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It's Time for a Negative Income Tax

A worker views a monitor at the drive-thru window of a McDonald's Corp. restaurant in Little Falls, NJ
A worker views a monitor at the drive-thru window of a McDonald's Corp. restaurant in Little Falls, NJPhotograph by Emile Wamsteker/Bloomberg

The latest data show that the job market continues to improve, slowly. Payrolls have expanded at a moderate average monthly rate of 189,000 over the past 12 months. Assuming no government shutdown or debt ceiling crisis in the fall (please), most economists predict more of the same. The median forecast of economists surveyed by Bloomberg call for an average monthly gain of 185,000 in the fourth quarter of this year and 191,000 a month in the first quarter of 2014. All told, the job market is on the mend.

The same cautious optimism doesn’t hold for wages. Employees took home less income in July, with hourly earnings down an average 0.1 percent for the month. Over the past 12 months, hourly earnings are up 1.9 percent (ending in July), essentially flat after taking the 1.8 percent rise in consumer price inflation into account (ending in June). While these figures reflect a subpar job market, they’ve become normal for low-income and middle-income workers. Hourly wages of workers with less than a high school education are down 20.4 percent from 1979 to 2011 (in 2011 dollars), according to the Economic Policy Institute. The Washington (D.C.) think tank calculates that hourly wages for high school-only workers have fallen 4.68 percent and for those with some college, 1.4 percent. Little wonder low-wage fast-food workers are staging protests calling for higher wages in major cities. (For a powerful illustration of the everyday impact of growing income inequality, check out McDonald’s $8.25 Man and $8.75 Million CEO Shows Pay Gap.)