The President’s Economic Speech in 10 Charts (And More)

Yesterday, President Obama gave a speech at Knox College outlining his vision for the US economy. As EPI President Larry Mishel notes, the speech did a great job diagnosing the failure of our economy (and our economic policies) to strengthen and reward the middle-class, even if it was a bit light on prescriptions to address these failures. We look forward to hearing the president’s more specific proposals in the upcoming speeches he has planned.

EPI has researched and documented much of what the president described in his speech. (For a great overview on how the economy has not been working for most Americans over the past 35 years, and what you can do about it, visit our new website, inequality.is.)

Here’s 10 figures that illustrate many of the president’s points, as well as links to some of EPI’s research on these topics.

 

Productivity/Wages and Top 1% Income:

Obama: “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.”

EPI: “The economy’s failure to ensure that typical workers benefit from growth is evident in the widening gap between productivity and median wages. In the first few decades after World War II, productivity and median wages grew in tandem. But between 1979 and 2011, productivity – the ability to produce more goods and services per hour worked – grew 69.2 percent, while median hourly compensation (wages and benefits) grew just 7.0 percent.”

– The State of Working America, 12th edition (page 7)

EPI: “Comprehensive income trends show a striking pattern in average income growth by income group: Income growth is strongly positively correlated with a household’s rank in the income distribution, and the gap in income growth between the highest-income households and the rest is enormous. For example, the top 1 percent of households registered cumulative income growth of 240.5 percent between 1979 and 2007, while households in the bottom and middle fifths of the income distribution posted gains of 10.8 and 19.2 percent, respectively.”

– The State of Working America, 12th edition (page 79)

 

CEO Pay and Long-Term Unemployment:

Obama: “The average CEO has gotten a raise of nearly 40% since 2009, but the average American earns less than he or she did in 1999.  And companies continue to hold back on hiring those who have been out of work for some time.”

EPI: “By 2012 the stock market had recouped much of the ground lost in the downturn and, not surprisingly, CEO compensation with realized options had also made a strong recovery. In 2012, average CEO compensation measured with options realized was $14.1 million, up 12.7 percent since 2011 and 37.4 percent since 2009.”
Mishel and Sabadish, “CEO Pay in 2012 Was Extraordinarily High Relative to Typical Workers and Other High Earners”

EPI: “The share of unemployed workers who have been jobless for more than six months was 36.7 percent in June, slightly below its all-time peak of 45.3 percent in March 2011, and still far above its prerecession share of 17.4 percent in December 2007. The fact that we still have large numbers of long-term unemployed is unsurprising given that the ratio of unemployed workers to job openings has been 3-to-1 or greater since September 2008.”
– Adapted from Shierholz, “February caps off three years of job growth, but much more is needed to fill employment deficit”

 

Student Debt:

Obama: “I’m also going to use the power of my office over the next few months to highlight a topic that’s straining the budgets of just about every American family – the soaring cost of higher education.”

EPI: “The cost of higher education has risen faster than family incomes, making it harder for families to pay for college. From the 1982–1983 enrollment year to the 2011–2012 enrollment year, the inflation-adjusted cost of a four-year education, including tuition, fees, and room and board, increased 130.0 percent for private school and 131.4 percent for public school. Median family income only increased 10.9 percent over this period, leaving families and students unable to pay for most colleges and universities in full. As tuition costs have risen at rates vastly exceeding income growth, it is not surprising that many students have to take on debt to pay for college. In 2010, about one in five of the nation’s households owed money on student debt, a proportion that has more than doubled since 1989.”
Shierholz, Sabadish, and Finio, “The Class of 2013″

 

Mobility:

Obama: “Unfortunately, opportunities for upward mobility in America have gotten harder to find over the past 30 years.  That’s a betrayal of the American idea.  And that’s why we have to do a lot more to give every American the chance to work their way into the middle class.”

EPI: “The preponderance of evidence suggests that mobility has likely declined in recent decades and clearly has not significantly increased, and it has certainly not increased enough to neutralize the steep rise in inequality over the last three decades.”
– The State of Working America, 12th edition (page 164)

 

Minimum Wage:

Obama: “And because no one who works full-time in America should have to live in poverty, I will keep making the case that we need to raise a minimum wage that in real terms is lower than it was when Ronald Reagan took office.”

