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Lawrence J. Hanley Headshot

A Maximum Wage Law?

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I recently read about a cash-strapped seven-year Walmart employee in Louisiana who says she'd live in her car if she could figure out how to do it. Another Walmart employee claims that many Walmart "associates" actually do that to make ends meet, but it's really not an option for the 52 year-old "front-of-the-store" manager.

The Louisiana woman used to get by on her full-time, $11.60 per hour paycheck, but she's struggling now as a result of her store's decision to cut the hours of full-time workers and increase the hours of lower-paid, part-time workers. Many other Walmarts have done the same, helping America's largest employer emerge from two years of declining profits.

During the corporation's downturn Chief Executive Officer Michael Duke's total 2011 compensation was $18.7 million -- 725 times the wages of Walmart's average worker.

Walmart isn't the only company balancing its books on the backs of its workers, which is one reason why many corporations have turned the corner while more and more Americans hit hard by the recession are still out of work or working for minimum wage or close to it.

There is growing support for a bill in congress that would raise the minimum wage. The legislation would increase the wages of 30 million Americans and provide a much-needed boost for working families and our ailing economy.

While raising the minimum wage is a laudable goal, the widening income gap between the rich and the rest of us must be addressed if we are to salvage the bulwark of our economy -- the middle class.

America is becoming a country of "haves" and "have-nots." Most of the wealth generated by U.S. workers over the last 40 years has gone to the richest 1 percent of our nation, while the middle class has seen no real improvement in their buying power or standard-of-living. And things are getting worse for an increasing number of middle class families who are falling into poverty because of the Great Recession.

You don't have to be an economist to be alarmed by the financial chasm opening up between the rich and the rest of us.

The average CEO made 380 times the wage of the average American worker in 2011. In actual dollars, that comes to $34,053 for the worker, and $12.9 million for the CEO -- a wage disparity far greater than that of any other country.

The median individual wage in 2010 was just $26,364 -- which means that half of all workers made that much or less that year. Significantly, the average wage of all workers is going up because the incomes of the rich are going up; but median income is falling because of the continued erosion of the incomes of the middle class and working poor.

There doesn't seem to be any finish line in this race to the bottom. Big business worships at the altar of the "Free Market" which rewards those who, in effect, impoverish hardworking people to feed the insatiable appetite of the rich. This transfer of wealth to the rich from the poor and middle class is most evident in corporate America.

What can be done to deal with growing income inequality and close the astronomical divide between the billionaires and millionaires and the rest of America?

A maximum wage law.

A maximum wage law would limit the amount of compensation an employer could receive to a specified multiple of the wage earned by his or her lowest paid employees.

In other words, if federal law limited an employer's income to no more than 100 times the wage of his or her lowest paid workers, and, if, for example, those workers made $25,000 per year -- the employer would make no more than $2.5 million per year. The employer's compensation could not increase above that amount unless his or her lowest paid workers got an equivalent raise as well.

The idea is not unprecedented. In a time of massive domestic and economic distress, President Franklin Delano Roosevelt issued an executive order during World War II limiting corporate salaries to no more than $25,000 per year after taxes. The president believed that if middle class fathers, brothers, and sons were putting their lives on the line for just $60 per month, the rich should be required to make some sacrifice too.

FDR's maximum wage proposal was bold and brilliant. Believing that all citizens should help out with the mobilization effort, he refused to be bullied by the rich, and never lost sight of the fact that fair compensation and a thriving middle class are essential elements of a healthy economy -- particularly during a national emergency.

A maximum wage law would actually ensure that "a rising tide [would lift] all boats," and encourage competition while improving lives at every level of society.

The minimum wage certainly must be raised. It's also time to start a national discussion about creating a maximum wage law.

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