How to save the American Dream
March 14th, 2014
02:03 PM ET

How to save the American Dream

By Rep. Alan Lowenthal and Michael Shank, Special to CNN

Editor’s note: U.S. Rep. Alan Lowenthal (D-Calif) serves on the House Foreign Affairs and Natural Resources Committees.  Michael Shank is associate director for legislative affairs at the Friends Committee on National Legislation and a senior fellow at the JustJobs Network. The views expressed are their own.

The partisan picking apart of last month’s Congressional Budget Office report on the minimum wage – and the debate over its impact on employment – was just the latest missed opportunity to find bipartisan solutions for this country’s problems. Sadly, in this case, the failure strikes at the very heart of the American Dream – economic mobility.

Despite what many Americans assume, the United States actually has some of the lowest and longest-stagnating rates of economic mobility in the rich world – significantly lower than many European countries. This fact should be of concern to both Democrats and Republicans as it hinders this country’s economy.

How has this happened? For a start, the minimum wage has lost much of its purchasing power, and hasn't kept pace with inflation. Indeed, the minimum wage, adjusted for inflation, is lower now than it was in the late 1960s, while wages at the bottom end of the scale have fallen in recent decades, even as worker productivity has grown.

That’s a serious problem.  The current federal minimum wage, at $7.25 per hour, makes economic mobility nearly impossible for many Americans as it means that a full-time minimum wage employee earns only around $15,000 in annual salary.  Try buying a house or sending your kids to college on that. Just as sobering is the fact that this is just a few thousand dollars higher than the 2012 poverty threshold for an individual ($11,945).

That is why the CBO report was so noteworthy.  The report says that raising the minimum wage above $10 per hour positively impacts a full 15 percent of the nation’s workforce – all of whom would see wages rise under the proposal.  It would, as noted in the Washington Post, directly benefit "the 16.5 million Americans who currently earn less than $10.10/hour," while "another 8 million workers, whose earnings hover above that level, would also benefit." And it would bring nearly 1 million Americans out of poverty.

From a social mobility, American Dream, and economic productivity perspective, this is significant.  Add to that the resultant earnings for low-wage workers, which would total $31 billion. This extra income would be invested back into the economy, thus helping to create new jobs and spurring additional economic productivity.

True, it is important to note that the CBO noted that raising the minimum wage to $10.10 could result in some job losses, a number they estimated to be “about 500,000” by the second quarter of 2016. But the nuanced report admitted up front that predicting job loss is a complex process and cautioned, “that the (500,000) estimate was imprecise, with the job losses likely to fall in a range from practically nothing to one million.”

Either way, there is surely enough here to inspire any policymaker to take note. But there is another aspect of this minimum wage conversation that isn’t being discussed, but one that has clear economic implications if not addressed.

America’s yawning income gap between the haves and the have-nots – the largest gap since the Great Depression and one of the greatest gaps among industrialized nations in the rich world – is costing our economy in countless ways, as it has become increasingly difficult for Americans to get ahead, get insured, get educated and get a job.

Our country’s penchant for income inequality is not financially sustainable, let alone morally excusable or philosophically justifiable by economists who claim this to be an inherent part of the system because societies with greater income inequality consistently struggle with social and health problems, problems that ultimately end up costing society even more.

Why? Because the higher a country's income inequality, the higher its infant mortality rates, obesity rates, homicide rates, illiteracy rates, mental illness rates, teenage births, incarceration rates, drug addiction rates, social immobility and lower life expectancy. This is a consistent trend across countries and U.S. states.

In other words, the bigger the gap between a nation's rich and poor populations, the greater dysfunction in that nation's society.  Taxpayers end up paying for that dysfunction and its impact on the community, whether in higher police costs, hospital costs, court costs, prison costs, or other costs.

By reducing income inequality, you reduce the rates of every kind of social malaise that are draining our federal, state and local budgets and services. Eradicate both and you have a certain moneymaker for America.

