The rich got a lot richer since the financial crisis
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.
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.