Guest Commentary: Minimum wage and Social Security inequities feed the wealthy

9:01 PM, Nov. 16, 2013  |  Comments

Who benefits from the minimum wage? No one pretends that anyone can live on a minimum wage salary, and it is customary for government to step in and supplement minimum-wage workers with food assistance, rent subsidies, and Medicaid. These are the working poor, but it is a misnomer to think of these workers as the ones being subsidized. The beneficiaries of government assistance are the businesses that employ these workers. Business can short-change workers because government safety-net programs will make up the difference to provide those workers with sufficient money, food, and shelter to survive.

That means taxpayers are on the hook instead of employers. An op-ed by Lawrence Wittner, professor of history emeritus at SUNY Albany, lays out the economic data of some of the low-wage big employers as he calls for raising the minimum wage. Wal-Mart's CEO received $20.7 million in compensation in 2012; the company pays its sales associates an average wage of $8.81 an hour. The CEO of McDonald's received $27.7 million last year while his workers struggle to make ends meet.

A study released last month by the University of California and the University of Illinois tallied public assistance to McDonald's workers alone at $1.2 billion a year. Clearly, McDonald's was the recipient of the benefit.

Last summer, fast food workers in 150 cities staged walk-outs to publicize their demand for a wage rate of $15 an hour. Given our polarized politics, that won't happen, at least not anytime soon in Washington, but there is progress on the local level. More than 120 cities have living wage ordinances, which means that employers who benefit from public funds or receive sweetheart deals from the government must share that largesse with workers by paying wages higher than the minimum.

New Jersey voters passed an increase in the state's minimum wage by a margin of 61 to 39 even though Governor Christie (R) campaigned against the measure. New Jersey boosted its rate by one dollar to $8.25, and tied it to inflation. There are now 20 states plus the District of Columbia with a minimum wage higher than the federal $7.25.

Meanwhile, Senate Democrats will vote before the end of the year on legislation to raise the minimum wage to $10.10, and index it to inflation to ensure it will automatically increase with the cost of living. But it won't go anywhere in the House, where Republicans have stalled everything except efforts to undercut Obamacare. Still, the time is right to put the spotlight on the growing disparity between the ultra-rich and the great bulk of Americans who comprise 60 percent of the population.

Middle income earners have been losing out as wages are stagnant and jobs that once sustained a family are scarce in today's service-oriented economy. The minimum wage was put in place in 1938 as part of the wave of FDR's New Deal. It was 25 cents originally, and over time it would be $10.74 today if that quarter had kept pace with inflation. But even that would not be enough.

The minimum wage should be doubled, and while we're dreaming, Congress should also lift the $113,700 cap on wages subject to the 12.4 percent Social Security tax. (Yes, it is a tax. Yes, the 6.2 percent paid by your employer is money that would otherwise go to you. Yes, you are paying for the previous generation's retirement, not yours.) It is America's most regressive tax because that 12.4 percent paid by most people is only 1.4 percent for someone earning $1 million a year. One solution is to lower the rate and lift the cap. The other is to fold the tax into the progressive tax tables and pay Social Security benefits out of general revenue instead of from the unfair dedicated tax currently in place.

The inequities in the minimum wage and the Social Security tax are not the only causes for the greatest wage disparity since the age of the Robber Barons, but they are among the most significant.