Minimum Wage and Income Inequality

Minimum Wage and Income Inequality (Or: How Much Suffering Must We Need To Endure To Receive True Equality For All Classes)?


Written By: Anton Sawyer

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A third of the country is starving, with many dying in the streets. Millions unemployed. A recent pandemic took the lives of millions of Americans. No, I'm not talking about the 21st Century, I'm talking about the amount of suffering the working class had to endure before serious change took place and lead us to a time of record prosperity in the 1900s.


This piece is going to look at where we were, what was done then, and how all of our economic classes today desperately need the same solution as before. We are at record numbers of wage disparity, we have more people working full time while being on public assistance than any other country in the world. Is there a limit? What is it? Have we become so accustomed to every man for himself that there's no bottom to this barrel?

Is the solution brought about in the 1940s going to be what it takes to spark the same kind of revolutionary ideas we got when we were here once before? The answer may be "yes," but looking at the new congress, along with the canyon-like fissures between the Republicans and Democrats, I don't have much hope. But before we get into the present, let's go back and see how the original catastrophe—the 1918 Spanish Flu and the 1929 stock market crash—was correctly dealt with.


Millions were starving. The US had a third of its workforce unemployed. There was literally no hope. Former President Franklin Roosevelt was sickened by it. Many had more money than they knew what to do with, while millions were dying in the streets. He enacted "The New Deal." I'm not going into all of the specifics, but there was one hugely impactful element; a federal minimum wage that was designed to not only be a living wage but would also increase regularly for inflation. It worked as intended and lifted millions of Americans out of poverty. Unfortunately, over time, people began to forget this crucial piece of the puzzle towards minimum wage working so effectively. The leaders knew of this memory loss and conveniently forgot to tell anyone. This was the beginning of the income separation.


Early in 2020, Pew Research released two studies that exemplify the wage inequality in America today. In their reports, they showed that the growth in income in recent decades has tilted to upper-income households. At the same time, the US middle class, which once comprised the clear majority of Americans, is shrinking. Thus, a greater share of the nation’s aggregate income is now going to upper-income households, and the share going to middle- and lower-income households is falling.


The share of American adults who live in middle-income households has decreased from 61% in 1971 to 51% in 2019. What is interesting about this number is when you look at minimum wage growth before the 1970s, and then look at the stagnation in the upward mobility of the lower and middle classes—a.k.a. The American Dream—since then, you notice a pattern. You realize that when the minimum wage had been increased to go along with inflation (which was done in 1950, 1956, 1961, 1963, 1964, 1965, 1967, etc.), all social classes benefitted. During this time only one parent had to work one job and was able to afford a house, car, and all other living needs. But then, in the 1980s, it dropped off. Between 1980 and 2021, the minimum wage has only been raised nine times—with the largest gap being between 1997-2007. Keep in mind that when the wage began, it was being increased almost every two or three years. A 2019 report by the Economic Policy Institute had this to say about the lack of increase to federal minimum wage. "Since the late 1960s, lawmakers have let the value of the minimum wage erode, allowing inflation to gradually reduce the buying power of a minimum wage income. When the minimum wage has been raised, the increases have been too small to counter the decline in value that has occurred since 1968, when the minimum wage hit its peak in inflation-adjusted terms. In 2018, 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 dollars." Some studies have shown that had the minimum wage kept pace with inflation, it would be around $21 per hour. Pew Research also revealed that the wealth gap between America’s richest and poorer families more than doubled from 1989 to 2016. Income inequality is at some of its highest levels in American history right now.


A good instance of those who have power and are not fans of the peasants rising through the ranks happened pretty recently. It's still going on now of this writing. This equity unfairness has lead the average citizen to come up with unique ways to bring more into their bankrolls; the stock market and penny stocks.


Over the last few weeks, we have seen middle and lower classes try to get a cut of the pie from the big boy casino that is Wall Street. Though I covered this more in-depth previously, (which you can read here), the basics are as follows. A bunch of people found that GameStop stocks were worth almost nothing. It circulated through the inter-webs that hedge fund companies were purchasing the stock to get it to tank (when you bet against it, you can only make money if it fails). Reddit found out and started posting to get people to buy these stocks to stop the big corporation. It worked. There have been millions of people buying the stock. There have been reports of some people making thousands of dollars a day. Because of this mass purchase, it destroyed the hedge fund managers.


What happens when the rich kids aren't happy? They call their friends in congress.


From Republicans and CEOs of giant corporations to those who have always played the market in the "right way," a lot of the establishment was incredibly upset. In fact, with how distressed they've been, both the Dow Jones and NASDAQ are lobbying for tighter restrictions. I do not know of a time when anyone involved with the stock market wanted MORE restrictions; it just doesn't happen.


The other illustration is with a debate that is currently raging in congress; raising the minimum wage to $15. Early indicators point that this is going to be a challenge. For the third time in six years, the majority party in the Senate detonated the so-called nuclear option in April 2019 to unilaterally change the years-old rules of the chamber with a simple-majority vote.


This time, Republicans cut the time between ending debate and a final confirmation vote on executive-branch nominees and district court judges from 30 hours to two. The majority leader, Senator Mitch McConnell of Kentucky, justified his actions, saying Democrats would have done the same thing, and he said Democrats started the process in 2003 when they began routinely filibustering a Republican president’s nominees. When asked to comment on those in congress who were saying that this nuclear option defied Senate traditions, and was truly a sad day, Mr. McConnell responded, “This is not a sad day; this is a glad day.”


During the 2021 transition to the new congress, McConnell was incredibly irritated over the fact that the Democrats wanted to go nuclear as well since they would have the simple majority with Vice President Kamala Harris' vote. Both McConnell and others in the party started complaining—they were being crybabies, let's just admit it. It wasn't until their petulance was caved in to by the DNC (by allowing them more of a say and power over Senate matters) that they felt they were being treated fairly. McConnell had the nerve to say “None of us on either side want to live in a scorched-earth Senate.” Thus vaporizing the potential of a $15 Federal Minimum Wage hike.


Earlier I asked what the limit is to all of this is? How much do the middle and lower classes have to suffer before they can be lifted up and given the promise of the American Dream?


In 2020, Business Insider reported about how much the average citizen making minimum wage (with overtime incentives) must work to afford the average rent prices in the US. It showed that the average full-time minimum worker needs to work at least 97 hours to afford a two-bedroom rental or 79 hours per week to afford a one-bedroom rental, according to the report. This doesn't include having children. Earlier I said that during our heyday, only one parent had to work. The minimum wage was such at that time to where it was an actual living wage and at least one parent would be at home to raise the children. Now, not only do both parents work but in many cases, one of the adults is working two jobs.


I hear older folks saying that we need to return to the "good old days." I agree. It would be nice knowing that I don't have to choose between medication and rent. That upward mobility is actually the dream we OWN. Too bad it's the American Nightmare.


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