wages as low as possible, deny health insurance, cut safety costs, cheapen products, and everything else they can get away with they will be gone, replaced by businesses that will.

The key to the equation is the "what the rules allow" and the "what they can get away with" part of that dirty fight. Businesses compete on a playing field, and the rules and enforcement of those rules determine the way the game is played.

Every individual business wants to save on labor and other costs. But if all businesses do the same, the result is that no one has any money to spend and all of those businesses are in trouble. This is where government comes in. Government is the essential part of this equation, setting and enforcing the rules in ways that make up for what inevitably happens if all businesses cut wages, costs, etc. And government is essential for enforcing those rules.

From "You Can'™t Have Healthy Businesses Without Strong Government":

Imagine this, though it might be difficult: some people are greedy and want more for themselves, at the expense of the rest of us. Yes, this is shocking, but true!


Government protects us from those who would take advantage and take too much. Government does this both domestically and internationally. At home it protects us from criminals and exploiters. Government also protects us from physical and economic threats from other countries.


[. . .] When too many business reduce costs by cutting employees or paying less, the system collapses from lack of demand. Government is needed to keep businesses from laying off too many people or cutting pay. Sometimes government does this by stepping in and hiring people (or just giving them money like unemployment benefits), or buying things, thereby creating demand, causing businesses to hire.
Crucial to this equation:
When government is strong we have more enforcement of a level playing field for all of us, more education for all of us, more security for all of us, more protection of our environment, more infrastructure so our own startup businesses can flourish and compete, more parks, more promotion of the general welfare.


And when government is weak we end up with a very few greedy, ruthless billionaires and their giant corporations controlling the economy, stifling competition, scamming and defrauding us, and consuming the environment and resources for their own short-term profit.
Sign a SignOn.org petition posted by the Campaign for America's Future calling for "œthe leaders of the House and Senate to allow an up-or-down vote on the Fair Minimum Wage Act of 2013, which would raise the minimum wage to $10.10 an hour and then index it to inflation."

It is the nature of our current economic system that things will concentrate into fewer and fewer hands. When you let the ones with more money win the game and set the rules it is inevitable that they will increasingly set the rules to they always win the game. When the winner gets more stuff, eventually a very few winners have to end up with all the stuff.

The Fair Minimum Wage Act

The Fair Minimum Wage Act is up before the Congress. Isaiah J. Poole explains in Time To Demand A Vote To Increase The Minimum Wage:

The Fair Minimum Wage Act would increase the current federal minimum wage, $7.25, to $10.10 in three steps over a three-year period, and then index it annually to inflation from that point forward.


The bill would make an even more significant difference for tipped workers, mostly in the restaurant industry. They currently have a minimum wage of $2.13 an hour that has not increased since 1991. Under the bill, tipped workers would earn a minimum 70 percent of the regular minimum wage.


... House members have in fact had one opportunity to vote on the bill in March, in the form of a motion instructing the House to add the minimum wage increase to a workforce training bill. The motion was unanimously rejected by House Republicans.


The bill, though, deserves a stand-alone vote in its own right. It’s been three years since the minimum wage went up to $7.25, and that increase did not undo the damage done to low-wage workers by decades of congressional failure to keep this wage floor from sinking.
Sign a SignOn.org petition posted by the Campaign for America'™s Future calling for "œthe leaders of the House and Senate to allow an up-or-down vote on the Fair Minimum Wage Act of 2013, which would raise the minimum wage to $10.10 an hour and then index it to inflation."

-----

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture.  I am a Fellow with CAF.  Sign up here for the CAF daily summary

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Comment Preferences

  •  Tip Jar (5+ / 0-)

    --
    Seeing The Forest -- Who is our economy FOR, anyway? Twitter: @dcjohnson

    by davej on Fri May 03, 2013 at 12:43:56 PM PDT

  •  This was in the Income Inequality Kos queue (0+ / 0-)

    I went ahead and published the dairy, author may not be around to comment.

    .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Fri May 03, 2013 at 02:12:10 PM PDT

  •  I think it's worthwhile, but I see increasing the (2+ / 0-)
    Recommended by:
    ManhattanMan, llywrch

    number of jobs being as important, if not more important for raising wages and salaries.  If the government would start hiring rather than firing, including investing in things like infrastructure even if it's CCC-style operations, and lord knows there are plenty of projects that could use that kind of refreshing, I think sucking up the unemployed would put pressure on employers to increase wages just to compete for employees.

