FacebookTwitterGoogle+RedditEmail

Maxing Out

Tackling income inequality through the minimum wage alone is an inadequate way to counter the economy’s anti-egalitarian tendencies. The minimum wage exists because the federal government recognizes the economy undervalues the average worker’s contribution and fails to provide a fair livable wage. Conversely, the economy’s overvaluing a few people’s contribution is also in need of governmental oversight. Since the government believes the economy is not a reliable gauge for determining how little is too little, it cannot assume the “market” is capable of determining how much is too much. Given this it is incumbent on the federal government to implement an income ceiling to eliminate the extreme income disparity between top and average wage earners.

Before dismissing the maximum wage idea outright, consider President Franklin Delano Roosevelt’s call for 1942 maximum wage of $25,000 a year (in 2012 dollars $364,000) as a means to fuel economic growth and reduce income inequality. In a recent Le Monde Diplomatique article Sam Pizzigati of the Institute for Policy Studies revealed that two short years after President Roosevelt’s proposal, Congress increased the top tax rate to 94% for individual incomes over $200,000 (in 2012 dollars $2.6 million) The 94¢ tax on every dollar over $200,000 limit help initiate the longest period of economic growth for the middle class in U.S. history. This tax rate remained in place until President Lyndon Johnson dropped it to under 70% in the late 1960s. About two decades later President Reagan reduced the rate to 50% and then to 28% in 1988 before it settled at today’s 35% rate. But this tax rate overstates the rich’s tax burden given that most of their income comes from 15% capital gains tax on profits acquired from buying and selling stocks, bonds and assets. This tax rate is about the same as that for working Americans earning between $50,000 and $75,000 before itemized deductions and exemptions.

Opponents of the maximum wage assert that cutting the top tax rates rather than increasing them will spark revenue and job growth. Their “trickle down” rationale assumes that making the rich richer will create good paying jobs, making working people more prosperous. But the trickle down approach and other piecemeal provisions like the minimum wage, earned income tax credit, and other minimalist economic programs and policies have proven ineffective in reversing the growth in income inequality over the last four decades. The ineffectiveness of such programs and policies is apparent in Emmanuel Saez’s recently released study showing that during the current recession one-percenters captured 93 percent of the income growth in both 2009 and 2010. In real dollar terms this means that the bottom 90% income on average declined $127 while the top 1% income increased $106,000.

One of the most proficient ways to restart job growth and alleviate poverty and inequality is to impose a maximum allowable wage tied to minimum wage and enforced through a progressive income tax. The maximum is set at a specific multiple (maybe twenty five times) of the minimum wage, so that all income over the multiple limit is subject to a 95% to 100% tax. Limiting and linking average and top wages earners in this way will help Americans clearly see that poverty and suffering is necessary for an individual to accumulate wealth.

The fact is that income and wealth inequality impedes economic recovery, and efficiency and stability because it weakens demand for goods and services. By implementing a maximum wage the government could generate billions in revenue that can be invested in health, education, technology and infrastructure maintenance in ways that ensure the economy is sustainable, productive and efficient.

Europeans, especially those dealing with economic austerity measures, are already debating how to enact a maximum wage policy to ameliorate economic calamity. The idea of the maximum wage is also starting to resonate in the United States with a public that is increasingly aware of the destructive and anti-democratic consequences of lopsided disparities in income and wealth. This emerging awareness encourage people to question and challenge the legitimacy of economic values and a political system that, as Martin Luther King, Jr. put it: “permit necessities to be taken from the many to give luxuries to the few.”

Johnny E. Williams is an Associate Professor in the Department of Sociology at Trinity College.                

 

More articles by:

Weekend Edition
December 14, 2018
Friday - Sunday
Andrew Levine
A Tale of Two Cities
Peter Linebaugh
The Significance of The Common Wind
Bruce E. Levine
The Ketamine Chorus: NYT Trumpets New Anti-Suicide Drug
Jeffrey St. Clair
Roaming Charges: Fathers and Sons, Bushes and Bin Ladens
Kathy Deacon
Coffee, Social Stratification and the Retail Sector in a Small Maritime Village
Nick Pemberton
Praise For America’s Second Leading Intellectual
Robert Hunziker
The Yellow Vest Insurgency – What’s Next?
Patrick Cockburn
The Yemeni Dead: Six Times Higher Than Previously Reported
Nick Alexandrov
George H. W. Bush: Another Eulogy
Brian Cloughley
Principles and Morality Versus Cash and Profit? No Contest
Michael F. Duggan
Climate Change and the Limits of Reason
Victor Grossman
Sighs of Relief in Germany
Ron Jacobs
A Propagandist of Privatization
Robert Fantina
What Does Beto Have Against the Palestinians?
Richard Falk – Daniel Falcone
Sartre, Said, Chomsky and the Meaning of the Public Intellectual
Andrew Glikson
Crimes Against the Earth
Robert Fisk
The Parasitic Relationship Between Power and the American Media
Stephen Cooper
When Will Journalism Grapple With the Ethics of Interviewing Mentally Ill Arrestees?
Jill Richardson
A War on Science, Morals and Law
Ron Jacobs
A Propagandist of Privatization
Evaggelos Vallianatos
It’s Not Easy Being Greek
Nomi Prins 
The Inequality Gap on a Planet Growing More Extreme
John W. Whitehead
Know Your Rights or You Will Lose Them
David Swanson
The Abolition of War Requires New Thoughts, Words, and Actions
J.P. Linstroth
Primates Are Us
Bill Willers
The War Against Cash
Jonah Raskin
Doris Lessing: What’s There to Celebrate?
Ralph Nader
Are the New Congressional Progressives Real? Use These Yardsticks to Find Out
Binoy Kampmark
William Blum: Anti-Imperial Advocate
Medea Benjamin – Alice Slater
Green New Deal Advocates Should Address Militarism
John Feffer
Review: Season 2 of Trump Presidency
Rich Whitney
General Motors’ Factories Should Not Be Closed. They Should Be Turned Over to the Workers
Christopher Brauchli
Deported for Christmas
Kerri Kennedy
This Holiday Season, I’m Standing With Migrants
Mel Gurtov
Weaponizing Humanitarian Aid
Thomas Knapp
Lame Duck Shutdown Theater Time: Pride Goeth Before a Wall?
George Wuerthner
The Thrill Bike Threat to the Elkhorn Mountains
Nyla Ali Khan
A Woman’s Selfhood and Her Ability to Act in the Public Domain: Resilience of Nadia Murad
Kollibri terre Sonnenblume
On the Killing of an Ash Tree
Graham Peebles
Britain’s Homeless Crisis
Louis Proyect
America: a Breeding Ground for Maladjustment
Steve Carlson
A Hell of a Time
Dan Corjescu
America and The Last Ship
Jeffrey St. Clair
Booked Up: the 25 Best Books of 2018
David Yearsley
Bikini by Rita, Voice by Anita
FacebookTwitterGoogle+RedditEmail