One of the many positive goals to come out of President Obama’s State of the Union Address last week was a proposed increase to the minimum wage. Obama is currently seeking to raise the hourly minimum to $10.10.
Obama’s goal comes with the promise to raise the minimum wages for federal workers by means of an executive order. This action clearly demonstrates the President’s commitment to upping the minimum wage so that millions can put food on the table a bit more easily. While many are opposed to this sort of minimum wage increase, it is important to put this wage increase into perspective.
Since the minimum wage was enacted in 1938 at $0.25 an hour, it has only been raised 22 times. In addition, when inflation is taken into account, the “real” minimum wage was actually at its highest in 1968 when it was $10.77 an hour by today’s dollar. Thus, Obama’s goal of pushing a $10.10 an hour minimum wage through Congress does not even push the limits of what our federal minimum wage has been in its brief history.
While these simple facts on inflation are convincing in their own right, Obama’s goal to raise the minimum wage is actually part of a plan to attack a much bigger problem in the States. The term “income inequality” is used to show the unequal distribution of wealth throughout a society. Obviously, there is going to be a large difference between the nation’s top earners and those who earn the least. However, income inequality has been increasing for decades in the U.S. and has now officially hit its highest level since 1928.
This figure alone sounds terrifying — after all, 1928 was the start of the Great Depression — but even scarier are the implications that this inequality brings out.
Anyone who has watched even a few minutes of an economics talk show has probably heard of the “importance of a strong middle class.” This basic concept is key to most functional economies because a strong middle class brings stability. The more people in the middle class supporting the economy by spending their reasonable wages, the better. However, studies into America’s income inequality have shown that our middle class is shrinking, particularly in the area of median household income. Combining that information with the studies on income inequality we see a very disturbing trend in the American economy.
As the few rich are experiencing even more growth of income, people in the lower-middle class are falling into poverty. This creates an unstable economic and political model for the U.S. With more Americans losing their ability to buy more than essential goods, and with wealthy Americans stockpiling their income and using their assets to shield themselves from taxes, we will see less and less consumer spending and fewer tax dollars for the government. Politically, as we move toward a larger and larger lower class, instability in our democracy becomes much more likely. We need a strong middle class to ensure the safety of our nation from an economic or political collapse.
While raising the minimum wage a few dollars an hour is a great place to start energizing the economy and strengthening the middle class, it certainly is not enough. Eventually, I would like to see the minimum wage above $11 an hour to truly progress as a livable wage rather than just playing catch up to inflation. By doing this and increasing our tax revenue from income, it is also my hope that social programs can be expanded. These measures will help those struggling with poverty and improve the state of the middle class in America.