    If an extra couple million could be hired (I think the government at all levels has lost around 750,000 employees since 2007) so that the number of unemployed were down, everyone's salaries would be higher as not just the minimum wage folk but the folks a bit higher up the scale would get bumps as competition would be stronger.

    The issue I find with just raising the minimum wage is that it raises a floor and, without anything to support this supposition, I would think that raising the minimum to $10 would make all the minimum wage jobs pay $10 plus all the other jobs that paid more than minimum but less than $10 pay $10/hr, not minimum plus whatever used to be the premium over minimum they used to get.  For example, to use round numbers, if minimum wage was $7 and someone received $9, I don't think raising the minimum to $10 would mean that one would get $10 and one would now get $12 - I think the higher-paid person would receive somewhere between $10 and something less than $12.  It would be better for them, but it would not mean everyone would benefit by the same amount.  However, I would think if the higher person could be hired by government for $12, they'd go do it and when the minimum wage employer couldn't get anyone for $7 anymore, they might have to offer at least $10 just to get their lower skilled worker to stay with them.

    I am not a labor specialist - that's just my two cents.

  •  The minimum wage hurts unskilled workers. (3+ / 0-)
    Recommended by:
    Sparhawk, Samulayo, VClib

    There are many people who don't have the education and training to produce $10 worth of goods and services in one hour.

    Setting the minimum wage above $10/hr guarantees that these people will be unemployed.

    I'm a landlord. When I'm renovating a house, I have a choice. I can:

    - Hire 3 unskilled high-school dropouts for $8/hr each or,
    - Hire 1 skilled guy (who works faster and better) for $25/hr

    (These numbers are hypothetical, but not unrealistic.)

    If you raise the minimum wage, I'll stop using the kids and go with the skilled worker. My costs will go up, but that's not the real problem. The problem is that the three kids now have no entrance into the economy.

    Minimum wages encourage us to substitute high skills for low skills. Fire the cashiers and hire programmers to write self-serve checkout software. Fire factory workers and hire engineers to build robots. Fire bank tellers and hire computer guys to build ATMs.

    There is a better way to do this. Simply raise income taxes and use the money to increase the EITC.

    Let people work for the most they can earn. If it is not enough to make a living wage, then we should cut them a check for the difference. But don't price the most vulnerable workers out of the market!

    •  Nope. (2+ / 0-)
      Recommended by:
      NoMoreLies, The Jester

      Tedious, "market-based" thinking.

      Markets are the problem, not the solution. You couch your "solution" in terms of you, the benevolent and beneficent landlord, but the reality of your proposal is that we end up subsidizing Walmart's minimum wage army (just as we already do, with, for example, Medicaid).

      To put the torture behind us is, inevitably, to put it in front of us.

      by UntimelyRippd on Fri May 03, 2013 at 04:46:16 PM PDT

      [ Parent ]

      •  Please explain... (1+ / 0-)
        Recommended by:
        Samulayo

        ..this. If a guy only has the skills to produce $8 worth of goods and services, (why why, why why?) do you think anyone will ever pay him $10?

        Will you be the person to pay $10 for this guy? If you are willing to do it, feel free. But every hour he is on your job, you will be $2 poorer.

        •  The moment you use a phrase like, (0+ / 0-)

          "$8 worth of goods", you reveal the box in which your thinking is constrained. In the first place, there is no magic to the price that the "market" has attached to something. The prices of everything can be manipulated in any number of ways -- and indeed, they are. In the second place, the price that the "market" has attached to something is always a dynamic value. Any analysis that begins with the economists' mantra, "All else being equal," is, simply, meaningless, because all else is never equal. If I raise the minimum wage at $10, it will change everything else in the market -- every single price of everything else will change.

          But apart from that rather sophisticated point, the main point is that minimum wages exist because the fundamental problem is not that there are people who are so pathetically useless that they cannot do enough work to support themselves and a family; rather the fundamental problem is that without a minimum wage, general wages will inevitably and inexorably fall to subsistence levels, and remain there, condemning the mass of the population to poverty. Adam Smith, Lord God on High of the hopelessly, murderously selfish, understood this perfectly well, and insisted that it was up to governments to do something about it. If your market-based scheme were implemented -- eliminate the minimum wage and send folks a supplementary check, wages for most labor would fall through the floor, as employers cheerfully relied on the government to write the checks to support their employees. Your plan is fundamentally unstable, and cannot ever be practicable.

