The current economic recovery coughs and sputters, largely because of insufficient consumer spending. Consumer spending lags because incomes in the mid- and lower range have stagnated or declined. Those incomes have stagnated or declined for two reasons:
1. The share of the national income taken by the richest 1 percent has increased from 8 percent of the whole in the 1970s to 24 percent in 2007. What's left for everybody else has shrunk correspondingly.
When CEO salaries soar (now about 350 times that of an average employee), less money is in the pool for everybody else. Say $20 million was shaved from the $62 million annual salary of CBS chief executive, Leslie Moonves. Then 2,000 lower-paid CBS workers could each enjoy a $10,000 raise.
But what could force such a change?
2. Labor unions and the minimum wage law long were the principal forces shoring up wages. Many factors, including illegal union-busting, offshoring of production, and so-called right-to-work laws, have gutted private sector unions. If Republican politicians have their way, public sector unions will wither too. Then what could prop up wages?
All that would be left is the minimum wage. Alas, its purchasing power peaked back in 1968. Today's minimum wage, adjusted for inflation, has lost fully one-third of its 1968 value.
To help the poor and invigorate the economy, we should gradually raise the minimum wage to a level where no full-time worker needs public assistance.