This is why an improved minimum wage is so important.  And while it won’t immediately fix the problem of 50 million Americans living in poverty and another 100 million living on low incomes, it is still a critical step forward in making America more socio-economically mobile and more Dream-worthy.

We recognize that there is no one single answer to this challenge. Improving education and job training programs is essential. Making sure the working poor have access to health care and childcare is important, too. All of this is more affordable when wages are stronger.

With polls consistently showing Americans support a higher minimum wage, all the reasons needed are there for an increase in minimum wage. It's good for the economy. It's good for workers and for business. It's good for social mobility – and it's good for the American Dream.

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Topics: Economy • Inequality • United States

soundoff (95 Responses)
  1. chrissy

    You do realise that just one hour of min wage does not cover a gal of gas and a gal of milk right? Thats before taxes! That kinda puts most workers today on the same playing field as third world countries! So how does THAT make us the greatest country on earth cuz i sure as he!! cant see it!!! But i thank God each and every day that i dont have to rely on government assistance cuz im quite sure its only by the grace of God that i dont! And some of you ppl might wanta think about that as well because you just never know what tomorrow will bring! For example...all those retired cops, firemen, etc in Detroit that worked their entire lives for the betterment of that citys citizens. And now theyre losing their pensions that they paid into all those years! What a disgrace! And theyre too old for a do over! Think about how degraded they must feel having to depend of government assistance before you start slamming ppl for being on welfare! And then you thank God its not you! If not then shame on you!!!

    March 17, 2014 at 11:32 pm | Reply
    • Jayanarayanan Sankaranarayanan

      Even highly qualified Indians, like myself, have been laid off, in California, because our jobs have gone to China. The US government seems to have absolutely no clue how to bring these jobs back. Forget about minimum wage. I have no wage right now, and no unemployment check because it ran out months ago, and I have BSEE and MSEE from Carnegie Mellon, an Ivy League University. Yes, we are all in a big mess right now. I could lose everything!

      March 18, 2014 at 2:16 am | Reply
  2. chrissy

    Then you are a prime example WHY our government MUST concentrate on the problems in our own country and stop sticking their noses in every other countries businesses particularly when its not wanted. And then you have that "work ethic" issue someone brought up earlier. Congress seems to have less work ethic than the lowliest employees as they have not done one constructive thing in at least 5 years!

    March 18, 2014 at 4:33 am | Reply
  3. Mark

    All those politicians for years did nothing to prevent jobs going overseas. The only one who understood that was Sam Walton who had smaller stores than today and argued to his executives, they would change everything he worked to build. He was instrumental in what was called: "Buy America First." I would go back and find out where all our great American companies have gone or left without a whimper. Americans lost thousands of manufacturing floor jobs and yet the roller coaster kept going on.

    March 18, 2014 at 10:19 am | Reply
  4. chrissy

    I understand that @ Mark! What i DONT understand is why knowing now what they know, that they continue to sit on THEIR (congress) lazy duffs and do nothing! Just exactly WHAT do they think they werd elected to do because as i see it they havent done much for the citizens of this country!!!

    March 18, 2014 at 11:23 am | Reply
  5. Jayanarayanan Sankaranarayanan

    Maybe we need to help them to figure it out. Apparently 70% of our politicians have Law Degrees or Political Science Degrees. This may not be well suited to solving a problem as complex as this. They need guys who really understand Multi-National Corporations, International Trade and Exchange Rates. My understanding is that a strong dollar only makes sense when you are making all the products. Once Asian countries began to learn how to make all the products we buy, the strong dollar severely hurt us. You see, when 8 Renminbi Yuan is equal to 1 US Dollar, that means the Chinese can make any product and flood your market with it and roughly 8 times a cheaper price than you could. So even including the cost of shipping the product from China to the US, still gave them enough profit margin to whip us. And so that is exactly what has happened!

