Minimum Wage and Inequality

One topic that is an interest of mine is the topic of growing income inequality. Over the last 30 years or so, a small fraction of the population in the US has increased its share of income (and even more wealth) while the middle class has been gradually gutted and those on the bottom have been stepped on. Ultimately I don't think it's a sustainable situation and something needs to be done to address those issues.

Today I want to look at a hot topic in politics: the minimum wage. President Barrack Obama has been pushing an increase of the Federal minimum wage to $10.10. And there's plenty of resistance to that but I don't want to focus on that too much. We can really consider two issues:

(1) Is raising the Federal minimum wage a good way to alleviate income inequality?
(2) Assuming (1), where should the Federal minimum wage be?

It's the latter question I'd like to take a look at today.

McDonald's and Wages

There's a considerable amount of debate revolving around the minimum wage and the vast number of workers in the US that earn a very low wage. I'm personally of the view that the growing inequality in the US in which the top 1% (and 0.1% which looks even worse) have been taking a larger share of the income.

A good portion of the talk has concerned fast food workers of which McDonald's is the largest and most focused on.  Today I want to take a practical look at McDonald's and wages.

Who are the 1%?

In Income Inequality in the US, I noted that the top 1% (and especially the top 0.1%) have been taking a greater share of productivity gains over the last 50 years (especially since the 1980's).

But that raises the question who are these 1%-ers and why have they been able to take a larger share of productivity gains?

We'll start by looking at some data found in this study which gives a breakdown of the top 1% and top 0.1% for years between 1979 and 2005. Here's a summary of the 2005 data:

Income Inequality in the US

Here's income inequality in one simple chart.