American dream millions can't afford

By Peter Huck

Obama talks of a liveable wage for all Americans but he faces an uphill battle against entrenched foes

Homeless in the land of plenty ... millions of Americans cannot afford the basics of life, but the gap between rich and poor is widening. Photo / AP
Homeless in the land of plenty ... millions of Americans cannot afford the basics of life, but the gap between rich and poor is widening. Photo / AP

In 1998, journalist Barbara Ehrenreich decided to see if she could get by working unskilled, low-wage jobs, a tradition dating back to George Orwell and Jack London.

Her report, Nickel and Dimed; On [Not] Getting By in America, became a minor classic, detailing a fraught, hand-to-mouth existence, variously spent as a waitress, house cleaner, nursing aide and Walmart clerk, beyond the ken of comfortably off, middle-class Americans.

Flash forward a decade or so and many more Americans know, to their cost, what it is like to eke out an existence without a safety net, as the fallout from the worst economic downturn since the Great Depression continues to stalk daily life.

The looming gap between rich and poor - the pay ratio of a Walmart chief executive to a worker is 1034 to 1 according to PayScale - mocks the notion that the cherished American Dream is built on hard work and equal opportunity.

Such disparity is part of a worldwide trend towards inequality, highlighted last month by an Oxfam report that said the world's 85 richest people have as much wealth as the 3.5 billion poorest people on the planet, about half the world's population.

No wonder the dispossessed have taken their anger to the streets as the elite - inequality was briefly a buzzword in Davos - talk the talk but do nothing else.

This week, President Barack Obama did more talking, making economic inequality - and how to fix it - the central theme of his fifth State of the Nation address to Congress.

"Inequality has deepened, upward mobility has stalled," he said. "The cold hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by - let alone get ahead. And too many still aren't working at all."

The task ahead, he said, was "to reverse those trends".

It had been widely signalled Obama would raise the US$7.25 ($8.87) an hour US minimum wage - introduced in 2009 - and he promised to use an executive order to give workers on new federal contracts US$10.10 an hour.

But only Congress can mandate a pay rise for existing US contractors and private employees.

Tellingly, Obama's pledge was an end-run around Congress, where conservatives oppose government intervention - other than welfare capitalism, such as a US$4 billion-a-year handout to the fossil fuel business - in the economy.

The President also asked Congress to extend unemployment insurance; 1.6 million Americans were kicked off the dole in December.

While unemployment is at a five-year low - 10.4 million people - and 8 million jobs have been created since 2010, a livable wage eludes many Americans. Women average US77c to the male dollar.

Concern about inequality is widespread. A Pew Research Centre poll in January found 65 per cent of Americans felt the rich-poor chasm had deepened over the past decade. This belief was shared across the political spectrum.

But there was sharp disagreement about what should be done to help. Ninety per cent of Democrats favoured government intervention; only 45 per cent of Republicans agreed. Sixty per cent felt opportunities still exist for hard workers, a sentiment not always endorsed by those marooned at the bottom.

Pay rises and extending unemployment insurance in hard times have been standard policy tools since the Eisenhower era, says Gary Burtless, an economist at the Brookings Institution.

But Republicans, dominated by Tea Party conservatives, have veered to the right, and "have a strong antipathy towards raising the minimum wage or extending unemployment benefits".

Minimum wage advocates are likely to do better at state level - 13 states raised the rate in December. Eleven more states and Washington DC are pondering similar moves. If state wages are higher than the US minimum the state figure applies.

But the US economy needs to elevate more people above minimum-wage, dead-end jobs. Obama said American workers, rated poor in literacy and numeracy by the OECD, need better on-the-job training to compete in the global economy. That will require funding from Congress.

Obama's speech was partly pitched towards November's midterm elections. Republicans are expected to increase their majority in the House of Representatives, and maybe gain a Senate majority, so Obama has his work cut out.

Appealing to traditional Democratic concerns about inequality fires up the base. The use of an executive order suggests he will try to bypass Congress whenever possible, but he is still hampered by a sluggish economy.

Despite job creation, many Americans scramble for work. In Ehrenreich's day a college graduate might muscle into the IT boom. These days they often live at home and count themselves lucky to have a barista gig with tips at Starbucks, a labour shift that is freezing out unskilled workers.

Demands for a liveable wage fuelled protests last November by Walmart workers, backed by the United Food and Commercial Workers Union, at 1500 stores.

Many need food stamps, public housing aid and other assistance to pad out meagre wages - Walmart said workers averaged almost US$12 an hour - making the world's largest company, with revenue last year of US$469 billion and 2.2 million staff, an indirect beneficiary of US largesse.

The President's speech referenced Costco, a huge retail chain. According to a calculator at the Mother Jones website, a single man supporting a wife and two children in Los Angeles would have to work for 64 hours at Costco to secure a modest livelihood, but 156 hours at Walmart for the same result.

The notion of a liveable wage is contentious. Obama's bid to raise the wage to US$9 in 2013 was blocked by Republicans, who argued this would drive up costs and, hence, prices. Proponents say higher wages reduce turnover and give low-wage staff - 3 per cent of the workforce, mostly in the service, maintenance and farm sectors - more cash, speeding up economic growth.

Can Obama turn the tide? Inequality has soared since the 1970s. Obama said the purchasing power of the minimum wage is "worth about 20 per cent less" than when Ronald Reagan started his neoliberal jihad in 1981, cutting regulations and unleashing the market. The 1981 minimum wage of US$3.35 is worth US$8.59 today, adjusted for inflation. A 2011 Congressional Budget Office study found after-tax earnings for the top 1 per cent soared 275 per cent between 1979 and 2007. Middle-class income barely nudged 40 per cent.

Obama hopes his speech will reboot his flagging presidency, beset by dismal poll ratings and intransigent Republicans foes.

Raising the minimum wage will funnel a few dollars to the needy. But it is a very modest start. Inequality rots from within. Millions of illegal immigrants live in the shadows, without help. Taxes favour the rich. Those at the bottom feel the deck is stacked against them. There is a long way to go before many Americans, living from pay cheque to pay cheque, if lucky, can reboot their dreams.

- NZ Herald

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