    March 18, 2014 at 12:12 pm | Reply
  6. Layne

    The fundamental cause of the US worker fall into poverty has been the outsourcing of many millions of manufacturing jobs to countries with slave-labor wages by the avaricious and amoral corporate 1% (abetted by the corrupt politicians they own). Every economic miracle of the 19th and 20th centuries was based on manufacturing, no exceptions, and the US gave its industrial base away on a silver platter to countries with governments that hate us. The US has lost on average over 50,000 manufacturing jobs EACH MONTH since 2001 when China was admitted to the WTO, mostly due to outsourcing, and each manufacturing position supported between 3 and 6 more jobs in services. In addition, manufacturing industries provided a robust vehicle for upward mobility and self improvement to many millions of young people. At this point, raising the minimum wage will probably not help, as it will give incentive to locate even more jobs overseas.

    March 18, 2014 at 1:03 pm | Reply
  7. chrissy

    You are a very wise man @ J.S. There is just a cpl problems with what youre suggesting. The first being that the GOTP will not go along with ANYTHING that wont make the current POTUS look bad even if it benefits this country nor its citizens! And another problem is that Congress as a whole is more concerned with the needs of THEIR financial backers (special interest groups) than they are with the citizens of this country! Something needs to be done with that whole process (campaign funding) and kickbacks need to be forbidden. Alot of work needs to be done on our governmental procedures!

    March 18, 2014 at 3:03 pm | Reply
  8. chrissy

    And @ Layne you are correct. But something MUST be done to help honest hard working people. And minimum wage hasnt been increased in a very very long time with the result more people having to depend on public assistance just to get by! So min wage should go up and every year it should increase with a cost of living increase. That would help decrease the public assistance programs and citizens would be much happier earning their own way in life! Many minimum wage earners today are so OVER qualified for the jobs they are forced to take it isnt funny! And then they still end up having to take food stamps too? Its just cruel and also discourages younger ones from furthering an education because they feel its pointless!

    March 18, 2014 at 3:13 pm | Reply
  9. Jayanarayanan Sankaranarayanan

    Thank you Ms. chrissy. My understanding is that the problem of job loss to Asia, is further complicated by the fact that the US politicians, at both the State & Federal level, have not lost their jobs at all. In fact, the average politician in the US got 2 huge raises over the last 10 year period. They also have the very best Health Care plan, Retirement Plan, Sick Pay and Holiday Pay on the entire Planet! So they are very comfortable indeed. They have no idea whatsoever what the average struggling American citizen is going through.

    March 18, 2014 at 5:02 pm | Reply
  10. Jayanarayanan Sankaranarayanan

    So my understanding is that approx 5000 US Corporations, followed the example of one Mr. Sam Walton, founder of Walmart, and gave away our entire country, to Asia. Over a 20 year period (1993-2013), this amounts to a gargantuan 50 million jobs! Fully 80% of those jobs went to China, and 20% went to the remaining 13 countries in Asia. Businessweek magazine calls this the "Walmartization of America". Here is what prevented the USA from acting. The very same Multi-National Corporations that gave our jobs away, on a sliver platter, to Asia, are the very same Corporations that are paying for the campaign financing of our politicians. There is a reason why "Super-Pacs" were made legal, against our wishes. This explains the vanishing of the middle-class and the concentration of billions of dollars in the hands of a few elite Americans, the super rich, like Sam Walton's daughter.........

    March 18, 2014 at 5:12 pm | Reply
  11. Jayanarayanan Sankaranarayanan

    But truly Ms. chrissy, what amazes me, is that of these 5000 Multi-National Corporations, fully 60% of them have their headquarters within the United States and 40% of them have their HQ in Europe. CNN actually did a show which looked at the lifestyles of some of the CEO's of these Multi-National Corporations. 99.999% of them are choosing to live in the USA or Europe. Why? Because they prefer the better administration, better law & order situation, more reliable water supply & electricity supply, much better implementation of "rule of law", much more sophisticated "elite" neighborhoods, much better shopping opportunities in Malls in the Western World, better roads, better railways, better airlines, better airports, better vacations........... So, what can we conclude? The super-rich in the western world, screwed over the middle-class and poor-classes in their own world, so that they could live opulently, because they found cheaper slave labor in another part of the world???

