The President Drills Down to the Core Challenge: Creating Good Jobs and Raising Wages

In his State of the Union address last night, President Obama articulated some core truths that ought to guide economic policy, with lines like “the best measure of opportunity is access to a good job,” and “Say yes.  Give America a raise.”

We need policies to create more jobs, but we must insure that they’re good jobs, with benefits and decent pay that can support a family and fuel economic growth based on what people earn on the job, as opposed to what households borrow or “gain” in asset bubbles.

The president highlighted the problem of stagnant wages, noting that “women hold a majority of lower-wage jobs—but they’re not the only ones stifled by stagnant wages.” This is absolutely true. I illustrated this point recently by pointing out that the share of young (ages 25-34) men earning poverty-level wages ($11.29 in 2012) had doubled from 1979 to 2012, jumping from 10.8 to 25.5 percent. Young women were even more likely to earn poverty-level wages, with 31.1 percent doing so in 2012. There’s been some, but not much, progress for women on this front, since a third earned poverty-level wages in 1979.

This is not news to us at EPI—we’ve focused on job quality and wage stagnation since our founding in 1986, and pounded on these themes in the twelve editions of the State of Working America and numerous other works. Generating better jobs and better pay is the key to addressing inequality and strengthening and expanding the middle class. Unfortunately, we have only seen broad-based wage growth for a few years (the late 1990s) over the last four decades. Over the last ten years there has been no wage growth for the vast majority of workers, white collar or blue collar, among college and high school graduates. We cannot get where we want to go unless different wage dynamics are generated and that has to be a central focus of economic policy. The president’s call for Congress to pass the Harkin-Miller minimum wage bill was absolutely right, as is his executive order requiring federal contractors to pay $10.10. Providing income to working families through a robust social insurance system, and work supports such as an improved EITC, are also pillars of economic growth and living standards.

The president also said that “we have to make sure that every American has the skills to fill those jobs.” This is also true, and relates, in my view, to facilitating upward mobility—providing education and skills to disadvantaged and working class children so they can obtain access to the good jobs we need to generate. But we know from the president that high school graduation has hit “its highest level in more than three decades” and that “more young people are earning college degrees than ever before.” The problem workers today face is not a skills deficit but a wage deficit, a lack of good jobs. This is clearly evident to anyone open to seeing the accumulating evidence of stagnant wages and underemployment of college graduates.


  • pops07

    Raising the minimum wage is a sucker’s gambit that serves only the political class. A business that meets this new wage floor will have to raise the prices of its goods and services in order to stay profitable. So the upward spiral of increased market prices pretty well renders the higher paychecks fruitless. Welcome to the world of liberal smoke-and-mirrors.

    • RobertJStedman

      Show me any relevant studies that supports your comment. It is the lack of wage increases for the workers that have lead to the profits going to the business due to inflation with no raises going to the workers that is the cause of the inequality.

      • pops07

        So the upshot for you is to deny businesses a profit, thereby costing jobs? Really?????

        • benleet

          Corporate profits are at their highest on record, little to worry about them. Read the article at the NYTimes http://www.nytimes.com/2013/03/04/business/economy/corporate-profits-soar-as-worker-income-limps.html?pagewanted=all&_r=0

          – Wage income for most workers is not growing while the economy grows. How will the vast majority, 80% of workers, purchase the value of what they produce? It won’t happen, layoffs and more unemployment will result, without a balance between profits and consumer incomes. Balance is the goal, not a one-sided affair. Wm. Lazonick, a professor at UMass, says that for over 10 years for 459 corporations on the the S&P 500 they devoted 94% of their profits to dividends and stock buybacks — not to expansion, employee wages or research. I feel that I may be wasting my effort on someone who has ideological blinders on, pops07. From Lazonick’s article: For 2001-2010, 459 companies in the S&P 500 Index in January 2011 distributed $1.9 trillion in dividends, equivalent to 40 percent of their combined net income, and $2.6 trillion in buybacks, equal to another 54 percent of their net income. After all that, what was left over for investments in innovation, including upgrading the capabilities of their workforces? Not much. — http://www.huffingtonpost.com/william-lazonick/how-american-corporations_b_1399500.html

        • RobertJStedman

          No I apposed to the businesses denning a living wage and other tax payer having to pay additional taxes to provide subsidies to the greedy businesses. There is no evidence that raising the minimum wage will cost any jobs.

  • Cynthia Alff-Steinberger

    Thank you for this essay –
    I would like to call attention to an OXFAM report – in case anyone missed it -
    Last week Oxfam published an informative report entitled “Working for the Few – Political Capture and Economic Inequality”; the Guardian article on this Oxfam report, entitled “Oxfam: 85 richest people as wealthy as poorest half of the world” is at http://www.theguardian.com/business/2014/jan/20/oxfam-85-richest-people-half-of-the-world
    with a couple of graphs about “the rich get richer”, from the second one it is seen that in the USA, the share of national income going to the richest one percent has risen from 8% to 20% in the past 30 years.

    The Oxfam press release re its report is at
    http://www.oxfam.org/en/pressroom/pressrelease/2014-01-20/rigged-rules-mean-economic-growth-increasingly-winner-takes-all-for-rich-elites
    and the link to the full report .pdf file is
    http://www.oxfam.org/sites/www.oxfam.org/files/bp-working-for-few-political-capture-economic-inequality-200114-en.pdf

    and, looking just now I found a comment by Eliza Anyangwea, an occasional Guardian journalist, who quotes a tweet [sic] from Branko Milanovic, a World Bank economist and “inequality specialist”, which is in full: “What can curb inequality is not feasible, what is feasible is not going to change it. .” Can this be real? Yes, it is, on-line at https://twitter.com/BrankoMilan/status/425740938632130560 – a shorter tweet might read “let them eat birdseed”.

  • Daniel Zbytek

    Growing profits of the wealthiest are wasted – they reinvest the again into bank papers but rarely in real economy. In this way GDP growth is a myth. What is the reason to create a
    false money nobody is able to use reasonably?