          Markets Do. Not. Work.
          End of story.

          To put the torture behind us is, inevitably, to put it in front of us.

          by UntimelyRippd on Fri May 03, 2013 at 08:44:28 PM PDT

          [ Parent ]

          •  Please think it through. (0+ / 0-)

            First, there is no reason why wages will "inevitably and inexorably fall to subsistence levels".  Asserting (with no evidence) that something is "inevitable" is as silly as those economists who claim that tax cuts "inevitably" reused jobs.  Workers have bargaining power, and they can unionize. They have done it before. The fact that most of us make more than the minimum wage is proof of this.

            Second, I don't understand what you mean by a "dynamic" value. If we make the minimum wage $10 will it make my $8 guys more skilled? Will it increase the value of their labor product by at least $2? Are you sure it will? 'Cause if not, they will be unemployed.

            Besides, suppose wages did fall. Employers would make more profits and they would pay more in taxes. These taxes fund the transfer payments.

            The transfer payments also give workers bargaining power.

            EITC funding is also more fair. Since it is funded by taxes, the rich pay more. Remember, not every employer is rich.

            Lastly, don't confuse me with some free-market disciple. You are reading things that I didn't write.  

            •  "Please think it through" (0+ / 0-)

              You tell me to think it through, and then you tell me that you don't understand what I mean by a "dynamic" value. Maybe I'm not the one who needs to do more thinking. Suffice it to say this much: You aren't going to tell me anything I haven't heard before.

              Similarly, you say that I'm confusing you for "some free-market disciple", to which I can only respond, "You are reading things that I didn't write."

              As to your hypothetical that the secret solution is that wages would fall and then profits would go up and then tax revenues would rise and then we'd give the money to the underpaid workers, i really don't think you're getting it, soldier: wages would fall effectively to zero. If the government guarantees a minimum income to anybody who works "for a living", to be paid out of tax revenue, there is no floor below which wages cannot sink. It is an absurd scheme, it is largely unnecessary, and it is motivated entirely and only by your conviction that there is some magic value to be associated with the "worth" of someone's labor. There are far superior approaches to managing full employment as well as providing essential physical security to the people (superior meaning: stable, practical, and tending to ensure that the maximum fraction of the population receive the lion's share of economic output). For starters, nationalize health care and energy resources. There is never a shortage of useful work to be done in the country -- if neither soulless amoral behemoths like walmart, nor benevolently-minded small-time pillars of the community think Joe McBlow is worth minimum wage, then have the government hire him to perform any of the myriad of chores that need doing.

              Incidentally, one very nice side effect of a $15/hour minimum wage -- which seems an eminently reasonable figure to me, by the way, though I admit it's an off-the-cuff number -- is that it would pump 10s of billions of additional dollars into FICA every year. If everyone making 8 bucks an hour were suddenly making 15, billions of dollars in CEO compensation and undertaxed capital gains would become FICA-taxable wages.

              To put the torture behind us is, inevitably, to put it in front of us.

              by UntimelyRippd on Fri May 03, 2013 at 10:02:53 PM PDT

              [ Parent ]

              •  Think about it. (0+ / 0-)

                If wages are zero, why would anyone show up for work? Workers say "no". They say "no" a lot!

                I still don't understand your "dynamic" idea that raising the minimum wage will magically make the output of my $8 worker worth $10. Where are you getting the extra $2 from? How do you know it's $2 and not $1.99?

                These questions are important because if it is $1.99, you've just rooked my guy out of a job...

                •  They would show up for work because, per your (0+ / 0-)

                  scheme, the EITC is given to people who actually work. That's why it's called the Earned Income Tax Credit. Would the actual wage be 0? Or would it be a nickel an hour? Or would it be exactly enough for the lowest of the low to be able to acquire just enough to physically survive from day to day? Does it matter?