    March 18, 2014 at 6:08 pm | Reply
  12. chrissy

    Your understanding is spot on @ J S! That was the primary reason that a group of people started their march on wall street 2 years ago. But many american citizens chose to remain dumb to the reasoning behind that protest and dubbed them hippees instead of joining up with them. And of course because the occupiers didnt have strong leadership the whole thing folded. Which really is to bad. Had they had a strong leader and continued their mission things today might look very different. Give it another 10 years and we will be like all other third world countries!

    March 18, 2014 at 6:21 pm | Reply
  13. Jayanarayanan Sankaranarayanan

    Regarding the issues within Wall Street, Ms. chrissy, I have some observations I would like to share. When GW Bush came to Presidency, Wall Street cleverly submitted some changes to existing laws, regarding "derivatives". Any person educated in mathematics, will tell you that derivatives are a "no-no" in Wall Street, and can be best described as "gambling" which belongs only within the realm of Las Vegas. Well, poor ol' "Dubya" being not very smart, or educated, or capable, or knowledgeable, approved these Bills and they got signed into Law by "financially motivated" Republicans. It turns out, that derivatives are very very bad for any economy and definitely very very bad for the average human being. The crash of 2008, in Wall Street, can be hugely attributed, to derivatives, credit default swaps, and illegal "betting" by giants like Goldman Sachs, as the Housing Market collapsed. They were actually trying to get rich while their own country was dying. Such is the nature of human greed.

    March 18, 2014 at 6:36 pm | Reply
    • MataHairy

      You lost all credibility when you left out Clinton's Freddie and Fanny – his repeal of Glass Steagal – and the Real estate debacle. To say nothing of his initiating the war in Iraq but being too busy with Miss Lewinski to follow through!

      No Sir, you are just another partisan hack with no real basis for your argument!

      March 19, 2014 at 5:27 pm | Reply
  14. chrissy

    Lol @ JS now WHEN are you running for office? I knew i liked your thinking and after your comments about dubya im convinced! And also being dumb as a post he had that hairbrained notion to bail out the banks, free and clear! No payback! No accountability! Nothing! The very same banks that were mainly the root cause of this recession!!

    March 18, 2014 at 7:20 pm | Reply
    • MataHairy

      As did Obama when he spent $4 Trillion bailing out banks and motor companies and EIGHT solar powered companies who took his "gift" then went bankrupt!
      You show a lamentable difficulty in accepting FACTS. But if spouting propaganda floats your boat.........carry on Muppet!

      March 19, 2014 at 5:30 pm | Reply
  15. Jayanarayanan Sankaranarayanan

    What is the saddest moment for America, is that because Wall Street had made derivatives legal, in 2000, they could thumb their noses at the SEC, after the 2008 financial fiasco. Roy Blankfein, CEO of Goldman Sachs, had the audacity to say: "Goldman Sachs has done nothing illegal", but we all saw the guilty look on his face! It is almost unbelievable that not even one single human being went to jail, or was held accountable, for the biggest financial disaster in US history, after the Great Depression. And get this, derivatives are STILL legal. Wall Street can still gamble with our retirement accounts and destroy them within a few hours.

    March 19, 2014 at 2:07 am | Reply
  16. UK:OK

    America needs to become sustainable. Get rid of the cars and rebuild Amtrak. Attract tourist from China, Russia and the UK Commonwealth. Stop fighting foreign wars for Angela MERKEL and the German crony capitalists. Remember the GREAT America of World Peace and freedom without the evil EU regime.

    March 19, 2014 at 1:08 pm | Reply
  17. chrissy

    The great America of World Peace?? Where? When?

    March 19, 2014 at 1:30 pm | Reply
    • MataHairy

      Did you blink and miss it? lol I like your comment!

      March 19, 2014 at 5:23 pm | Reply
  18. chrissy

    Not to mention the building of cars is almost the ONLY manufacturing left in this country!

