USA Today’s Susan Page recently interviewed Secretary of Labor Thomas Perez. She asked Perez about a paradox in the current economic recovery: unemployment is down with little increase in wages. Perez said that there is still “slack” in the market, which would mean that unemployment would have to go even lower to drive increased wages. He also discussed a White House Summit on Workers, which will take place on October 7, 2015. This sounds like good news, but what results will it bring? Perez captured the general mood of American workers this way: “They’re hard and falling behind.” Page cast this as a “disparity between the wealthy and the middle of the workforce.” I would respectfully disagree. From the Occupy protests to the ongoing Fight for 15, low wage working people are voicing their frustration and demanding justice in a way that the middle class is not. That said, most American (I’d guess 70-80%) are feeling anxiety and a lack of security. President Obama put it best when he said, “America needs a raise.”
During his last State of the Union Address, President Obama declared that “America needs a raise.” Yesterday, he acted on those words. The president announced that salaried employees (5 million Americans) making as much as $50,400 would be eligible for overtime. As Laura Clawson of Daily Kos puts it, employers will no longer be able to use exempt status (salaried employees) to keep from paying overtime. This move by the Obama Administration (if it’s not overturned by a court challenge) will either give employees more money or more time off. The 40 hour week will again become meaningful to millions of Americans. It’s a good day for working people.
P.S. President Obama is featured in The Huffington Post on his overtime reform. The president express great confidence that he is doing the right thing for American workers: "That's how America should do business. In this country, a hard day's work deserves a fair day's pay. That's at the heart of what it means to be middle class in America." I agree, but would add that what the president is doing will also help the working class and the working poor, who are often victims of wage theft. We all deserve a fair day's pay.
Laura Clawson of the Daily Kos reports on a big change in labor law that might impact millions of Americans. The Department of Labor is considering an increase to the threshold for overtime pay from $23,360 to $52,000, which means any worker, including salaried employees, making less than that amount would be legally entitled to overtime pay. Clawson notes that this is a change President Obama could make without legislative approval. She also says that the move would probably be opposed in the legislature and courts. Even so, changing the threshold would be a good way to help low wage workers, and it would be a fit punishment for employers who pay employees salary so they do not have to pay overtime. I hope President Obama and the DOL put working people first – raise the threshold.
Companies like McDonalds and Walmart have raised their workers’ minimum wages. While it is a step forward, Laura Clawson of the Daily Kos has documented that these raises still mean that workers need to rely on government support for child care, housing, medical insurance, breakfast/lunch programs for children, and heating assistance. Clawson then shows that none of these subsidies would be needed if employees were paid $15 an hour. As I noted in my last post, a small increase in price will have great benefits for all. As President Obama said, “America needs a raise.”
David Cay Johnston is one of my favorite writers on economics. He presents complex issues in language that is easy to follow and compelling to read. In a commentary published by Al Jazeera, Johnston notes that the recent growth in the U.S economy has not led to a growth in income reported on income taxes. In fact, average income reported dropped from $63,297 in 2012 to $61,668 in 2013. Johnson also presents a chart that tracks labor’s share of income since WWII. Since 2001, capital has been taking a bigger and bigger piece of the pie. He points to political factors, such as the outsourcing of factory jobs due to trade deals. He cites President Obama’s 2011 deal with South Korea as costing “thousands of manufacturing jobs.” He also demonstrates that all working people have been losers recently. While those making $250,000 or more a year did see a 4.8% increase in their reported income in 2013, their total income fell by 8.6% and average income by 12.8%.
What’s the moral of the story? The investor class is king. Workers are more productive than ever. Unemployment is down. Somehow, reported income is declining for all working people. As Johnston warns at the end of his commentary, “The American economy is getting bigger, but average incomes are shrinking. If that trend continues, it will eventually spell economic, social and political trouble for the country.” Johnston’s words frighten me more than ISIL. The real terror is economic.
Laura Clawson of Daily Kos reports on New Jersey Governor Chris Christie’s take on the minimum wage. According to the governor, the minimum wage and income inequality are only problems because Democrats keep talking about these subjects. Christie thinks that more “opportunity” is the real solution to what plagues the U.S. He refers to President Obama as a “class warrior.”
In my view, Christie is the one playing politics. He is a leading contender for the GOP presidential nomination in 2016, and he is now on the trail campaigning for other Republican candidates. The issue of the minimum wage is political, but it is also about people’s lives. It’s a fact that most working people and those in the middle class have fallen further and further behind since 2008. “Opportunity” works well for the investor class and corporate executives. For everyone else, income and benefits have been problems. Not talking about the problem won’t make it go away.
First Seattle – now the Big Apple. Huffington Post reports that the New York state legislature is debating a measure that would increase the state’s minimum wage to $10.10 and enable New York City to set its own minimum wage. According to the article, the income of a minimum wage worker would increase by $100 a week. Low wage workers would spend that money, which would help improve the economy.
