The tide is turning against rich CEOs

The CEO of McDonald’s (MCD) has been a regular presence at fast-food protests. Not because he's ever shown up, but because fast-food workers demanding a raise routinely point out that the burger chain paid its chief $7.3 million last year while many of its workers required food stamps to survive.

Highlighting that awkward discrepancy finally seems to have accomplished something, now that a wage board in New York has recommended the state raise the minimum wage for fast-food workers from $8.75 (the minimum for all workers in the state) to $15 by 2021. Not long ago, a 71% hike in any state's minimum wage seemed laughable. But the economy has improved, corporate profits have strengthened--and policy makers finally seem to be buying the argument that if companies can pay CEOs millions, they ought to share more of the wealth with ordinary workers.

Nationally, the minimum wage is $7.25 per hour. Municipalities can set the minimum higher if they want -- and many have been doing just that. Seattle, Los Angeles and San Francisco now have a $15 minimum wage. The University of California just said it, too, will impose a $15 minimum wage across its 10 campuses. Chicago recently approved a $13 wage floor. Other states and cities in cheaper parts of the country have boosted the minimum wage to lower levels that still represent a sizeable percentage increase.

Though the New York wage board's finding is just a recommendation, state officials are likely to act, making the $15 minimum wage a reality across the state. For an entry-level minimum-wage worker, that would represent an annual raise of more than 10% per year through 2021. And activists hope the same threshold will spread to other industries and states.

Part of the minimum-wage momentum comes from a renewed focus on those falling behind as the economy gets back to normal. But there also seems to be a pivotal change taking place as the political system begins to respond to the widening pay gap between the rich and the rest. Corporate bosses accustomed to getting their way may soon find they’re losing power in ways that affect the rules their companies must abide by and even their firms' profitability.

Average pay for a big-company CEOs is $16.3 million, according to the left-leaning Economic Policy Institute. In 2014, that was 303 times what the typical worker earned. The CEO-to-worker gap today isn’t the highest ever (in 2007 it was 345-to-1) but it has exploded since 1978, the point at which income inequality in the United States generally started to worsen. Back then, the CEO-to-worker pay gap was just 30-to-1. Widening awareness of the problem has now made income inequality a staple of political campaigns, bestsellers lists and even movies.

In New York, the legislature had shown little interest in addressing minimum wage concerns, so Gov. Andrew Cuomo formed the wage commission to make a recommendation, bypassing the legislature. The commission turned out to be unsympathetic to the concerns of restaurant owners concerned about a big jump in labor costs. It also disregarded suggestions that it’s bad policy to boost wages in one part of one industry, while ignoring all other sectors.

New York City is a high-wage, high-cost metropolis that can probably absorb the wage hike. But distant regions such as Syracuse, Rochester and Buffalo are more like middle America than Manhattan, which means the higher wages could be a genuine hardship for smaller chains or those with lower profit margins. New York resturant chains may file a legal challenge to the way the state handled the matter, arguing that the minimum wage can only be set by the legislature passing a law. For now, however, a measure that would have been hopeless a few years ago will soon go into effect.

This doesn’t mean the pitchforks are coming for well-paid CEOs. But it does suggest the immunity from political pressure the 1% has generally enjoyed is faltering. This will show up most notably in campaign promises made by presidential candidates to address the wealth gap--and perhaps in actual policy changes before long.

Hillary Clinton, the leading Democratic candidate for president, has already attacked CEO pay and pledged to raise taxes on investment income earned by the wealthy. Expect this to be a key campaign theme for Clinton, especially given the surprise popularity of Bernie Sanders, the most leftist Democratic candidate, who revs up cheering crowds by vowing to “engage and defeat the billionaire class of America.” Sanders wants to raise the national minimum wage all the way up to $15, much higher than President Obama's target of $10.10. Sanders would also reduce the tax deductibility of some forms of executive compensation, which in practice would lower CEO pay.

It’s not surprising that Democrats want to raise taxes on the wealthy. But polls show around one-third of Republicans also support higher taxes on the rich. Republican presidential candidate Marco Rubio has a tax plan that abandons the traditional Republican idea of slashing tax rates for everybody. Instead, his plan would keep the top income tax rate close to where it already is. And some higher-income Americans might actually pay more in taxes under Rubio's plan, not less. Jeb Bush and other Republican candidates are also focusing on income inequality, though they're not going as far as threatening to raise anybody’s taxes.

There’s a big difference, of course, between a plan touted during a political campaign and an actual law that changes take-home pay. Some wealthy taxpayers who have watched tax-hike schemes get batted down for years probably feel it’s no different this time around. But a few years ago, there seemed to be no chance the minimum wage in New York would hit $15 any time soon. The future arrived faster than expected.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.