    March 19, 2014 at 4:35 pm | Reply
  19. MataHairy

    The only way to restore ANYTHING in America is to demand the resignation of Obama..............after all he encouraged the 10 countries in the Arab Spring to get rid of failing tyrants. Easy!

    March 19, 2014 at 5:21 pm | Reply
  20. The Mayor of Medinah

    America needs to get back to work, we need good jobs from bottom to top, without work people can not pay taxes, can not purchase they can not save. Raising the minimum wage does nothing in the long term. Also taking care of our people first without importing additional labor would be a good start as well instead of importing the H1B information Tech people how about we start training some of our veterans and inner city youth for these great paying jobs. that is one way to start to make America strong.

    March 19, 2014 at 6:24 pm | Reply
  21. wait a minute

    reading some of the ignorant comments on here, it would appear that many Americans deserve what is coming to them. third world backwater status.

    March 19, 2014 at 6:36 pm | Reply
  22. chrissy

    Lol @ Mr. Hairy, you are mistaken. It was GWB who bailed out the banks! With no provisions that they had to account for how and where they spent it nor a stipulation that it be paid back! AT LEAST prez Obama made the auto industry repay their LOAN! And @ Mayor of Medina has the right idea,train and put the vets to work! Then train and put the young ppl to work because ultimately the burden of our debt will be falling on them not that congress gives a sh!t.

    March 19, 2014 at 6:47 pm | Reply
  23. America is a crumblin'

    Thank you Fareed, for helping us to become more aware of the fact that we are slipping, and then trying to help us to figure out how to turn things around. The truth is often a bitter pill to swallow. It also takes humility to accept the truth and incredible courage to start a climbin' up that hill again. Hopefully we have both.

    March 21, 2014 at 12:25 am | Reply
  24. America is a crumblin'

    Do we Americans realize that our own CEO's imposed gargantuan sanctions, against us, the American people, when they shipped all our jobs overseas? And less than 10,000 of these super-rich traitors continue to live opulently, in gated mansions, on a hill not too far from you!!! Who cares about sanctions against Iran or Russia! Verily I say unto you, we Americans have been "sanctioned" into poverty, by our very own super-rich CEO's. And our government did absolutely nothing to stem the tide! Here are some ideas: First of all, admit that it has happened. Then seriously discuss why it has happened. Then "crowd source" it, for possible solutions, to reverse the trend regarding the exodus of our jobs to Asia.

    March 21, 2014 at 12:15 pm | Reply
  25. Eddie Fonseca

    When we think of the American Dream with owning a big house with two cars also one paycheck that will cover the mortgage on a two bedroom home with a swimming pool in the backyard, that was the dream when our parents who worked eighty work weeks in car factories in Detroit the birth place of Ford and GM which provided jobs to average hard working people in American over twenty years ago. That was the true American Dream providing jobs to American workers, getting out of high school or college and landing a great job which would pay your bills for life, now if you look at the average American family these days most family's find a struggle to put food on the table or a shelter for their kids every single night in city's across America. If you like most Americans like myself that are working two or three jobs just to put bread on the table, this should not be the case in the richest nation in the world if our military can afford to buy new weapons to bomb terrorists cells in another country then we should be able to raise the minimum and professional wages in the good old USA to level which decreases middle class poverty. How is it the other industrial nations have figured out by having a mixed economy that combines social capitalism, and does not allow the richest one percent to get rich and the middle class to be driven to poverty, we should as America adopt ideas from other nations on social capitalism and health care as to make America better for our citizens. As Americans when we think of the future of our great nation, that one day we like our children to inherit if we leave a nation which is broken in terms of poor social and economic programs what kind of example are setting for our children that America does not care about your well being and health and that the all might dollar will be always be constant driving point in the land of milk and honey. Michael Jackson said that hard times don't go away and you must open your mind, we should as Americans work together from the average family to our congress leaders, to find way's to combat middle class poverty and make food stamps and social agency's a thing of a past in city's across America for years to come.

    August 14, 2014 at 11:28 pm | Reply
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