                  The answer is, no, it doesn't matter -- the point is that without a minimum wage, wages fall to subsistence. And in fact, in our real American economy, wages have fallen to subsistence -- they've fallen so low that many people can't afford to work, because they can't even earn enough money to offset the costs of being someone who goes to work. We are already there, in our current economy. Whenever some ass observes that raising the minimum wage isn't necessary, because almost nobody earns that little, said ass deserves to be kicked around the block, put in the stocks for a day, and then tossed out to live in the streets of an unfamiliar city -- preferably in another country -- for 2 days without money, identification, or a cell phone: If everybody is already making above the minimum wage, that means people are working for subsistence wages, and therefore the minimum wage needs to be higher.

                  Employers don't pay their employees what their employees are worth, they pay their employees what their employees will take. Period. Your question about 10 dollars versus 8 dollars is fricking moot, though of course the answer is, "No, I can't guarantee a goddamned thing, but that validates neither your objection, nor your alternative proposal."

                  To put the torture behind us is, inevitably, to put it in front of us.

                  by UntimelyRippd on Sat May 04, 2013 at 09:18:20 AM PDT

                  [ Parent ]

                  •  You can't... (0+ / 0-)

                    ...guarantee a "goddamned thing", but I can. And it is a problem that you have been dodging:

                    I can guarantee that if a man spends an hour producing things that sell for $8, nobody will pay him $10 for that hour.

                    Nobody.

                    Your problem is that you are sad that this guy only gets $8. You think he should have $10.

                    Fine. Let's give him $10. But the money should come from all of society (including you), through taxes. It should not just come from the employer...the employer may not even be profitable!

                    Lastly, the EITC has a sliding scale. If you make $8 (for example) we would add $2. But if you make $7, we might only add $2.50...this gives people an incentive to demand better wages.

                    Look, I'm speaking from real-world, actual experience. Those house renovation numbers I gave are pretty accurate. I do it for a living. Unskilled, inexperienced workers have a tough time producing 1/3rd as much as skilled tradesmen.

                    I know that personal experience isn't everything, but you've offered no data to contradict me. The fact that there are hundreds of thousands of guys that even McDonald's won't hire at minimum wage tends to suggest I'm right.

                    Some people just aren't worth $10. We can't let them starve, but the burden of feeding them should not fall on the one guy who is giving them a chance to get some experience and training.

            •  Decades of studies say youre wrong. (0+ / 0-)

              Seriously.... what your peddling was debunked better than 40 years ago.

              Whats worse is you expect to be taken seriously.

              .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

              by Roger Fox on Sun May 05, 2013 at 05:45:10 PM PDT

              [ Parent ]

      •  To each according to (1+ / 0-)
        Recommended by:
        VClib

        his need, from each according to his ability.

        We tried this stuff, and the market won.

        Astonishing how fast people forget 1989.

  •  No. But I'll sign a petition to raise it to $21. (1+ / 0-)
    Recommended by:
    Spron

    Because $10.10 is where it should be if this were, what, 1985.

    There also needs to be a limit on CEO pay say to, a mere 50 TIMES the lowest full time wage paid in the company.

    •  TJ - there should be no maximum CEO pay (1+ / 0-)
      Recommended by:
      ManhattanMan

      The right way to handle excess CEO pay is to raise marginal tax rates on high incomes. If Congress ever had a 50X cap on CEO pay you would see everyone in a public corporation earning less than $100K be made a temp and thousands of public companies go private. The current pay limits under Section 162m apply only to public companies. Private companies have no obligation to disclose any executive compensation amounts.

      "let's talk about that"

      by VClib on Fri May 03, 2013 at 08:02:24 PM PDT

      [ Parent ]

      •  I agree. (1+ / 0-)
        Recommended by:
        The Jester

        And I don't understand why Progressives can't just keep it simple:

        - Raise income tax rates.
        - Raise capital gains tax rate.
        - Spend the money on health, education, and welfare.
        - Don't stop doing this until the recession is over.

        But ever since the election I keep hearing these whacky schemes: Transaction taxes, minimum wage hikes, salary caps, value-added taxes, whatever.

        These things are not all bad, but they are distractions. We need to keep a tight political message based on the existing taxation framework.

        •  I apologize, I let my bent for shareholder.... (0+ / 0-)

          ... rights leak into the other discussion.

          Corporate reform is a whole other subject, and almost as important overall as minimum wage, and tax reform.

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