By GREGORY N. HEIRES
It’s always eye-opening to look at the divide between Wall Street and Main Street.
The income gap gives you a sense of the depth and cost of inequality in the country, where an estimated 42 percent of workers earn less than $15 an hour. That’s right, more than four of every ten workers!
The $25 billion in bonuses given out to 172,400 Wall Street employees in 2015 would be enough to double the earnings of the 895,000 Americans who work in full-time jobs at the federal minimum wage of $7.25 per hour, according to “Off the Deep End: The Wall Street Bonus Pool and Low-Wage Workers,” a recent report of the Institute for Policy Studies.
Highlighting the divide between Wall Street and Main Street, the Fight for 15 movement has created a political climate to allow for state and local initiatives to boost the minimum wage. Both New York and California have raised their minimum wage to $15 an hour.
Democratic presidential candidate Sen. Bernie Sanders, who put inequality at the center of this year’s Democratic primary race for the presidency, helped make the $15 minimum wage–once regarded as a pie-in-the-sky proposal even by some on the left–a realistic goal. Democratic presidential candidate Hillary Clinton is for boosting the federal minimum wage to $12 an hour while encouraging local $15 an hour initiatives. Republican candidate Donald Trump has flip-flopped on this issue.
“For Wall Street employees, annual bonuses come as an extra bonus on top of their base salaries, which averaged $404,800 in 2014,” the IPS report states. On top of their bonuses and salaries, executives often receive large stock options and restricted stock gains.
The 2015 bonus pool in 2015 would be enough to bring the wages of the workers in any of the following groups up to $15 an hour:
• restaurant servers and bartenders (2.6 million workers)
• home health and personal care aides (1.6 million), or
• fast food preparation and serving workers (2.6 million).
Fairness and Economic Policy
The startling pay gap between Wall Street employees and low-wage workers raises questions about fairness and economic policy.
A pay rate of $15 an hour is what’s needed to cover basic living costs in most areas of the country, according to the National Law Project. As a society, do we want to tolerate an out-of-balance economy in which more than two out of five workers earn less than $15 an hour?
By increasing the minimum wage, the government would not only raise the income of low-wage workers, it would also stimulate the economy.
Low-wage workers typically spend their entire paycheck to meet their day-to-day expenses, sparking additional economic activity. In contrast, the wealthy tend to save and invest more of their earnings.
“The Wall Street bonus season may coincide with an uptick in luxury goods sales, but a minimum wage hike would give America’s economy a much greater boost,” the IPS briefing says.
The government could address inequality by raising the Earned Income Tax Credit, implementing a transaction tax on financial trading and adopting more progressive income tax policies. Closing a loophole that allows certain earnings of hedge fund managers to be taxed as capital gains rather than as income (with its higher rate) would also help curb inequality.
As an economic policy, raising the minimum wage makes sense. Ethically, in our economically polarized county, it’s ethically the right step to take.