Minimum Wage
On Election Day, five states voted to raise the minimum wage. Josh Barro reported in the New York Times’ Upshot Blog, “Alaska [will] set its minimum wage the highest, with a gradual rise to $9.75 by 2016. Nebraska [will] go to $9 in 2016, South Dakota to $8.50 in 2015 and Arkansas to $8.50 by 2017.” Illinois voted to raise its minimum wage in a non-binding referendum; and San Francisco’s minimum wage will rise over the next three years to $15 an hour, according to Lydia O'Connor. The fact that these referendums passed with significant support “suggests voters have come to see minimum wage, and economic inequality, as practical issues that can directly or indirectly affect them,” says Erik Sherman of Forbes. Meanwhile, economists are still split on its impact on employment rates. Lauren Carroll wrote in a PolitiFact article, “There’s some research that shows raising the minimum wage negatively impacts job growth, and a lot that shows it has an insignificant effect.”
Savings
The Atlantic’s Derek Thompson wrote on wealth inequality and the role of income and savings this week in the article “Forcing Americans to Save Money.” According to Thompson, “The problem facing the bottom 90 percent—not the rich, but the "rest"—isn't merely that they're making less money than they used to, but also that they are saving none of it—virtually, none of it.” He recommended “a new automatic retirement plan that skims 3 percent of annual earnings up to $100,000.” Shane Ferro rebuffed his inequality solution noting that “necessary fixed costs increased while incomes stagnated, so saving gave way to debt in order for people to maintain the same lifestyle they had in previous decades… The bottom 90% then lost out on wealth accumulation, not just because they didn't save money, but because that money then missed out on the kinds of capital gains the rich enjoyed as the stock market surged and their saved money became worth much more.”
Retirement
Allison Schrager reported that wealth inequality was exacerbated by low- and middle-income Americans using their 401(k) plans as financial cushions during the Great Recession: “Many low-and-middle income Americans bought stocks at high prices when the market last peaked, sold low when it tanked, never got back in, and missed out on the rally… Meanwhile, high earners stuck with the stock market all along and got richer.” Elliot Schreur of New America’s Asset Building Program described how raising the 401(k) contribution cap has contributed to inequality and policies that could mitigate its impact and provide support to more workers. Schreur argues that “the government should stop focusing on maintaining the value of this wasteful subsidy and instead help the majority of American workers build sufficient assets to retire with dignity.”
Quick Hits
The Corporation for Enterprise Development (CFED) will serve as the national coordinating entity for the Volunteer Income Tax Assistance (VITA) program, good for them, and good for VITA providers all across the country.
Patricia Cohen of the New York Times highlighted the role of state and local treasurers in “pushing through experimental policies aimed at lifting the fortunes of low- and moderate-income families.”
Brookings’ Richard Reeves described the findings of U.K.’s Social Mobility and Child Poverty Commission and posited lessons on improving social mobility in the U.S.
Karen Demasters and Joseph Coughlin discussed how providing adult children and elderly parents with financial support should be a part of retirement planning.
