By Bernd Debusmann
Reuters, 7/30/08

WASHINGTON (Reuters) - The minimum wage in the world's richest country has just been raised by almost 12 percent. That followed a 13.6 percent hike last year and looks like major progress for those at the bottom of the economic ladder. At first sight, at least.

Examined more closely, the figures highlight poverty and economic inequality of Third World proportions.

The latest increase took effect last week and brought the minimum wage to $6.55 an hour. Adjusted for inflation, this is less than it was in 1964, the year President Lyndon Johnson declared "unconditional war on poverty in America."

Poverty won, as free-market champion Ronald Reagan put it a quarter of a century later.

Then, 13 percent of the U.S. population lived below the official poverty line. In 2006, the most recent year for which the U.S. Census Bureau has statistics, it stood at 12.3 percent, or 36.5 million people. On the other end of the scale, the U.S. economy produced billionaires at a steady pace.

There are 469 of them, by the latest count of Forbes magazine. In 1982, when the magazine started its annual list of the richest Americans, there were just 13 billionaires. Today, the United States has the largest gap between rich and poor of any Western industrialized country. In terms of equitable distribution of income and wealth, the U.S. is closer to Iran, Argentina or Mexico than to Canada or Germany. (That is according to the Gini index, a complex statistical measure of inequality named after Corrado Gini, the Italian economist who devised it in 1912.)

"There has been a massive shift of income from the bottom and middle to the top," says Holly Sklar, director of Business for Shared Prosperity, a network of business owners supporting higher minimum wages. "The richest 1 percent of Americans have increased their share of the nation's income to a higher level than any year since 1928, the eve of the Great Depression."

Poverty and inequality are not usually subject of wide debate in the United States but this is an election year which might mark the beginning of a change. A poll this month by TIME magazine and the Rockefeller Foundation showed that 85 percent of Americans are unhappy with the economy and think their country is on the wrong track. TIME termed the percentage unprecedented.

The poll also showed a striking shift of sentiment towards the role of government in solving the country's problems. More than 80 percent favored public works projects to create jobs and 70 percent advocated government programs to help those struggling to survive in a sinking economy marked by falling home prices, foreclosures, and sharply higher prices for fuel and food.

COUNTER-REFORMATION?

TIME termed the results "a counterreformation of sorts in a Republican-led era that emphasizes deregulation and self-reliance."

Are there parallels between the present and the mood that led to the New Deal social reforms of the 1930s? Some scholars say yes. In the words of Jacob Hacker, a political scientist at Yale University, "we have an economic order that is not well placed to deal with the challenges of the 21st century, just as back then there was a realization that the world had changed but the government hadn't."

No matter who wins on November 4, Democrat Barack Obama or Republican John McCain, it is difficult to see economic gains flowing as freely to the top 1 percent as they did in the eight years of President George W. Bush.

Both candidates have announced plans to reform a health care system which has contributed greatly to the economic anxieties reflected by polls. There is a good reason why the Census Bureau's annual report is entitled "Income, Poverty and Health Coverage in the United States."

The number of Americans without health insurance has risen relentlessly since the beginning of the millennium and now stands at 47 million (out of a population of 301 million). More than 22 million hold full-time jobs and for many of them, falling ill can spell financial disaster and a slide from the edge of the middle class to the ranks of what is euphemistically known as "the working poor."

That is the label for those working at the minimum wage - an estimated two million - or close to it. Often they work two or three jobs and still can't make it. They include people who are forced to sleep in cars, trailers or shelters.

How miserably the system has failed is highlighted by the large crowds turning up for free weekend clinics run by an organization called Remote Area Medical Volunteer Corps. It was founded in 1985 to bring medical services to the Central Amazon Basin, an area ill-served even by Third World standards.

The organization's founder, Stan Brock, calls the clinics "expeditions" to where the needs are greatest. Sixty percent of the expeditions now go not to the Amazon or other Latin American regions but to places in the United States. The most recent expedition, last weekend, was to Wise, in the southwest corner of Virginia.

Bernd Debusmann is a Reuters columnist. The opinions expressed are his own.
You can contact the author at Debusmann@Reuters.com.(Editing by Kieran Murray)

© Thomson Reuters 2008

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