For Minimum Decency, a Maximum Wage

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

In the United States today, a just-released Federal Reserve report informs us, over a fifth of the nation’s families simply cannot afford to “pay all of their current month’s bills in full.”

Over a quarter of families, the report goes on, skip “necessary medical care” because they can’t afford the cost. And an even greater share — 40 percent — wouldn’t be able to cover an unexpected expense of $400 without having to borrow cash or sell something they own.

In other words, many millions of American households have essentially almost nothing in the way of savings. And not much in the way of income either. Two out of every five Americans, the new Federal Reserve study details, have annual household incomes less than $40,000.

Meanwhile, at the other end of America’s economic spectrum, we have households raking in much more than $40,000 every day. Half the CEOs at America’s 200 biggest corporations now make over $336,538 per week, according to a review of 2017 corporate compensation that Equilar, a pay consulting firm, has just completed for the New York Times.

These top execs and their fellow wealthy can afford to handle any personal emergency life may throw their way. More importantly, they can also afford to buy a level of political influence that turns their needs — and their needs alone — into national priorities.

The end result? We find ourselves in a United States where nearly half the nation lives at the edge of economic disaster while government wallows in a “gridlock” that magically vanishes only when lawmakers have a chance to enrich the already rich.

So what do we do about all this? Maybe we need to start thinking more boldly about solutions to our ever-widening economic divide. One such solution: a maximum wage.

What might an appropriate limit on income be? In 1942, Franklin Roosevelt, the President of the United States, had one answer. After paying federal income tax, FDR proposed, no individual American should have an annual income greater than $25,000, about $375,000 in today’s dollars.

In effect, FDR was proposing a 100 percent tax rate on income over $25,000.

Congress didn’t buy Roosevelt’s 100 percent top rate, but Congress did set a top tax rate at 94 percent on income over $200,000, and that top rate would hover around 90 percent for the next 20 years, years that would see the United States become the first mass middle class nation in the history of the world.

But those steeply progressive tax rates in the United States did not last. They could not withstand the fierce political pushback from the rich. The wealthy simply had more of a direct stake in slashing high rates than average Americans had in keeping those high rates in place.

So those top rates fell, to 70 percent in the mid 1960s, to 50 percent in 1982, to 28 percent in 1988, before jumping up a bit. The current top rate: 37 percent, and that’s only for paycheck income. On income from investments, America’s richest pay taxes at just a base 20 percent rate.

Progressive taxes, as traditionally structured, proved unsustainable in the 20th century. We need a new structure. We need a tax system that gives average Americans a clearer personal stake in keeping tax rates on high incomes high — and the wealthy a reason to care about those without wealth.

A new tax structure that linked incomes at top and bottom could meet both these goals — by placing a 100 percent top tax rate on income above a set multiple of the annual income that comes from working at the minimum wage. If we had this linkage in place, our richest and most powerful could only see their incomes increase if the incomes of our weakest and poorest increased first.

Imagine a world with this sort of “maximum wage” in effect. Our most privileged would have a direct personal interest in improving the life chances of our least advantaged.

Those of us already graying will likely never see that world in our lifetimes. But we could move meaningfully in that direction if we began challenging the pay practices now common in our single biggest contemporary contributor to inequality, the modern American corporation.

And this takes us back to that new corporate pay ratio disclosure mandate. By the end of this year, every major U.S. corporation that trades on Wall Street will have made these disclosures. Many already have. At Walmart, we now know, typical employees would have to work 1,188 years to equal the pay that went last year to Walmart’s CEO. At McDonald’s, typical workers would have to work 3,101 years. At the toymaker Mattel, just under 5,000 years.

What if we placed consequences on the corporations with outrageous ratios like these? What if we subjected corporations with wide ratios to a higher corporate tax rate? Or denied them government contracts and subsidies?

Work toward these ends has already begun. In Oregon, the city of Portland has raised the business tax rate on companies that pay their CEOs over 100 and 250 times typical worker pay. San Francisco has a similar proposal up for a referendum this November. Six states have legislation pending that either ups business taxes on companies with wide ratios or penalizes these companies in the government procurement process. In the UK, the Labour Party is pushing for legislation that would deny government contracts to companies with a CEO-worker pay ratio wider than 20 to one.

