Marty Solomon: $15 minimum wage would be economic silver bullet

Despite corporate profits near all-time highs and the stock market's record levels, middle class incomes have fallen.

The disparity between rich and the rest has never been greater. The average income of the 400 richest Americans is $130,000 an hour. The average income of the top million taxpayers is $800 an hour. Yet the average American earns $24 an hour.

While the bottom 40 percent of Americans earn 7 percent of the income, the top 1 percent earns 20 percent.

This disparity seems to be the new normal. What is the answer? Many things have been tried — stimulus, quantitative easing, earned income credits — yet most Americans have been left out.

There is something that has not been tried and could make an immense difference — a silver bullet. Drum roll, please. It's the $15 minimum wage for workers 18 or older.

Today 40 percent of households earn less than $25,000 a year. That is $11 an hour and that's poverty for a family of four, so even a $10.10 minimum wage seems too puny. But a $15 minimum wage could change things overnight.

Guess what? None of America's millions of adult full-time workers would be in poverty. Imagine that.

And guess what else?

It would pump at least $400 billion annually into the economy, creating enormous demand for retail, housing and autos; requiring businesses to increase hiring, and, at the same time, permit millions of American families to enjoy a better standard of living.

Billions in welfare payments would be saved; federal income tax revenues would rise, helping to reduce the federal deficit. State income tax revenues would also increase.

While that's great, what about the downside? Some say that it would force too many people out of work, but what if all competitors paid a $15 minimum wage? Let's look at the facts.

Assume that a company's labor costs are 25 perecent of income and that the average wages of all its employees is $8.90. To raise all employees to $15 minimum would increase labor costs by 68 percent.

McDonald's is a case in point. Its company-owned stores brought in $18.9 billion in revenue last year and spent $4.8 billion on employees. That's 25 percent labor costs. Let's assume that a hamburger sells for $2 and thus, the labor component is 50 cents.

Further assume that the average wage at McDonald's is $8.90. Then the cost of a hamburger could be increased by 34 cents (that is, 68 percent of 50 cents) to cover the increased costs of labor. Additionally, ingredients might cost another 10 percent or 20 cents. Thus the cost of the burger would need to be increased by 54 cents. Most customers would probably never notice.

Arby's sells a Jr roast beef sandwich for $1.49 and sells its twice as large big brother for $5.79. Yet customers buy many times more big brothers. Incredibly, even a $4.30 difference does not seem to deter most buyers who could buy two Jrs for only $2.98. The promised chilling effect of small price increases would seem to be extremely overblown. Some say that business cannot raise prices in today's economy, yet they do it almost every day. Arby's just increased its Jr from $1 to $1.49.

But savings from decreased training costs and reduced employee turnover could make increased prices unnecessary.

And even Walmart would benefit. Walmart would pay higher wages, but because such a large proportion of American consumers buy from Walmart, its profits would, in all probability, skyrocket.

Naysayers always predict doom and financial disaster each time a minimum wage increase is discussed. But it never happens.

While it is impossible to predict precisely the economic impact of a $15 minimum wage, it could be spectacular, kick-starting the country back on the road where everyone shares in the American dream.

For those who think that $15 is too radical, it has already been approved in San Francisco, Oakland, Seattle and Los Angeles.

Let's think big and do something that just might create what we once had in America.