The Dangers of Obama Aiming Too Low on Inequality Issues in the State of the Union

On Monday, the president’s allies leaked the top points of his State of The Union speech to be delivered tonight and left no doubts that Obama would focus on America’s lack of upward mobility. Looking past his congressional enemies, he will issue executive orders, such as requiring federal government contractors to pay at least a $10.10 minimum hourly wage. And looking at Capital Hill, Obama will again call for passing legislation to raise the federal minimum wage to $10.10 and start campaigning for it nationwide.   

The 2014 State of the Union will build on Obama’s big inequality speech last December, we are told, with the top action item raising the federal minimum from its current $7.25 rate. In the balcony with the First Lady will be a Michigan pizzeria owner paying $10 an hour, as an example that it can be done. Also in the presidential skybox will be a woman featured in Maria Shriver’s recent report on low-income women living on the brink. On Wednesday, Obama will speak at a CostCo and a U.S. Steel plant.

There is no doubt that raising the federal minimum wage is very important for millions of workers. But it is the starting point, not the finish line, for a national discussion on wage suppression, where, except for the very top, American pay scales have remained stuck for decades despite growing productivity.

Just how far Congress or White House can go to offset America’s rampant inequality is an open question. Obama’s $10.10 wage, about a $1 more than most state minimums, is not going to end paycheck-to-paycheck struggles for the poorest Americans. Last year’s fast food worker strikes demanded $15 an hour, plus benefits. Top labor economists say the target should be at least $12.50 an hour—closer to Germany’s new minimum wage.

What’s taking shape has all the makings of a classic Obama disappointment. In the first instance, his target—a $10.10 wage floor—is too low. And them comes the danger of lofty rhetoric overselling an underwhelming remedy. Obama’s handlers have said that he will strike a “We can’t wait” tone, cite higher minimum wages in 20 states and Washington, talk up businesses that are paying more and prospering, and say that raising the minimum wage strengthens families and communities, and increases the odds that someone who is willing to work hard can be a success in America.

While Obama is making these points, many Republicans and conservatives will turn to their newly crafted script on why a $10.10 minimum wage may not be so bad. Ron Unz, the California entrepreneur who was a former GOP candidate for governor and is now bankrolling a ballot initiative to raise the state’s minimum wage to $12, said the issue is one where conservatives don’t automatically oppose it. Unz explained in an interview Monday that it’s not a tax increase, not a big government solution—as private businesses implement it, and might cut federal welfare spending by up to $40 billion because the lowest-paid workers would no longer qualify for public assistance.

But as you ponder how national bipartisan backing can emerge for what’s a long overdue and modest step, pay attention to what is not being talked about in Congress or on the national political stage. 

Wage suppression is not just an issue facing the poor. It has been a decades-long trend across every American income bracket except for the very top. Oxfam recently released a global report on inequality and said that had the share of income going to the richest one percent stayed the same as 1980, each American would have about $6,000 more today. That equates to an 11 percent raise for the average U.S. income of roughly $51,000.  

Wage stagnation deeply affects the working and middle classes. If Obama just shines a light on the wages of poor Americans, he may not inspire middle-class voters to pressure Congress to respond to a broader economic security agenda facing average Americans, including expanding safety nets like Social Security.

Robert Reich, the former Secretary of Labor, frequently writes about why America is not in open revolt against the advantages that the richest Americans keep accumulating. He says the poor and working classes are scared of losing their jobs. He says recent college and university graduates also are scared because of debt loads that are on par with their parents’ mortgages. And he says that the middle class feels abandoned by government.

One can only wonder if the shrinking sense of what’s politically possible in Washington today does not include government’s ability to address big economic issues.

With wage suppression and income stagnation, listen carefully to Obama’s words—and to his top Democratic allies in Congress—and see where they frame the problems. Will they only talk about raising wages for the poor, not higher up the economic ladder? Will they talk about new government formulas for future wage increases—replacing inflation with productivity measurements—or skip that? Will they push for a new way to define the federal poverty line, not just keep using 1960s baselines that are outdated today?

And will they link the wage and inequality discussion include Social Security? Obama’s handlers said that Senate Majority Leader Harry Reid will schedule a vote on a $10.10 minimum wage bill in early March. Should that pass Congress, it could become a striking benchmark in the retirement security debate. Today, the average monthly Social Security check for elderly Americans is $1290. If that were a monthly wage, it would be equal to $8.06 a hour—far below the minimum living wage for the poorest Americans.

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