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Finally giving the middle class the pay raise they deserve

May 30, 2018
Ro's Op-Eds
Ro Khanna

The Boston Globe

Earlier this year, a casual reader would have seen headlines declaring that the economy is booming in certain big, coastal cities like San Jose or Boston. The business sector also had articles reporting “Stocks finish at record highs” and “S&P 500 has best start to a year.” There is no doubt that our nation’s wealthiest have done well.

But working families have seen their incomes stagnate across the country, including in those very coastal regions whose growth is leading our technology economy. Between 2005 and 2014, 81 percent of US households saw their wages remain flat or decline. That percentage has not fallen much in recent years.

In fact, income inequality is a particularly acute challenge in booming tech towns. Many teachers, nurses, firefighters, and electricians can no longer afford to live in cities where rent is nearly $2,500 for a one-bedroom apartment. In Silicon Valley, the gap between the haves and have-nots has widened. While top earners have seen their income increase by more than $60,000, nearly a third of households don’t earn enough to meet their basic needs without assistance. Boston is currently building offices and hotels to support new tech businesses; like these other tech-boom regions, the city will need to be affordable for the service people who work in those buildings.

A recent survey found that people believe the reasons for growing income inequality and disparities are globalization, immigration, and corporate elites. This has led some politicians to use anti-immigrant and anti-institutional rhetoric to win votes.

But appealing to fear is not the American way. We need to draw on another vision, one rooted in our values, if we want to address inequality and stitch the fabric of our cities and nation back together.

As a start, it is time to expand the Earned Income Tax Credit (EITC) dramatically. The EITC is a refundable tax credit for working families. The Grow American Incomes Now (GAIN) bill expands the EITC to compensate for the loss of wages of the bottom 40 percent of wage earners since 1979. The GAIN Act roughly doubles the EITC for working families and increases the credit for childless workers almost six-fold. It would mean that any family making up to $75,000 would see an additional $6,000-$10,000 in their pockets, which they could use to pay for housing, food, or education.

This legislation would provide employers with an incentive to hire, and it would provide the unemployed with an additional incentive to seek work. If it is coupled with a $15 minimum wage, then ordinary Americans will finally get the pay raise they deserve.

This legislation is just a first step. More policies — like subsidized employment, strengthening collective bargaining rights for workers including for subcontractors, and investing in career training programs and apprenticeships — must complement this EITC expansion. Every economist knows that the constraint on America’s future economic growth is consumer demand. Put simply, we need people making enough to buy products for America’s economy to succeed.

My belief that ordinary Americans are responsible for America’s success is shaped by my upbringing. I still remember seeing my parents, when returning home, waiting in line at JFK airport to have their green cards stamped. I was fortunate to be born and raised in Bucks County, Pa. — a community that believed in and nurtured my potential. I grew up with neighbors who were teachers, nurses, electricians, and, yes, engineers. It was a typical middle-class neighborhood, where the kids of executives and the kids of union workers were on the same teams in Little League.

The secret to America’s economic prowess is the work ethic, ingenuity, and grit of ordinary Americans. They need a stake in the new economy. It is for policy makers to ensure that the benefits of innovation and tech are shared by the unsung workers who helped build our nation and whose success is key to our nation’s future competitiveness and economic growth.