EPI: “A parent who is a minimum wage worker and works full time, year round, does not make enough money to be above the federal poverty line.  This wasn’t always the case… Until the 1980s, earning the minimum wage was enough for a single parent to not live in poverty.  Indeed, a minimum-wage income in 1968 was higher than the poverty line for a family of three.  But… today’s minimum wage is not enough for single-parents to reach even the most basic threshold of adequate living standards.”
Cooper, “Putting a $9 Minimum Wage in Context” 

 

Good jobs:

Obama: “Good jobs.  A better bargain for the middle class and folks working to join it. An economy that grows from the middle-out. This is where I will focus my energies…”

EPI: “Output per worker increased 48.3 percent from 1979 to 2010, underscoring that workers were getting more productive and the country as a whole was getting richer over this period. If those gains were broadly distributed across the workforce, one would expect to see the share of good jobs increase accordingly. Instead, the share of good jobs declined by 2.8 percentage points from 1979 to 2010.”
– The State of Working America, 12th edition (pages 333-334)

 

Inequality:

Obama: “After all, what makes us special has never been our ability to generate incredible wealth for the few, but our ability to give everyone a chance to pursue their own true measure of happiness.”

EPI: “The American economy delivered extraordinarily equal, and much more rapid, growth in family incomes between 1947 and 1979 than between 1979 and 2007. These data clearly reveal the contrast between the broadly shared growth seen from World War II through the 1979s and concentrated-at-the-top-growth seen since.”
– The State of Working America, 12th edition (pages 26-27)

 

High unemployment is not driven by a skills gap:

Obama: “And I’m challenging CEOs from some of America’s best companies to hire more Americans who’ve got what it takes to fill that job opening, but have been laid off so long no one will give their resume an honest look.”

EPI: “The large increase since 2007 in the unemployment and underemployment rate of young college grads, along with the large increase in the share of employed young college graduates working in jobs that do not require a college degree, underscores that today’s unemployment crisis did not arise because workers lack the right education or skills. Rather, it stems from weak demand for goods and services, which makes it unnecessary for employers to significantly ramp up hiring.”
Shierholz, “In one chart: we have a demand problem, not a skills problem”

 

The Affordable Care Act (Obamacare):

Obama: “Just last week, New York announced that premiums for consumers who buy their insurance in these online marketplaces will be at least 50% less than what they pay today.  That’s right – folks’ premiums in the individual market will drop by 50%.  For them, and for the millions of Americans who have been able to cover their sick kids for the first time, or have been able to cover their employees more cheaply, or who will be getting tax breaks to afford insurance for the first time – you will have the security of knowing that everything you’ve worked hard for is no longer one illness away from being wiped out.”

EPI: “The health insurance premiums announced today for the new health insurance exchanges for New York were far lower than their current individual health insurance market. This is great news for the thousands of New Yorkers who will see their premiums fall, and for the many more thousands who will be able to find affordable coverage when they couldn’t before. This is a promising sign that the health insurance exchanges established in the Affordable Care Act (at least in states taking implementation seriously) could work as planned and improve the range of affordable choices available to consumers.”
Gould, “Prices drop as the Affordable Care Act is implemented”

 

Investment in Infrastructure:

Obama: “We’ve got more than 100,000 bridges that are old enough to qualify for Medicare.  Businesses depend on our transportation systems, our power grids, our communications networks – and rebuilding them creates good-paying jobs that can’t be outsourced.  And yet, as a share of our economy, we invest less in our infrastructure than we did two decades ago.  That’s inefficient at a time when it’s as cheap as it’s been since the 1950s.  It’s inexcusable at a time when so many of the workers who do this for a living sit idle.  The longer we put this off, the more expensive it will be, and the less competitive we will be.”

EPI: “Just because budgeting is all about tradeoffs doesn’t mean that win-win policies aren’t out there. One notable example is infrastructure investment, which both creates jobs in the short run and raises long-run economic growth. Right now we’ve got an amazing opportunity to do something that we need to do anyway at record-low costs, we’re practically being given the money, and if we delay investments, their eventual cost will be much higher. Oh, and it will create jobs. This isn’t win-win, this is win-win-win-win.”
Pollack, “Infrastructure is win-win-win-win”

 

Retirement Disparities:

Obama: “Along with homeownership, the fourth cornerstone of what it means to be middle class in this country is a secure retirement.  Unfortunately, over the past decade, too many families watched their retirement recede from their grasp.”

EPI: “As employers have replaced traditional pensions with 401(k)s, the share of prime-age households with retirement savings has trended upward. But because contributions are voluntary and funds may be tapped before retirement, retirement savings accounts are more affected by economic downturns than traditional pensions. The share of households with savings in retirement accounts expanded in the 1990s but contracted after the 2001 and 2007–2009 recessions. The dropoff was particularly sharp among pre-retirement-age households after 2007, a bad sign for baby boomers’ retirement prospects.”
– Forthcoming from Morrissey and Sabadish