exc-551a31e3e4b07f0166153928
We were doing a bit of reading on inequality and ran across an article by the Economist, the thesis of which was that larger firms lead to rising inequality.
To show this rising inequality, they displayed a graph of the change (as %) in inflation-adjusted wages for American workers, broken into the top through bottom quintiles:
When one looks very closely at the graph (we almost missed it!), one sees a very surprising result that the Economist doesn’t mention.
Look at the dark blue line, which is the highest-rising of the five quintiles. To our surprise, it was the 5th–or bottom–quintile.
What this means is that when looked at this way, America’s poorest have seen the largest growth in wages of any income group.
With this in mind, something to consider: what might America be doing right to help its poor almost double their wages, particularly given that the real value of the minimum wage has stayed the same in that time period? How can it do more?
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In 1985, the federal minimum wage was 3.35. It's now 7.25, so it is up about 250%
Inflation adjusted from 1985, it is still keeping up, and most states have higher minimum wages.
There is a 15 year point, where minimum wage first grew far faster than inflation, and thus caused inflation on the other side of the increase, which yields points where inflation appears to out-strip the minimum wage. Overall, it has not.
Note the peak years of inflation in 1979-82
http://www.usinflationcalculator.com/inflation/historical-inflation-rates/
The poorest are doing better because the lowest paying jobs have been dragged up. This is at the expense of the blue collar middle class, however. That would be the second, third, and fourth quintile (particularly the third and fourth)
The poorest do better because people pay the most attention to them. Alas, we do not look at the consequences of trying to help them, and where the money really comes from.
Good eye--I'll change it to "stayed the same."
I'm curious to hear more about the lowest paying jobs having been dragged up. Able to elaborate more?
I tried and it glitched. Did you find it?
I can't say that I'm an authority on the subject, but I can give you my interpretation of the data.
The very poor are in a unique position in which their income is at near the minimum amount of money needed to survive -- we as a society make sure that this happens so that they have the minimal money needed to not starve. They have to stay above a certain level based on inflation. This is the "safety net" that gets talked about and it's why Mitt Romney was actually right when he stated in the last election cycle that he's "not concerned about the very poor" (FYI: I'm not a fan of his).
Anyway, given that everyone in the lower middle class, middle class, upper middle class, etc.... have no safety net to survive, there is nothing ensuring them of anything. As these large firms get larger, what happens is that they start to represent a pseudo-monopoly (or oligopoly -- one of a few companies) that dominates in some market. This is a classic anti-competitive marketplace. When you dominate a market, you can provide products and services for less than small businesses can. Your products and services are probably just fine, nothing special, but customers will buy from you simply because your products and services are cheap. Through this arrangement, large firms become disincentived from increasing wages for their workers -- why would their increase wages if their employees have no viable alternative options to be paid more? This is what happens when you have a few companies with highly concentrated market power. This is why wages go down for everybody (besides the very poor).
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