Minimum Wage - Income Inequality

Arguments by the Left for increasing the minimum wage are primarily "based on fairness and redistribution." (See HERE).

Among these arguments, concerns regarding "income inequality" loom large. (See HERE and HERE and HERE and HERE and HERE and HERE and HERE)

And, one of the key planks of Obamanamics was to shrink the financial disparity between the rich and poor. (see HERE and HERE)

In certain respects this is an admirable goal.

Investors.com reported that: "When President Obama first ran in 2008, he claimed his economic policies would 'foster economic growth from the bottom up and not just from the top down.' He said he'd put in place 'an immediate rescue plan for the middle class' and would end the 'tired, worn-out, trickle-down ideologies we've been seeing for so many years.'"(See HERE)

More recently, in a speech delivered in December of 2013, President Obama indicated: "Some of you may have seen just last week the pope himself spoke about this at eloquent length: 'How can it be,’ he wrote, ‘that it’s not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points.’ But this increasing inequality is most pronounced in our country. And it challenges the very essence of who we are as a people...The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American dream, our way of life and what we stand for around the globe." (Cited HERE and HERE)

This speech put the country on notice that the President intended to renew his commitment to decrease income inequality, and this through, among several things, advocating for raising the minimum wage. (See HERE)

Whether this renewed commitment will eventually end up any different from Obama's broken promises about minimum wage increases in the past (see HERE and HERE), is yet to be seen.

Regardless, it brings up the important question whether minimum wage laws actually work in decreasing income inequality as intended?

This question can easily be answered by tracking minimum wage increases and comparing them to annual changes in income levels between rich and poor.

Minimum wage laws have been around in the U.S. since 1912, and federally they have gone from less than $1 an hour (prior to 1960) to the current level of $7.25 and hour. (See HERE)

Here is a graph of minimum wage increases posted at Wikipedia. (ibid)

Notice that in nominal dollars the minimum wage has steadily climbed over the years.

As for earnings differences between the rich and poor, here is a graph I created using the Census statistics cited below:

Notice that for each of the income categories (very poor, poor, lower middle, middle, upper middle, rich, and very rich) they all increased from 1967 to 2009, although they increased at different rates. This means that the poor got richer and the rich got richer, but their respective incomes became increasingly disparate over time. Whereas, in 2009, when Obama took office, the rich and very rich continued to get richer, but the middle class and poor either stagnated or got poorer, thereby expanding the disparity even greater than before. (See HERE and HERE and HERE and HERE and HERE and HERE and HERE) (See more recent data HERE and HERE and HERE and HERE and HERE and HERE and HERE)

In short, the Leftist LUNC here is that even though the minimum wage rose periodically over the years, income inequality didn't decrease as intended, but instead went steadily up, and expanded most radically after Obama took office in 2009 and the last increase in minimum wage was enacted. At best, then, increasing the minimum wage does nothing to curb income inequality, and at worse it may accelerate the gap between rich and poor. Raising the minimum wage does exactly the opposite from what was been intended.

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For an explanation as to why these Leftist LUNCs may occur, please see: Gov: Wrong Tool for the Right Job - Introduction and Cold Nanny as well as The Politics of Compassion, Emotions, Ignorance, Denial, Blame-Shifting, and Victimization