Drop in official
jobless rate masks
President Obama put the focus on inequality in his address on Dec. 4.
SEVERAL SEEMINGLY unrelated recent developments have turned the spotlight on the vast and increasing inequality in America.
President Obama used his Dec. 4 speech to focus clearly on the issue. It has also been highlighted in spreading state and local initiatives to increase statutory minimum wages, and strikes against major US employers in retail and fast food industries.
The minimum wage initiatives are the populist expression that something is gravely amiss, despite the headline-grabbing drop in the unemployment rate reported on Friday.
Federal action such as the president suggested is sorely needed to make the American dream again within grasp of those left behind since the Great Recession.
THE FOCUS ON inequality is the result of several emerging, well documented trends.
“[I]t’s not surprising that the American people’s frustrations with Washington are at an all-time high,” the president said in his address to the Center for American Progress.
One of the main reasons is that the federal minimum wage has not budged since 2009, and in fact its purchasing power is now the same as it was 40 years ago.
“[A] dangerous and growing inequality and lack of upward mobility … has jeopardized middle-class America’s basic bargain – that if you work hard, you have a chance to get ahead,” President Obama said.
“I believe this is the defining challenge of our time: Making sure our economy works for every working American.”
The story at CNBC on how stagnant wages are holding back the economy. Click image to enlarge.
But the evidence abounds that, even though the official unemployment rate dropped to 7.0 percent in November, the benefits are not being widely felt by those at the lower end of the income pie.
One of the reasons was clearly stated on the business web site CNBC in the story Yes, more jobs, but wage growth holds up recovery
“The job market may be gradually improving, but the gains aren’t showing up in worker’s paychecks,” John Schoen reported on Dec. 6
“And the resulting belt-tightening continues to weigh on an economy heavily dependent on consumer spending.”
Schoen noted that average hourly earnings rose a minute 4 cents, and explained its effects on job seekers thus:
“With millions of qualified, experienced workers … willing to accept less pay in a tough job market, employers had little motivation to pay more,” he quoted an economic expert in the matter.
Below the horizon for most is a popular uprising against the stagnation in pay despite a slowly improving unemployment picture.
States like Washington and California have already approved new minimum wages far above the $7.25 per hour federal minimum; and similar moves are being implemented at the local level of cities and counties.
We reported on this trend when it emerged more than a month ago in Support grows for minimum wage increase.
What’s notable is that whenever a proposition is put before voters to raise statutory minimum wages, these are approved – often with overwhelming majorities – despite massive opposition from business interests.
This was highlighted again in The New York Times on Dec. 7 in the story Fleeing to Next Town, Bosses May Find Minimum Wage Is Rising There, Too.
Democrats see it is a winning issue, reported Trip Gabriel.
The New York Times story on local minimum wage initiatives. Click image to enlarge.
“Democrats across the country are hoping to use the issue in next year’s midterm elections,” the report said.
“Drives to place a minimum-wage measure on the 2014 ballot are underway in half a dozen states, including three — Arkansas, Alaska and South Dakota — where Democrats are fighting to retain vulnerable Senate seats in states that voted for Mitt Romney, the 2012 Republican presidential nominee.
“There is much more action at the state and local level around raising the minimum wage than we’ve ever seen before,” said Paul Sonn, the general counsel of the National Employment Law Project, which tracks the issue. “We clearly think what’s driving it is the fact that the economy is producing mostly low-wage jobs.”
That is a key element.
The drop in the unemployment rate has occurred largely because of growth in low-paid, service sector jobs like retail and fast food industries – the very same ones targeted by recent wage protests.
What Gabriel pointed out in the story is that employers cannot flee to neighboring jurisdictions to escape the new minimums. Services must be located near the consumers they serve; they cannot be “off-shored” to low wage locales.
These trends were brought together in The New York Times editorial on Saturday headlined Work and Rewards.
“Unfortunately, job creation remains concentrated in low-income work, including in retail, restaurants and bars. It is little surprise that fast-food workers have been organizing and agitating for better pay,” the editorial said. “Their employers are adding jobs and earning profits, but pay is stuck around $9 an hour.”
Because of the low wages, huge numbers of people with jobs are still forced to rely on government programs to get by. This is a direct subsidy to massive corporations like McDonalds and WalMart.
“A recent study found that more than half of fast-food workers rely on public assistance. A wage increase — the strikers are asking for $15 an hour — would clearly help them, and everyone else, because the public aid they require costs taxpayers an estimated $7 billion a year,” The New York Times wrote.
A proposal to increase the federal minimum wage – which would cover everyone – to $10.10 per hour “is years away from becoming a reality,” the Times noted.
Calling, among other things, for an increase in the minimum wage, President Obama noted that the social contact “at the heart of our economy has frayed.
“Increasing inequality … challenges the very essence of who we are as a people. We are a better country than this.
“So this is an issue that we have to tackle head on.”
He is absolutely correct. His leadership on this issue is both moral and political: it is the right thing to do and a smart move politically.
It is a winning issue on which the president may yet reclaim his legacy, tarnished by the botched rollout of healthcare reform. And it’s one progressive can ride to victory in 2014.
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