The Daily Caller

The Daily Caller
              President Barack Obama speaks about the economy and growing economic inequality, Wednesday, Dec. 4, 2013, at the Town Hall Education Arts Recreation Campus in Washington. The president said the income gap between America  President Barack Obama speaks about the economy and growing economic inequality, Wednesday, Dec. 4, 2013, at the Town Hall Education Arts Recreation Campus in Washington. The president said the income gap between America's rich and poor is a "defining challenge of our time." Obama said income inequality has jeopardized the nation's middle class. And he is urging Washington to take steps to ensure that the economy works for everyone. (AP Photo/ Evan Vucci)   

Raising the minimum wage won’t solve the problem of income inequality

Photo of Hughey Newsome
Hughey Newsome
Advisory Council, Project 21

Once again, liberals demand an increase in the minimum wage.

President Obama has said raising the minimum wage is a step in addressing rising income inequality, something he called “the defining challenge of our time.” Additionally, per the Washington Post, he has given his support to the Harkin-Miller proposal put forward by congressional Democrats. This plan, introduced earlier this year by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) would raise the minimum wage to $10.10 and peg it to inflation, more than a dollar higher than the $9 proposal the president made in his State of the Union address in February.

The proposals at the federal level would be a required minimum, but states could choose to have their own higher minimums. The state of New Jersey recently raised its minimum wage to $8.25 per hour and the California legislature recently approved an increase to $10 an hour.

Data on income inequality does not lie, but when the goal is to make an oversimplified argument about the rich getting richer and the poor not catching up, some significant nuance is missing.

The top quintile of wage earners is not a monolith. Consider the riches to rags stories of rapper M.C. Hammer, football star Ryan Leaf and businessman John DeLorean. Success and wealth can be a chutes-and-ladders affair.

One-percenters already contribute a disproportionate amount to annual tax revenue. They are also likely subject to income taxes in addition to double taxation through capital gains taxes and dividend taxes (both increased by Obama’s Affordable Care Act).

These facts, however, are usually missing from the left’s income inequality talking points.

Inconvenient truths notwithstanding, there is definitely a divergence in earnings between the haves and the have-nots. The left wants to fix this with a top-down approach, forcing higher wages for low-income wage earners rather than addressing what’s driving the divergence in the first place.

Ironically, Obama highlighted one critical driver just after taking office.

In his February 2009 address to Congress, Obama stated, “In a global economy where the most valuable skill you can sell is your knowledge, a good education is no longer just a pathway to opportunity — it is a pre-requisite.” He was absolutely correct. Globalization and technology changed the requirements for advancement in America. Oft-quoted studies show income inequality increasing since the 1970s, and the U.S. Census Bureau reports American has not had a trade surplus since 1975.

Consuming more than we produce, Americans have less actual wealth to enjoy here at home. The rich can adapt as they have more resources to invest in growth abroad. But the rest of American wage earners need to adapt, as Obama suggested, by offering more skills and knowledge in the 21st century marketplace.