How the World Works

Wednesday, Jan 24, 2007 18:24 EST

Income inequality up, minimum wage down

Senate Republicans hold a wage bill hostage; meanwhile, the rich get richer.

By Andrew Leonard

Two news items:

Senate Republicans blocked an attempt to pass a minimum wage bill, holding it hostage for more tax cuts for small-business owners. They were successful in their extortion bid, and the bill is now expected to pass next week, along with $8 billion worth of new tax cuts. However, the minimum wage bill passed by the House has no tax cuts included, so some jockeying will be necessary before there is legislation to put in front of President Bush.
Meanwhile, data released in December by the Congressional Budget Office, parsed with extreme care and diligence by the wonks at the Center on Budget and Policy Priorities, show that in 2004, the top 1 percent of the United States continued to grab a hugely disproportionate share of the country's wealth, as measured by after-tax income. (Thanks to Mark Thoma at Economist's View for the tip.

The average after-tax income of the richest one percent of households rose from $722,000 in 2003 to $868,000 in 2004, after adjusting for inflation, a one-year increase of nearly $146,000, or 20 percent. This increase was the largest increase in 15 years, measured both in percentage terms and in real dollars. In contrast, the income of the middle fifth of the population rose $1,700, or 3.6 percent, to $48,400 in 2004. The income of the bottom fifth rose a scant $200 (or 1.4 percent) to $14,700.

What would inspire How the World Works to pair an item about the minimum wage with an item about expanding income inequality during the Bush presidency? Oh, I don't know, perhaps maybe the idea that a bump upward in wages for the bottom rung of workers in this country should be paired with a tax hike on the top 1 percent, instead of yet another tax cut that the country can't afford? But more to the point: Senate Democrats could not muster the 60 votes necessary to close off debate on the minimum wage bill, a sign that the Republicans will be able to thwart pretty much any legislation they choose to in Congress, at least until 2008.