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The rich got a lot richer since the financial crisis

By
Nin-Hai Tseng
Nin-Hai Tseng
By
Nin-Hai Tseng
Nin-Hai Tseng
September 11, 2013, 5:15 PM ET

FORTUNE — Lately everyone from policymakers to fast-food workers have urged Washington to raise the minimum wage. It’s a thorny topic that’s spawned countless arguments both for and against an increase, but a new study suggesting that mostly the richest Americans are recovering from the Great Recession should make opponents rethink a minimum wage hike.

Income inequality has been a problem for decades, but the gap between the haves and have-nots has worsened in the years following the recession. The rise in home and stock prices may be benefitting the richest Americans, but the poorest are being left behind: From 2009 to 2012, the top 1% incomes grew by 31.4% while the bottom 99% incomes grew a mere 0.4%, according to an updated study by University of California Berkeley economists Emmanuel Saez and Thomas Piketty.

That means the top 1% took more than one-fifth of the income earned by Americans — one of the highest levels since 1913 when the modern federal income tax started, the economists note. More than that, the top 1% incomes are close to full recovery while the bottom 99% incomes have barely started to recover.

MORE: Government banks $15 billion on Citigroup bailout

Raising the minimum wage won’t close the gap, but it could certainly ease it. Sadly proposals haven’t gone anywhere and face stiff opposition. Last month, fast-food workers staged a one-day strike in 60 U.S. cities to demand a minimum wage of $15 an hour, more than double the current minimum of $7.25 and more than the $9 an hour President Obama proposed in February during his State of the Union address.

These aren’t just workers looking for a raise (aren’t we all), but symptoms of bigger income disparity problems. It’s easy to argue against raising the minimum wage: that an increase would make hiring more expensive for companies; that it would actually raise the unemployment rate, since higher wages would encourage more people to apply for jobs; that it wouldn’t help the broader economy because only a few workers actually earned the minimum wage.

That may or may not be so, but the White House has said raising the minimum wage to $9 would boost wages for about 15 million low-income workers. This of course wouldn’t equal to gains the top 1% of earners have enjoyed recently from the stock market and home prices, but as the White House has said, a $1.75 increase in the minimum wage would be enough to offset roughly 10% to 20% of the increase in income inequality since 1980.

That won’t close the gap between rich and poor, but it would at least help the very poor play catch-up.

About the Author
By Nin-Hai Tseng
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