Bring fairness back with maximum wage

(The national leader of one of America's feistiest unions is aiming to expand the economic fairness debate. He's proposing a cap on incomes at the top that rises only if incomes at the bottom rise first.)

By Sam Pizzigati

Editor 

Too Much Weekly

With Labor Day fast approaching, what better time to reflect about those Americans who earn the least for their labor? These Americans — workers paid the federal minimum wage — are now taking home just $7.25 an hour.

On paper, minimum wage workers are making exactly what they made in July 2009, the last time the minimum wage bumped up. In reality, minimum wage workers are making less today than they made last year — and the year before that — since inflation has eaten away at their incomes.

And if we go back a few decades, today’s raw deal on the minimum wage gets even rawer. Back in 1968, minimum wage workers took home $1.60 an hour. To make that much today, adjusting for inflation, a minimum wage worker would have to be earning $10.55 an hour.

In effect, minimum wage workers today are taking home almost $7,000 less over the course of a year than minimum-wage workers took home in 1968.

Figures like these don’t particularly discomfort our nation’s most powerful. We live in tough times, their argument goes. The small businesses that drive our economy, we’re informed, can’t possibly afford to pay their help any more than they already do.

But the vast majority of our nation’s minimum wage workers don’t labor for Main Street mom-and-pops. They labor for businesses that no average American would ever call small. Two-thirds of America’s low-wage workers, the National Employment Law Project documented last month, work for companies with over 100 employees on their payrolls.

The 50 largest of these low-wage employers are doing just fine, even with the Great Recession. Over the last five years, these 50 corporations — outfits that range from Wal-Mart to Office Depot — have together returned $175 billion to shareholders in dividends or share buybacks.

And the CEOs at these companies last year averaged $9.4 million in personal compensation. A minimum wage worker would have to labor 623 years bring in that kind of pay. 

So what can we do to bring some semblance of fairness back into our workplaces? For starters, we obviously need to raise the minimum wage. But some close observers of America’s economic landscape believe we need to do more. A great deal more.

Count Larry Hanley among these more ambitious change agents. Hanley, the president of the Amalgamated Transit Union, sits on the AFL-CIO executive council, the American labor movement’s top decision-making body. Earlier this month, Hanley called for a “maximum wage,” a cap on the compensation that goes to the corporate execs who profit so hugely off low-wage labor.

This maximum, if Hanley had his way, would be defined as a multiple of the pay that goes to a company’s lowest-paid worker. If we had a “maximum wage” set at 100 times that lowest wage, the CEO at a company that paid workers as little as $15,080 — the annual take-home for a minimum wage worker — could waltz off with annual pay no higher than just over $1.5 million.

During World War II, Amalgamated Transit Union president Hanley points out, President Franklin D. Roosevelt called for what amounted to a maximum wage. FDR urged Congress to place a 100 percent tax on income over $25,000 a year, a sum now equal, after inflation, to just over $350,000.

Congress didn’t go along. But FDR did end up winning a 94 percent top tax rate on income over $200,000, a move that would help usher in the greatest years of middle-class prosperity the United States has ever known.

Throughout World War II, FDR enjoyed broad support from within the labor movement — and the general public — for his pay cap notion. Now’s the time, Hanley believes, to put that notion back on the political table. We need, he says, “to start a national discussion about creating a maximum wage law.”

Hanley may just have started that discussion, just in time for Labor Day.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Institute for Policy Studies. Read the current issue or sign up here to receive Too Much in your email inbox.