“Job security, with good wages and durable industries. A good education. A home to call your own. Affordable health care when you get sick. A secure retirement even if you’re not rich.”
That’s President Obama’s understanding of the American middle class. And, in his major economic address in Galesburg Illinois this afternoon, the President acknowledged that this kitchen table vision of the American Dream was in danger. The broadly shared growth that led to a flourishing of the middle class in the years after World War II had stalled over the last 30 years:
Technology made some jobs obsolete. Global competition sent others overseas. It became harder for unions to fight for the middle class. Washington doled out bigger tax cuts to the rich and smaller minimum wage increases for the working poor. The link between higher productivity and people’s wages and salaries was severed – the income of the top 1% nearly quadrupled from 1979 to 2007, while the typical family’s barely budged.
Towards the end of those three decades, a housing bubble, credit cards, and a churning financial sector kept the economy artificially juiced up. But by the time I took office in 2009, the bubble had burst, costing millions of Americans their jobs, their homes, and their savings. The decades-long erosion of middle-class security was laid bare for all to see and feel.
President Obama has significant authority to improve many of the poorly-paid workers whose work is paid for with our tax dollars.
The story is a far more accurate account of the trends shaping American’s daily lives than most of Washington’s political discourse. And there is no question that the President’s policy proposals would help to build a strong and diverse middle class – in fact, many resemble policies we’ve called for at Demos to do just that. If we did raise the minimum wage, make high-quality preschool available to all, invest in infrastructure and research and development, strengthen manufacturing, and enable students to go to college without taking on onerous levels of debt, the middle class would indeed be strengthened and more Americans would be able to work their way into its ranks.
It would also have been exciting to hear how the President would reverse trends that made it harder for unions to fight for the middle class (we’ve discussed some old and new ideas at Demos) but we can hope that’s coming in a later speech.
Yet powerfully as the President articulated his vision of an America “poised to reverse the forces that have battered the middle class for so long,” the dominant sense was one of profound frustration with an obstructionist Congress that lacks any economic plan beyond cutting spending and gutting laws protecting the nation.
The President vowed that Congress would no longer be an obstacle. For example, he would highlight companies like CostCo that recognize that paying their workforce livable wages is both good business and good for the country. It’s a wise strategy: our research suggests that if the nation’s large retail companies raised wages for their low-paid employees to just $25,000 per year, it would lift 1.5 million retail workers and their families out of poverty or near poverty, add to economic growth, and create over 100,000 new jobs – while also increasing sales for retail companies themselves.
If the President can successfully use his bully pulpit to get companies to act, the results could be profound. A particularly potent impact could be achieved if the President used his Administration’s connections to Walmart, the nation’s largest retailer and largest employer, to persuade the company to raise employee wages and respect its employees’ right to organize. Walmart is an industry trendsetter with an unparalleled capacity to reshape the landscape for retail work.
The President also vowed that “whatever executive authority I have to help the middle class, I’ll use it.” That’s a tremendously exciting proposition. To begin with, the President could make a big difference for at least one group of low-income Americans trying to climb into the middle class – workers employed by federal contractors. Our research finds that nearly two million private sector employees paid through federal funds earn wages too low to support a family, making $12 or less per hour. Through an executive order like the one that President Lyndon Johnson signed in 1965 to mandate equal employment opportunity for federal contract employees, President Obama has significant authority to improve many of the poorly-paid workers whose work is paid for with our tax dollars.
President Obama is right to commit the remainder of his presidency to reviving the American middle class. Both his legislative agenda and his executive actions have great potential for moving the nation forward.
Amy Traub's research focuses on consumer debt, job quality and job creation, and policies to build the American middle class. Most recently, Traub coauthored Underwriting Bad Jobs: How Our Tax Dollars Are Funding Low-Wage Work and Fueling Inequality.