Economic inequality has grown substantially over the past 50 years, with current income inequality between the top 1 percent and the bottom 99 percent reaching levels not seen since the late 1920s. In our current economy, the average CEO makes 273 times more than the average worker with the top 10 percent of Americans taking home more than half of the nation’s total income. And while the gap between the rich and poor is steadily increasing, levels of upward mobility have started to decrease as well. For instance, a child raised in a family with an income level in the top 20 percent of all Americans has a 2-in-3 chance of staying at or near the top compared to a child born into the bottom 20 percent who has a 1-in-20 chance of reaching the top.
This widespread inequality coupled with diminished levels of upward mobility poses a serious problem for a number of reasons. The first is that recessions tend to be more frequent and growth during these economic downturns is often greatly limited in countries with higher rates of economic inequality. This is because consumer spending is a fundamental driver of the economy, and when the wealth of a nation is concentrated among a few at the top, middle and lower class families across the country have less to spend. This means businesses will have fewer customers and so on, which, in turn, limits economic growth.
In order to address this growing problem, President Barack Obama and congressional Democrats have proposed raising the minimum wage to $10.10. Currently, a family with two kids that earns the current minimum wage of $7.25 still lives below the poverty line. Raising the minimum wage would have an immediate impact in increasing these families’ incomes, which could potentially decrease levels of poverty while reducing the amount of government assistance these families would need. Obama has also proposed tying the minimum wage to cost of living expenses in order to allow workers to earn a living wage without having to wait for Congress to raise the limit year after year.
This proposal, however, has been met with opposition from conservatives who say raising the minimum wage increases unemployment. But this assertion is still largely inconclusive, as economists remain sharply divided on this issue. Additionally, Republicans reason that the minimum wage jobs are only temporary employment for teenagers. But this ignores the millions of workers past their teen years who are forced to keep working these jobs because they cannot find better employment opportunities. It is also important to note that when adjusted for inflation, the current minimum wage has decreased significantly since the 1960s and 1970s. Thus, the current proposal by the president is not unprecedented, but rather would restore the wage near previous levels.
When considering the level of wealth in this country, raising the minimum wage a few dollars is almost minuscule in comparison. But the benefit of raising this wage, in the words of Obama, “could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead,” which, for these families, could make the biggest difference.
