I was in Seattle, Washington, recently, to congratulate union and community organizers who helped Seattle enact the first $15 per hour minimum wage in the country.
Other cities and states should follow Seattleās example.
Contrary to the dire predictions of opponents, the hike wonāt cost Seattle jobs. In fact, it will put more money into the hands of low-wage workers who are likely to spend almost all of it in the vicinity. That will create jobs.
Conservatives believe the economy functions better if the rich have more money and everyone else has less. But theyāre wrong. Itās just the opposite.
The real job creators are not CEOs or corporations or wealthy investors. The job creators are members of Americaās vast middle class and the poor, whose purchases cause businesses to expand and invest.
Americaās wealthy are richer than theyāve ever been. Big corporations are sitting on more cash they know what to do with. Corporate profits are at record levels. CEO pay continues to soar.
But the wealthy arenāt investing in new companies. Between 1980 and 2014, the rate of new business formation in the United States dropped by half, according to a BrookingsĀ studyĀ released in May.
Corporations arenāt expanding production or investing in research and development. Instead, theyāre using their money to buy back their shares of stock.
Thereās no reason for them to expand or invest if customers arenāt buying.
Consumer spending has grown moreĀ slowlyĀ in this recovery than in any previous one because consumers donāt have enough money to buy.
All the economic gains have been going to the top.
The Commerce Department reported last Friday that the economy grew at a 4.6 percent annual rate in the second quarter of the year.
So what? The median householdās income continues to drop.
Median household income is now 8 percent below what it was in 2007, adjusted for inflation. Itās 11 percent below its level in 2000.
It used to be that economic expansions improved the incomes of the bottom 90 percent more than the top 10 percent.
But starting with the āReaganā recovery of 1982 to 1990, the benefits of economic growth during expansions have gone mostly to theĀ top 10 percent.
Since the current recovery began in 2009, all economic gains have gone to the top 10 percent. The bottom 90 percent has lost ground.
Weāre in the first economic upturn on record in which 90 percent of Americans have become worse off.
Why did the playing field start to tilt against the middle class in the Reagan recovery, and why has it tilted further ever since?
Donāt blame globalization. Other advanced nations facing the same global competition have managed to preserve middle class wages. Germanyās median wage is now higher than Americaās.
One factor here has been a sharp decline in union membership. In the mid 1970s, 25 percent of the private-sector workforce was unionized.
Then came the Reagan revolution. By the end of the 1980s, only 17 percent of the private workforce was unionized. Today, fewer thanĀ 7 percentĀ of the nationās private-sector workers belong to a union.
This means most workers no longer have the bargaining power to get a share of the gains from growth.
Another structural change is the drop in the minimum wage. In 1979, it was $9.67 an hour (in 2013 dollars). By 1990, it had declined to $6.84. Today itās $7.25,Ā well below where it was in 1979.
Given that workers are far more productive now ā computers have even increased the output of retail and fast food workers ā the minimum wage should be even higher.
By setting a floor on wages, a higher minimum helps push up other wages. It undergirds higher median household incomes.
The only way to grow the economy in a way that benefits the bottom 90 percent is to change the structure of the economy. At the least, this requires stronger unions and a higher minimum wage.
It also requires better schools for the children of the bottom 90 percent, better access to higher education, and a more progressive tax system.
GDP growth is less and less relevant to the wellbeing of most Americans. We should be paying less attention to growth and more to median household income.
If the median householdās income is heading upward, the economy is in good shape. If itās heading downward, as itās been for this entire recovery, weāre all in deep trouble.
Robert B. Reich has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He also served on President Obama’s transition advisory board. His latest book is “Aftershock: The Next Economy and America’s Future.” His homepage isĀ www.robertreich.org.