Closing the gap

An exhaustive study released this week confirmed what anyone who draws a paycheck has long known — the wage gap between the low and middle classes and the high-income earners is wide and growing wider.

Aptly titled “Pulling Apart,” the report by the Center on Budget Priorities and the Economic Policy Institute finds that in the last 20 years the average income nationwide of the lowest fifth fell by more than 6 percent, the middle fifth increased by just 5 percent, the top fifth by a robust 30 percent. The last 10 years, a period which has seen the virtual elimination of unemployment and longest peacetime economic boom on record, slight gains by the low and middle have only slowed this trend, not reversed it.

In Maine, the overall picture is largely the same, but with a twist: The low and middle gained a modest amount of ground from the late 1970s to the late 1980s, but have given all or most of it back in the last decade.

This is more than an unfortunate trend, and it is not merely one more example of why life isn’t always fair. If work is not rewarded with fair pay, if workers believe the economy only serves the wealthy, the democratic values of merit and equal opportunity are undermined; the importance of obtaining an education, of saving, of making immediate sacrifices for a better future, is diminished. It is not by accident that the post-World War II era, the ’50s and ’60s, was a period of a strong middle class and also a period of historically low income disparity. As the economy grew and businesses prospered, so did middle-class workers, who fueled the economy, started their own businesses, built homes and sent their kids to college. Work was encouraged and rewarded.

Further, extensive research worldwide demonstrates a strong correlation between income equality and public health. The disparity in the United States, the greatest among developed nations, is increasingly seen as the reason the world’s richest country has only middle-of-the-pack longevity and infant mortality rates. Not to mention hunger and homelessness reaching epidemic proportions.

Spreading the wealth

Politicians often argue that what Americans want is economic growth, not wealth redistribution. That remains the best solution, but one that first requires an end to the current form of wealth shift — from the bottom to the top.

As taxpayers at the federal, state and local levels provide assistance to business — tax breaks, subsidies, infrastructure improvements, training programs, low-interest loans, research — it is not too much to ask that this assistance result in demonstrable improvements in wages and benefits for workers. The basic needs of the working poor are filled, to at least a subsistence level, by tax-funded social programs, which allows some businesses to continue to pay low wages.

In a perfect world, the minimum wage would be unnecessary — employers and shareholders would realize that well-paid workers are productive, loyal workers. It’s not a perfect world, which is why 10 states have minimum wages above the federal level. Among them are California, Massachusetts, Connecticut, Delaware, Oregon and Washington — hardly economic backwaters with reputations as being unfriendly to business. The facts simply fail to bear out the common objections that most minimum-wage earners are teens, that increases drive businesses across state lines or raise unemployment. Since each 25-cent increase boosts a full-time minimum-wage worker by $520 a year, it doesn’t take much of an increase to substantially improve the standard of living. For those who work for small businesses that truly may be unable to pay a higher minimum, the earned-income tax credit can be an effective substitute.

Those who write tax laws must become more alert to the difference between progressive and regressive taxes. A growing number of states — Maine not has not yet joined them — require an assessment of the impact of any tax increase or cut on the various income groups before they are enacted.

Several states and cities have policies that public-sector contracts will only be awarded to companies that pay a liveable wage. A few states track every penny of taxpayer support that goes to a business and cut off those who don’t keep their end of the bargain. There is even talk now and then of tying the tax deductability of executive salaries to the liveability of the wages paid to a company’s lowest-paid worker.

It is sad — tragic, really — that a solution to the problem of income inequality might require anything that carries even the faintest whiff of government-enforced wealth redistribution. Government alone cannot close the wage gap, but it can at least change those policies that have helped create it.