Will some jobs be lost if the minimum wage is increased. Probably. But other jobs will be created because of that extra $100 a week in people’s pockets. An increased minimum wage will also spur employers to increase the pay of other hourly workers. President Obama put it best: “America needs a raise.”
Huffington Post offers an interesting take on wage trends since the year 2000. The article, originally from Upworthy, shows that most Americans have seen their income go flat or decline over the last 13 years. Income for the bottom 20 percentile has fallen by nearly 5%. Workers are feeling more and more stress. This article and the accompanying graph helps explain why. As the President said, “America needs a raise.”
I frequently blog about income inequality because it is a vital issue that affects all working people, not just those in low wage jobs. Today, President Obama called income inequality, “the defining challenge of our time.” The President referred to specific types of low wage workers in calling for an increase in the minimum wage. More importantly, he addressed the issue of decreased mobility: not only are more Americans being born into poverty, they seem to be stuck there. The President’s words are good and inspiring. However, during his first campaign, he told labor that he would stand with them and put on his walking shoes to be with them in the picket line. Did Obama march in Wisconsin or Ohio? No. Did he push through passage of the Employee Free Choice Act? No. Hopefully, these good words will lead to some positive action. Let’s remember Jesse Jackson motto: “Keep hope alive.”
There is nothing hopeful about the situation in Detroit. Judge Steven W. Rhodes, a federal bankruptcy judge, ruled that all should be for the creditors, nothing for retired workers who paid into pension funds. David Cay Johnston describes the situation as “stealing from the workers.” His reasoning is clear: Pensions are deferred wages. Would anyone think of taking money from an employee’s paycheck? That would clearly be theft. How is a promised pension any different? Johnson lists several examples of how politicians have played this game in the past. Detroit is just the latest, ugliest example of a trend that is also taking place in my state, Illinois, which is run by Democrats.
As Johnston examines the economic impact of Detroit’s bankruptcy, John Nichols considers the political impact. Citing a study by Demos, Nichols argues that Detroit’s serious financial problems should not have led to bankruptcy. Why did the city go bankrupt? So the Governor could appoint an unelected manager to strip assets that range from pension funds to the great collection in the city’s art museum. Nichols quotes Detroit’s new mayor Mike Duggan, who admits that he will only have power to the degree that it is given by the governor and his manager. The elected mayor is powerless. Nichols captures the problem in these words: “There is a lot more at stake in Detroit, and in Michigan, than one city’s balance sheet. Our understanding of democracy, itself, is being subverted.”
If President Obama is serious about addressing income inequality and mobility, he should start in Detroit. Turn the Justice Department loose on Governor Snyder and his “Emergency Managers,” who lord over cities that are populated mostly by poor African Americans. Clearly American citizens in the cities under Governor’s Snyder’s Emergency Manager system are not enjoying the rights promised under the XV Amendment. Detroit is a good starting point, Mr. President. Save democracy and promote opportunity in that great city.
P.S. David Sirota calls out the fraud in Detroit by discussing funds that can be found for a new hockey arena and $6 billion in subsidies, also known as corporate welfare.
[“Sabbath” is this blog’s Sunday feature that looks beyond jobs and careers.]
The Week Ahead
This very well could be the week the U.S. government defaults on its debt. If that happens, experts say the world economy will be harmed. So why don’t Republicans in the Congress do what their predecessors have done, which is to increase the debt limit? Politics. The GOP and its Tea Party wing have become so desperate in their hatred of President Obama that they are willing to do anything to ensure that his presidency is a failure. I am not being partisan in saying this. Why did the same members of Congress – Boehner, Cantor, Ryan – raise the debt ceiling under President Bush and allow two wars and the new Medicare program to be put off the books if they cared so much about the debt and spending? The simple answer is that Republican leaders in the House only care about politics, and they see default as a path to power. They believe the public will come to blame the President for the consequences of a default, which could include an instant jump in interest rates and a quick trip back into recession.
I’m not a great fan of President Obama. He’s been too soft in all of his dealings with the Republicans. He negotiates by starting with the compromise and then giving away even more. In some way, the GOP’s action could be based on this behavior: They’re sure he will give in again. So far, the president has been steadfast in refusing to compromise, asking to be treated as other presidents have been in the past. The problem is that the current group of Republicans is unlike any politicians we have seen in their ability to invent a reality to fit their rhetoric. They are also very flexible in shifting from demand to demand, moving from healthcare to spending and now a mix of spending and social issues. Many Democrats are gloating that this is the end of the GOP. I’m not so sanguine. If their action drives a weak economy into a tailspin, neither party will benefit, at least initially. Then when the problem isn’t solved fast enough to fit a media news cycle, all blame will be shifted to Obama and the Democrats. Even if the GOP caused the problem, the Democrats didn’t fix it. This seems to be a very high stakes game of chicken. I fear there will be a very ugly crash, and it will begin later this week.
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