Internet Explorer 11 is not supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.

How Raising the Minimum Wage Would Boost the Middle Class

Higher pay at the bottom of the scale ripples upward, improving purchasing power for everybody.

In this political season, both the minimum wage and income inequality have become hot-button political issues. Because the minimum-wage debate has tended to revolve around opponents arguing the employment consequences and the proponents arguing its anti-poverty value, what has been lost is that the minimum wage is fundamentally about the middle class. Everybody claims to be speaking in the name of the middle class, but nobody has a serious proposal for helping to sustain and grow it.

The political left focuses on new programs financed through higher taxes on the rich, while the political right recycles the laissez-faire policies of lower taxes and reduced regulation. If government would simply unleash the marketplace, the argument goes, everyone would prosper. Meanwhile, the gap between the top and the bottom only continues to grow.

Income inequality is important because of what it symbolizes, which is a two-tiered or dual economy with highly educated and skilled workers at the top of the wage distribution and poorly educated workers with little if any skills at the bottom. The issue is not income inequality per se, because it is fantasy to believe that we can all be equal. We aren't all born with the same natural endowments and we don't all make the same choices. In a market economy where freedom of choice reigns, there will always be inequality. Rather, the issue is the increase in income inequality, because it is with this widening gap that we are able to see that the middle class is being squeezed out.

Rebuilding the middle class requires boosting the purchasing power of workers so that they can drive the economy by increasing their aggregate demand for goods and services. Here is where the minimum wage, income inequality and the middle class can spoken about in the same breath.

Policymakers who would like to truly do something for the middle class without doing anything radical would be wise to look no closer than the minimum wage. The issue has been receiving considerable attention because President Obama has called for increasing the federal minimum wage to $10.10 an hour. Several states already have raised their minimum wages since the beginning of this year, and on a couple of occasions fast-food workers have gone out on day-long strikes for a $15-an-hour minimum wage. When one considers that the median hourly wage in 2012 was $14.90 an hour, a $15-an-hour minimum does not seem so far-fetched.

The minimum wage should not be increased simply because it is a matter of economic justice. On the contrary, the minimum wage needs to be raised because its macroeconomic benefits would shore up the middle class. Its benefits are broader than opponents would like you to believe.

Consider for a moment a wage distribution divided into intervals. If the first were to begin with the actual minimum wage and range to 25 percent above that figure, the second then ranges an additional 25 percent, and so on. Data from 1962-2008 that I gathered shows that when 10 such intervals were created, accounting for up to 70 percent of the labor force, the median wage in each interval increased in years that the minimum wage increased, and in years when it did not increase the median wage in each interval remained the same. The ripple effects from raising the minimum wage were effectively benefitting the middle class.

Increasing the minimum wage, then, will create a new floor, and wage increases will ripple through the wage distribution. Moreover, a policy that can shore up the middle class will also reduce income inequality and serve as a foundation for job creation. The real reason income inequality has been increasing and the middle class has been shrinking is because of stagnating wages. Increasing the minimum wage would go far toward reversing that trend.

Oren M. Levin-Waldman is a professor of public policy and public administration at the Metropolitan College of New York.
Special Projects
Sponsored Stories
In recent years, local governments have been forced to adapt to a wildly changing world, especially as it pertains to sending bills and collecting payments.
Workplace safety is in the spotlight as government leaders adapt to a prolonged pandemic.
While government employees, students and the general public had to wait in line for hours in the beginning of the pandemic, at-home test kits make it easy to diagnose for the novel coronavirus in less than 30 minutes.
Governments around the nation are working to design the best vaccine policies that keep both their employees and their residents safe. Although the latest data shows a variety of polarizing perspectives, there are clear emerging best practices that leading governments are following to put trust first: creating policies that are flexible and provide a range of options, and being in tune with the needs and sentiments of their employees so that they are able to be dynamic and accommodate the rapidly changing situation.
Service delivery and the individual experience within health and human services (HHS) is often very siloed and fragmented.
In this episode, Marianne Steger explains why health care for Pre-Medicare retirees and active employees just got easier.
Government organizations around the world are experiencing the consequences of plagiarism firsthand. A simple mistake can lead to loss of reputation, loss of trust and even lawsuits. It’s important to avoid plagiarism at all costs, and government organizations are held to a particularly high standard. Fortunately, technological solutions such as iThenticate allow government organizations to avoid instances of text plagiarism in an efficient manner.
Creating meaningful citizen experiences in a post-COVID world requires embracing digital initiatives like secure and ethical data sharing, artificial intelligence and more.
GHD identified four themes critical for municipalities to address to reach net-zero by 2050. Will you be ready?