The Issue: Obama challenges Congress on wages, unemployment

By MARCELLA S. KREITER, United Press International
U.S. President Barack Obama walks along the colonnade of the White House from the residence to the Oval Office a few hours before he is to deliver the State Of The Union speech before congress on January 28, 2014 in Washington, DC. UPI/Kristoffer Tripplaar/Pool
1 of 6 | U.S. President Barack Obama walks along the colonnade of the White House from the residence to the Oval Office a few hours before he is to deliver the State Of The Union speech before congress on January 28, 2014 in Washington, DC. UPI/Kristoffer Tripplaar/Pool | License Photo

U.S. President Barack Obama upped his game, throwing down the gauntlet to Congress by saying if lawmakers refused to act he would do what he could through executive order to boost wages, create jobs and help the hard-pressed middle class claw its way to prosperity.

Obama's State of the Union address last week was pitched to his populist base and challenged Republicans, especially Tea Party Republicans, to break the destructive cycle of opposition and inaction that has hamstrung the economic recovery, roiled markets and kept millions on unemployment rolls.


Last year, Obama suggested boosting the federal minimum wage from the current $7.25 to $9; Tuesday he boosted that to $10.10 and pledged to sign an executive order implementing it for future federal contracts. It would have no impact on contracts already let or the private sector.

AlterNet senior editor Lynn Stuart Parramore said $10.10 an hour falls "far short" of a living wage.


"The plan does not even match the boldness of conservative California businessman Ron Unz, who wants to raise the minimum to $12 because he doesn't like having to pay for all the social welfare programs people have to rely on when they get paid squat," Parramore said.

"If you were wanting something bold and butt-kicking, something that takes on inequality in America the way Lyndon B. Johnson took on poverty in his 1964 State of the Union address, you did not find it."

The 39 percent proposed jump "would compel McDonald's to aggressively implement methods to cut employees," University of Maryland economist Peter Morici said.

"Smaller restaurants, whose customers simply cannot afford to pay another $2 for lunch, would close, and the same would repeat in other industries."

(Morici didn't address the fact most restaurant workers are paid far less than minimum wage and are expected to live on tips.)

The National Employment Law Project applauded the proposal, calling it "a powerful first step" and urging Congress to follow suit.

Increasing the minimum wage, however, will do little to address the inequality that has been growing between the nation's lowest-paid and highest-paid workers, a gap Labor Department figures indicate is still growing. Wages for the top 10 percent of earners grew by 7 percent from the end of the recession in the middle of 2009 to the first quarter of 2012 while those for the bottom 10 percent grew by only 2.5 percent.


University of California-Berkeley Professor Emmanuel Saez said income inequality is at its highest level since 1928. His research indicates in 1982 the upper 1 percent of families earned 10.8 percent of pretax income while the bottom 90 percent earned 64.7 percent. Saez estimated for 2012 the top 1 percent earned 22.5 percent of pretax income compared with 49.6 percent for the bottom 90 percent.

Would an increase in the minimum wage help or hurt the 4 million long-term unemployed? Unclear. Some 1.3 million long-term unemployed people lost their benefits Dec. 28 and the number has been growing by 72,000 a week since. What is clear is there's been virtually no movement toward renewing those benefits in Congress even though previous administrations renewed extended benefits when the unemployment rate was far less that the current 6.7 percent.

"Congress, give these hardworking, responsible Americans that chance. They need our help, but more important this country needs them in the game," Obama exhorted Congress in his speech. In the next breath, however, he said he would turn to the private sector, urging business leaders "to give more long-term unemployed workers a fair shot at that new job and new chance to support their families."


At the White House Friday, Obama met with chief executive officers and announced more than 300 companies had agreed -- including 80 of the nation's largest -- to make an effort to focus on hiring the long-term unemployed.

"Folks who have been unemployed the longest often have the toughest time getting back to work," Obama noted. "It's a cruel Catch-22 -- the longer you're unemployed, the more unemployable you may seem.

"Now, this is an illusion, but it's one that unfortunately we know statistically is happening out there. According to one study, if you've been out of work eight months, you're likely to get called back for an interview only about half as often as if you've been out of work one month -- even with the identical resume. So we are here tonight to say that's not right."

Obama issued a memo barring federal agencies from discriminating against the long-term unemployed or those who have run into financial trouble because of unemployment.

"Although executive departments and agencies ... generally can, and do, take job applicants' employment history and other factors into account when making hiring decisions, it is the policy of my administration that applicants should not face undue obstacles to federal employment because they are unemployed or face financial difficulties," Obama said in the memo.


Whether the jawboning has any impact remains questionable.

The unemployment rate for people who have been out of work for fewer than 26 weeks "is now consistent with the past," press secretary Jay Carney told reporters Thursday.

"The elevated level of unemployment we still have is ... attributable to the persistent problem of the long-term unemployed," Carney said.

"Nearly 4 million Americans have been unemployed for longer than six months, an unprecedented level three times greater than when the recession began. These record-high levels have persisted for more than four years," NELP Executive Director Christine Owens said in a news release. "It doesn't help that many employers shut their doors to job applicants who have any extended period of joblessness. NELP documented hundreds of instances of employers brazenly posting ads precluding consideration of unemployed applicants."

A recent CareerBuilder poll conducted by Harris Interactive found 30 percent of formerly full-time workers who have been jobless for a year or more have not had a single interview since they lost their jobs.

Forty-four percent of the 300 long-term unemployed interviewed Nov. 6-Dec. 2 said they look for work daily and 43 percent said weekly.

Sixty-six percent blamed their age for their plight, with 92 percent of those at least 55 feeling that way. Sixty-three percent said the longer they were out of work, the less likely employers would pay attention to them. Sixty-three percent blamed a reduction in the number of jobs available in their professions while 30 percent said they were unable to relocate or commute far and 16 percent said they had difficulty training for a new field.


"There are many talented people in the U.S. who are having a tough time finding a job -- not because of a lack of ability, but because of ongoing challenges in the economy," said Rosemary Haefner, vice president of Human Resources at CareerBuilder.

And the situation is taking its toll: 25 percent said they don't have enough money for food, 25 percent said their relationships with family and friends are suffering, 12 percent have maxed out their credit cards trying to pay bills, 10 percent have lost their homes and 9 percent have had to move back with parents.

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