If we made pay ratios central to our progressive political project, we wouldn’t have to limit ourselves to legislative actions like these. Published corporate pay ratios could inform and inspire grassroots citizen campaigns on a wide variety of fronts.

With pay ratios, almost every social situation would become a potential arena for egalitarian struggle. Students could join with university faculty and staff to demand that their institutions link top administrator salaries to a modest multiple of pay at the base. Donors to nonprofits could insist that the organizations they support limit their executive pay to a similar multiple. Workers could take pay ratio demands to the bargaining table.

Every such grassroots campaign waged would help stitch an awareness of pay ratios into the fabric of everyday life. Every victory won, no matter how small, would help people understand that the level of inequality that surrounds us has been and always will be a human construct. No force of nature leaves some of us enormously richer than others. We can choose to be more equal. Struggles around pay ratios can make these choices plain.

We can wage these struggles at every level, from local to national, calibrating each campaign to whatever political realities confront us. Lawmakers not ready to impose consequences on private companies with unconscionably wide gaps? Then the struggle starts in the public sector: No one paid with public funds should walk away with more than 10 or 25 or 50 times what any other person in the public sector makes. A 50-times ratio too politically difficult to achieve, in either a public- or private-sector struggle? Then the push becomes a call for a 100-times standard.

No magic, perfect ratio number exists, just as no magic, perfect minimum-wage level exists. Our income floors globally have evolved over time. Our income ceilings will evolve over time as well. And every ceiling we set, in whatever setting, will leave society’s remaining sky-high incomes less tolerable — and more vulnerable.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality. He is an associate fellow at the Institute for Policy Studies in Washington, D.C. Last year, he played an active role on the team that generated The Nation magazine special issue on extreme inequality. That issue recently won the 2009 Hillman Prize for magazine journalism. Pizzigati’s latest book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives (Apex Press, 2004), won an “outstanding title” of the year ranking from the American Library Association’s Choice book review journal.

Posted In: Allied Approaches

Union Matters

Federal Minimum Wage Reaches Disappointing Milestone

By Kathleen Mackey
USW Intern

A disgraceful milestone occurred last Sunday, June 16.

That date officially marked the longest period that the United States has gone without increasing federal the minimum wage.

That means Congress has denied raises for a decade to 1.8 million American workers, that is, those workers who earn $7.25 an hour or less. These 1.8 million Americans have watched in frustration as Congress not only denied them wages increases, but used their tax dollars to raise Congressional pay. They continued to watch in disappointment as the Trump administration failed to keep its promise that the 2017 tax cut law would increase every worker’s pay by $4,000 per year.

More than 12 years ago, in May 2007, Congress passed legislation to raise the minimum wage to $7.25 per hour. It took effect two years later. Congress has failed to act since then, so it has, in effect, now imposed a decade-long wage freeze on the nation’s lowest income workers.

To combat this unjust situation, minimum wage workers could rally and call their lawmakers to demand action, but they’re typically working more than one job just to get by, so few have the energy or patience.

The Economic Policy Institute points out in a recent report on the federal minimum wage that as the cost of living rose over the past 10 years, Congress’ inaction cut the take-home pay of working families.  

At the current dismal rate, full-time workers receiving minimum wage earn $15,080 a year. It was virtually impossible to scrape by on $15,080 a decade ago, let alone support a family. But with the cost of living having risen 18% over that time, the situation now is far worse for the working poor. The current federal minimum wage is not a living wage. And no full-time worker should live in poverty.

While ignoring the needs of low-income workers, members of Congress, who taxpayers pay at least $174,000 a year, are scheduled to receive an automatic $4,500 cost-of-living raise this year. Congress increased its own pay from $169,300 to $174,000 in 2009, in the middle of the Great Recession when low income people across the country were out of work and losing their homes. While Congress has frozen its own pay since then, that’s little consolation to minimum wage workers who take home less than a tenth of Congressional salaries.

More ...

A Friendly Reminder

A Friendly Reminder